Socially Responsible Investment Bond Framework

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This document is not intended to be and should not be construed as providing legal or financial advice. It does not constitute an offer or invitation to sell or any solicitation of any offer to subscribe for or purchase or a recommendation regarding any securities, nothing contained herein shall form the basis of any contract or commitment whatsoever and it has not been approved by any security regulatory authority.

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The information in this document has not been independently verified.

The addressee is solely liable for any use of the information contained herein and AIB shall not be held responsible for any damages, direct, indirect or otherwise, arising from the use of this document by the addressee.

This framework represents current AIB policy and intent, is subject to change and is not intended nor can be relied on, to create legal relations, rights or obligations.

The Allied Irish Banks Socially Responsible Investment Bond Framework is recognised and sponsored by:

Dara McKennaHead of Banking Book Risk

Brendan BaneHead of Treasury

Table of Contents

Introduction ...................................................................................................................................4

Investment Philosophy ..............................................................................................................6

Pillars of Sustainable Investment ............................................................................................7

(i) Focuses & Exclusions ..............................................................................................7

(ii) Reporting ...................................................................................................................9

(iii) SRI Engagement ...................................................................................................... 10

(iv) Living the Sustainable Way ................................................................................... 11

Portfolio Outlook ......................................................................................................................... 11

IntroductionThe investment community is in a position to lead global change for a more socially responsible planet. Investors are increasingly conscious of the social and environmental impacts the entities they invest in are having.

As an established, buy-to-hold bond investor, Allied Irish Banks plc (AIB) is in a position to help facilitate the transition to a more sustainable global economy. AIB is well positioned to contribute to positive environmental and social changes via the sustainable bond market. We aim to fund sustainable projects via global sustainable bond issuances, thus contributing to a more sustainable planet.

AIB is committed to a low-carbon economy, and is active across the entire renewable energy mix including solar and wind, waste to energy, across the island of Ireland and beyond. AIB is the first Irish bank to become a Founding Signatory of the United Nations Environment Programme Finance Initiative (UNEP FI) Principles for Responsible Banking. This demonstrates a clear commitment to proper governance, culture, transparency and accountability, and to working responsibly with both clients and stakeholders. AIB is also the first Irish bank to publish a Green Bond Framework that aligns with the ICMA Green Bond Principles and the latest EU Taxonomy.

AIB’s Sustainability Journey

2016 2017 2018 2019

Formation of the Sustainable

Business Advisory Establishment

of AIB’s sustainability governance

structure

AIB Energy Efficiency

Outlook Report for SMEs

Sponsorship of Climate

Finance Week Ireland 2019

CDP Climate Change A List

Low Carbon Pledge

Launch of AIB’s Climate Action

Fund

Founding Signatory of the UNEP FI Principles for

Responsible Banking

First Sustainability Conference

(over 350 attendees)

Definition of the material sustainability

topics

Green Bond Framework

First Sustainability

Report published

Launch of AIB Together – two

volunteering days per staff member per

yearBACKING A SUSTAINABLE FUTURE

Allied Irish Banks, p.l.c. Sustainability Report 2016

CDP Climate Change A List

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Investment PhilosophyAIB has established a Socially Responsible Investment (SRI) Bond portfolio to fund domestic and international projects aimed at global sustainability, carbon emission reduction, and social improvement, all under the over-arching themes of Environment, Social, and Governance (ESG).

Sustainable bonds aim to deliver sustainable value in areas, including, but not limited to, some of the following sectors:

1) Green areas

• Pollution prevention

• Renewable energy

• Energy efficiency

• Clean transportation

• Environmentally sustainable management of living natural resources and land use

• Terrestrial and aquatic biodiversity conservation

• Sustainable water and wastewater management

• Green buildings

2) Social areas

• Affordable basic infrastructure

• Access to essential services

• Affordable housing

• Employment generation including through the potential effect of SME financing and microfinance

• Food security

• Socioeconomic advancement and empowerment

• Local community regeneration

• Better labour standards

• Promoting and providing positive social impact for target populations / groups such as:

– Living below the poverty line

– Excluded and/or marginalised populations/communities

– Vulnerable groups

– People with disabilities

The Socially Responsible Investment bond portfolio represents AIB’s next step in contributing to sustainable economic development. Our investments will be linked to the four key pillars of investment detailed overleaf.

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Pillars of Sustainable Investment

AIB has designed four key Pillars of Sustainable Investment for our SRI Portfolio, as follows:

Pillars of Investment

Focuses & Exclusions

SRI Engagement

Reporting

Living the Sustainable Way

Focuses and ExclusionsFocusesThe ICMA Green/Social Bond Principles issuing framework will include four key headings:

1. Use of Proceeds

2. Process for Project Evaluation and Selection

3. Management of Proceeds

4. Reporting

We will focus on bonds that are issued under this framework.

The non-Use of Proceeds (UoP) bond market is still in the early stages of development so we have decided not to include these types of instruments in our portfolio. Instead we discuss UoP bonds.

UoP bonds are a debt obligation where the issuer’s lending and investment operations are linked to green/social/sustainable projects. The cornerstone of these bonds is that the proceeds are described in investor presentations and issuing frameworks for the security as well as in the Impact and Allocation reports.

Our SRI portfolio will focus on the project categories listed below, however we will not necessarily be limited to these categories.

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Renewable Energy• Solar energy

• Wind energy (on and off-shore)

• Hydropower

• Geothermal

• Tidal energy

Green Buildings• Construction of

low-emission buildings

• Retrofitting of domestic properties to be more environmentally friendly

Sustainable Water Management• Sustainable

management of wastewater

• Efficient urban and rural drainage

• Environmentally- friendly flood mitigation systems

Energy Efficiency• Energy storage

• District heating, smart grids, appliances and products

• Energy-efficient solutions for industrial plants

Pollution Prevention• Reduction of

greenhouse gases

• Waste prevention and reduction

• Recycling

• Soil-and-grass regeneration

Social Projects• Affordable housing

• Access to essential services

• Affordable basic infrastructure

• Employment generation through SME financing

• Projects targeting vulnerable groups

Positive environmental impact

Positive social impact

ExclusionsIn order to ensure the SRI portfolio maintains a high standard of socio-economic and environmental contribution, we will exclude some issuers as there are some industries where we deem there to be no foreseeable pathway to responsibly invest in them.

Corporate issuers whose primary business is in the following areas will be excluded from the SRI portfolio:

• Exploration, extraction and upgrading of oil sands project

• Nuclear power generation

• Nuclear waste transportation, decommissioning and/or final disposal of high level nuclear waste

• Thermal coal or oil power generation (other than emergency or stand by oil generation) except where less than 25% of revenues are generated from this activity and only where there is a plan to move to sustainable fuels by 2025.

• Onshore/offshore exploration, extraction or refining of Coal or Oil

• Natural gas fracking

As previously mentioned, bonds without a defined Use of Proceeds will not currently be eligible for the portfolio. Should this niche of the market develop further, and a greater volume of research become available, we will consider altering our exclusions.

Bonds issued under a framework not aligned to the ICMA Green/Social Bond Principles will not be eligible for the SRI portfolio.

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ReportingWe view reporting as a cornerstone of the ESG bond market. Reporting demands issuer integrity and holds their use of proceeds to account, as well as providing the investor with key information on how their funds are being utilised. Under this pillar, we require issuer reporting to align with the ICMA Green/Social Bond Principles reporting recommendations.

Allocation reporting should include: (i) the size of the eligible portfolio

(ii) the total amount of proceeds allocated to the eligible projects

(iii) details of the project where feasible

(iv) the balance (if any) of unallocated proceeds.

Impact reporting should include(i) qualitative performance indicators such as energy consumption/Co2 saving

(ii) metrics regarding projects’ environmental and/or social impacts where feasible

We require the issuing framework to have a Second Party Opinion, as per the ICMA Green/Social Bond Principles.

These reports allow us to demonstrate and contextualise the positive impact AIB’s investments are having throughout the world.

We will not include bonds in our SRI portfolio where the issuer does not intend to publish any information, reports, or impact metrics regarding their sustainable bond issuance.

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SRI EngagementWe will look more favourably upon issuers who actively engage in the world of socially responsible investment. This includes sustainable bond roadshows, communication of ESG strategies and results with the general public, and creating a general awareness of the importance of socially responsible investing in finance. For our SRI portfolio, we are looking for issuers who strive to raise awareness of the contribution the sustainable bond market is having on the planet through their own efforts and publications, and will look more favourably on these market participants.

We will also look favourably upon issuers whose frameworks incorporate some of the UN Sustainable Development Goals (SDGs). The SDGs are the blueprint to achieve a better and more sustainable future, and they address the global challenges we face.

UN Sustainable Development Goals:

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17 ICONS: COLOUR VERSION

ICONS

When an icon is on a square, that square must be proportional 1 x 1.

The white icon should be contained by its defined colour, or black background.

Do not alter the colours of the SDG icons.

ICONS

Effective 1 January 2018, the United Nations is launching a revised design of Icon 10, as seen on this page

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17 ICONS: COLOUR VERSION

ICONS

When an icon is on a square, that square must be proportional 1 x 1.

The white icon should be contained by its defined colour, or black background.

Do not alter the colours of the SDG icons.

ICONS

Effective 1 January 2018, the United Nations is launching a revised design of Icon 10, as seen on this page

48

17 ICONS: COLOUR VERSION

ICONS

When an icon is on a square, that square must be proportional 1 x 1.

The white icon should be contained by its defined colour, or black background.

Do not alter the colours of the SDG icons.

ICONS

Effective 1 January 2018, the United Nations is launching a revised design of Icon 10, as seen on this page

48

17 ICONS: COLOUR VERSION

ICONS

When an icon is on a square, that square must be proportional 1 x 1.

The white icon should be contained by its defined colour, or black background.

Do not alter the colours of the SDG icons.

ICONS

Effective 1 January 2018, the United Nations is launching a revised design of Icon 10, as seen on this page

48

17 ICONS: COLOUR VERSION

ICONS

When an icon is on a square, that square must be proportional 1 x 1.

The white icon should be contained by its defined colour, or black background.

Do not alter the colours of the SDG icons.

ICONS

Effective 1 January 2018, the United Nations is launching a revised design of Icon 10, as seen on this page

48

17 ICONS: COLOUR VERSION

ICONS

When an icon is on a square, that square must be proportional 1 x 1.

The white icon should be contained by its defined colour, or black background.

Do not alter the colours of the SDG icons.

ICONS

Effective 1 January 2018, the United Nations is launching a revised design of Icon 10, as seen on this page

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Living the Sustainable WayInternal governance is a significant factor in our analysis of a sustainable bond issuer. We are looking to see issuers who conduct themselves and grow in a socially responsible way. Issuers who have shown improvements and satisfactory standards in board diversity, ownership and control, executive pay, tax transparency and business ethics will all be looked upon favourably, and be more likely to receive larger investment in their sustainable bonds from AIB.

Transparent and open communication is consistent with strong internal governance, and fosters confidence in an issuer’s actions and processes. We therefore look favourably upon issuers who provide direct access for investors to ESG research, ESG departments, and are open to dialogue with investors.

In terms of ESG issuer scoring, we rely on external ESG reviews to contribute to our investment decisions. We require the issuer (excluding Sovereigns, Supranationals, Sub-Sovereigns and Agencies) to have one of the following:

• Rating of BB or better. A minimum of 90% of our portfolio that has an ESG related rating, will have a rating of BBB or better

• Should an MSCI rating not be available, ratings from other environmental rating agencies may be considered on a case-by-case basis

As regulation and best practice in the ESG market develops further, we will develop our scoring criteria, incorporate further standards and continue to revise our Framework.

Portfolio OutlookIn order to ensure we maintain a strong presence in the sustainable bond market, and continue to fund positive impact projects, it is our ambition over time to grow the SRI portfolio to at least 10% of the entire fixed income portfolio. We believe sustainable investment is of paramount importance to the global economy, and will continue to contribute to a more socially responsible world for generations to come.

To affirm this commitment to the sustainable bond market, we will disclose the size of our SRI portfolio in AIB Financial Reports.

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This publication has been printed on seed paper that is made from 100% post-consumer and post-industrial paper waste, and is completely biodegradable. This process diverts waste from landfills, creating a new product, which then can be used and biodegrades so no waste is left behind. Seed paper can even have a positive impact on the environment, as the flowers it grows are good for pollinators like bees and butterflies.

How To Plant Plantable PaperSupply list:• Pot for planting• Soil• Water• A sunny corner

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in the prepared pot with the paper. It’s okay if the paper overlaps. Spread a 1/8 inch layer of soil over the plantable paper pieces and tamp down gently.

2WATER DURING GERMINATION After planting the paper in your pot, give it a good soak. You want

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4ENJOY THE FLOWERS Once the

flowers (or herbs or vegetables) start to blossom, enjoy them in the pot or cut them and place in a decorative vase.

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Allied Irish Banks, p.l.c. is regulated by the Central Bank of Ireland.