Volvofinans Bank - Green Bond Presentation

8 May, 2017

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Volvofinans in brief

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Ägarmöte – Svensk Volvohandel

THE MOBILITY BANK

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Ägarmöte – Svensk Volvohandel

11th Largest

Swedish Bank

Balance

Sheet

Turnover

35 Bilion SEK

230.000

financial

contracts

Rating

A3

(Moodys)

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THE OWNERS

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VOLVOFINANS BANK AB

Ab VOLVERKINVESTThe swedish Volvo dealers

Volvo car CORPORATION

50% 50%

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Ägarmöte – Svensk VolvohandelOur areas of business

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The Volvo Card

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Sales Financing Cars

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Fleet operations

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Sales Financing Trucks

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STRATEGY

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How to make difference?

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OUR VISION

THE MOBILity BANK

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Our Environment

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SmartER CAR ECONOMY

THE PROMISE

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230 000

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2016 Financial Statements

• Profit before appropriations

and taxes: 379.0 M (363.0)

• Return on Equity: 8.7 % (8.9)

• Lending as per 31 december: 31.2 bn (27.4)

• Credit losses, net: 13.5 M (11.9)

• CET1 ratio: 21.3 % (21.8)

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0

50

100

150

200

250

300

350

400

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

304

273

220

267 262

234

276

331

363379 Stable income,

even during the

financial crisis,

2008-09

Profit before appropriations and taxes

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Income

Statement2016-01-01 – 2016-12-31

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Balance sheet – Total assets

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Balance sheet - Total l iabi l i t ies and equity

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Development within Business Areas

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Market VFB Income Operating profit

Neutral Increased + 8 %

market share

Slight Increased + 27 %

Increase market share

Neutral Increase in Fuel sales - 6 %

All other down

Increasing Increased + 22 %

market share

55’’

15’’

83’’

226’’

Funding facilities YE2016

42%

5%

53%

Sources of funds - Utilised excl Equity

Market Borrowing

Bank

Deposits

25%

75%

Sources of funds - Market Borrowing & Bank

< 1 year

MT/LT

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Volvofinans’ Bank Savings Account

• SEK 13,980 million (+9%)

• 60,500 Customers

• Approx 60% of the savings volume is

deposited by relationship customers

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Funding facilities YE2016

42%

5%

53%

Sources of funds - Utilised excl Equity

Market Borrowing

Bank

Deposits

25%

75%

Sources of funds - Market Borrowing & Bank

< 1 year

MT/LT

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Capital base

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016S

EK

M T2 capital

CET1 capital

Capital Base: SEK 3,497 million

Total Capital Ratio: 21.3 %FSA requirement: 14.2%

CET1 capital ratio: 21.3%FSA requirement: 10.0%

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Our Sustainability Work

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2015 2016 2017 2018

The development of our commitment

• Defining Sustainability for VFB

• Sustainability Policy

• Sustainability in Annual Report

for the first time

• Adding business value

• New products

• Green Bonds

• Annual sustainability report

• GAP analysis ISO26000

• Stakeholder Analysis

• Part of the NPAP

Economy Social

Ecology

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Sustainability policy”The basic strategy is to combine profitability with being a sound

institution within a sound market.“

ECOLOGY

VFB shall take a long

term environmental

responsibility aiming

to reduce our

ecological footprint as

long as it is

technically possible

and economically

reasonable

SOCIAL

VFB shall act to be a

sound institution

within a sound

market. VFB shall be

recognised as a

modern and attractive

employer who takes

responsibility

externally as well as

internally.

ECONOMY

Financial stability is a

foundation for a

sustainable business,

especially for a bank.

In order to gain trust

and to fulfil

regulations the bank

follows capital

requirements and has

correct risk and

control functions.

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ISO26000 – Gap Analysis

Strengths

• Labour pratices

• Human rights

• Organisational governance

• Fair operating pratices

• Consumer issues

Areas of improvment

• The environment

• Comunity involvment and development

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ECOLOGY

• New products

• Green bonds

• Electricity savings

• Paper savings

SOCIAL

• Trainee-program

• AML

• Anti-Corruption

• Business ethics

• Background check

of suppliers

• Childhood

foundation

ECONOMY

• Financial stability

• Regulatory issues

• Green bonds

• New products

Work in progress and sustainability focus areas

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Finalist in the category ”Störst

förändringsresa”

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Dra av från nästa tvätt

Skänk till Childhood

Donate to charity?

Climate

compensation?

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Green Bonds

Framework

- Prepared in accordance with

Green Bond Principles

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• Environmental Friendly Cars (Sw. Miljöbilar)*, that can;

• be powered entirely or partially by non-fossil fuels, i e:

– electric vehicles

– fuel cell vehicles

– electric/petrol hybrid vehicles

– electric/diesel hybrid vehicles

– ethanol/petrol hybrid vehicles

– biogas/natural gas vehicles

– biogas/natural gas/petrol vehicles

Eligible Projects

*) Passenger vehicles that meet the criteria as specified by Paragraph 11 a of Chapter 2 of the

Swedish Road Traffic Tax Act (Sw. Vägtrafikskattelag (2006:227))

mean a selected pool of loans and leases to vehicles that are funded, in whole or in part, by Volvofinans Bank and that

promote the transition to low carbon and climate resilient growth, as determined by Volvofinans Bank

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Selection Process

Green Loan

Portfolio

Initial screening of

projects in accordance

with the

Green Bond

criteria

Input

Green Bond

Selection according

to the Framework

defined Eligible

Projects The Head of

Sustainability has a

veto

• Eligible Projects will be selected in consensus with the

Head of Treasury and the Head of Sustainability

Departments

• Approved loans and leases will be included in Volvofinans

Bank’s Green Loan Portfolio

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Selection Process

Green Loan

Portfolio

Initial screening of

projects in accordance

with the

Green Bond

criteria

Input

Green Bond

The investor will

finance a share and a

cross section of the

Green Loan Portfolio

• Green bond proceeds will be used for the refinancing of

loans and leasing contracts raised at the car purchase.

• The customers have already signed contracts at the time

of allocation of proceeds.

• The average LTV is approx. 80%

• Cars that meet the criteria and are included in the Green

Loan Portfolio can be both new and used.

Our ambition is that

the Green Loan

Portfolio at all times

will be larger than the

amount of outstanding

Green Bonds

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Transparency & Reporting

A description of the Green Loan Portfolio including:• impact reporting at portfolio level;

• information about the maturity profile of the Green Loan Portfolio;

• information about the average share of the total value of the vehicles in the Green Loan Portfolio that has

been financed by Volvofinans Bank; and

• information about the share of Green Bond financing of the Green Loan Portfolio

A selection of Eligible Project examples

A summary of Volvofinans Bank’s Green Bond development

The investor letter as well as

the whole Green Bonds

process will be checked and

certified by Volvofinans Bank’s

compliance function

Based on the

framework, Volvofinans

Bank lives up to the

requirements of the

Green Bond Principles

Volvofinans Bank will provide an annual Green Bond investor letter

which will include the following items:

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Volvof inans Bank’s Green Loan Por t fo l io

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245

171

217

180

1

Balance (SEK M)

Electric Electric/Diesel hybrids Electric/Petrol hybrids

E85/Petrol hybrids Petrol/Natural Gas/Bio Gas Natural Gas/Bio Gas

0

100

200

300

400

500

600

700

800

900

1 000

SE

K M

Balance development

2016-02-28

2017-02-28

As of 28 February, 2017, a total of SEK 864 million has been identified as eligible projects

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Examples of Environmental Friendly Cars

in the Green Portfolio

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Expected environmental impact and impact reporting

VFB’s Green Loan portfolio

2017-02-28

VFB Green Loan

portfolio

Expected CO2-

reduction

Gram CO2 per km 45 78

Vehicles (N) 7 778

Balance (SEK M) 864

CO2-emission Tons/Year 4 229 7 251

Based upon following assumptions:

• Average annual driving 12,000 km

• Average emission for a new Swedish car: 123g CO2

Annual impact reporting

• Estimated CO2 reduction

• Reference value:

Comparison with

Swedish average

emissions of new cars

sold

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Second Opinion

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Shading• Dark green for projects and solutions that are realizations today

of the long-term vision of a low carbon and climate resilient

future. Typically, this will entail zero emission solutions and

governance structures that integrate environmental concerns

into all activities.

• Medium green for projects and solutions that represent steps

towards the long-term vision, but are not quite there yet.

• Light green for projects and solutions that are environmentally

friendly but do not by themselves represent or a part of the long-

term vision (e.g. energy efficiency in fossil-based processes).

• Brown for projects that are irrelevant or in opposition to the

long-term vision of a low carbon and climate resilient future.

“Volvofinans Bank AB’s Green Bond

Framework gets a Light Green shading”

*) A copy of a full Second Opinion on Volvofinans Bank’s Green Bond Framework can be found on www.volvofinans.se 46

Conclusion

“Overall, Volvofinans Bank AB’s Green Bond Framework provides a clear and sound framework for climate-friendly

investments. The framework lists eligible categories of projects that are supportive of the objective of promoting a

transition to low-carbon growth and is supported by a good governance structure. Proceeds will be allocated to financing

and refinancing more environmental friendly cars in Sweden. Volvofinans developed an overarching sustainability policy

including on environment in 2015, but has no clear climate ambition or targets for its overall activities.”

“Based on the overall assessment of the project type that will be financed by the green bond and governance and

transparency considerations, Volvofinans Bank AB’s Green Bond Framework gets a Light Green shading. A darker

shading would have required clearer guarantees that only best available technologies will be selected under the Green

Bond Framework. Hybrid solutions qualify as bridging technologies and hence a medium green shading is within reach.

However, since battery capacity of most of these hybrids is still limited, and because hybrids (ethanol and biogas hybrids

as well) also could run on petrol alone, and because there will be no tracking of real emissions these types of cars are

graded light/medium green projects. According to the issuer the majority of the existing car fleet is ethanol/petrol hybrids

and biogas/natural gas/petrol vehicles.”

*) A copy of a full Second Opinion on Volvofinans Bank’s Green Bond Framework can be found on www.volvofinans.se 47

ConclusionS t r e n g t h s & W e a k n e s s e s

• Volvofinans Bank AB’s green bonds proceeds will be

allocated to more environmental friendly cars. It is a

strength that the vehicles in order to be eligible need

to be powered entirely or partially by non-fossil fuels.

The definition is aligned with the EU’s objective of

achieving 95 g/km of CO2 by 2021.

• Impact reporting is an important tool to enhance

transparency in regard to the projects economic risk

from climate change and the environmental

effectiveness of the projects. We are encouraged to

see that the framework includes impact reporting.

• “There are no obvious weaknesses in Volvofinans

Bank AB’s green bond framework.”

*) A copy of a full Second Opinion on Volvofinans Bank’s Green Bond Framework can be found on www.volvofinans.se 48

omtanke

RESOURCE EFFICIENT BUSINESS

Climate neutral operations by 2025

LIFE-CYCLE PERFORMANCE

1 million electrified vehicles sold by 2025

PARTNER IN SUSTAINABLE

DEVELOPMENT

Engage in corporate partnerships

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OUR COMPANY IMPACTS THE IMPACT OF OUR PRODUCTS OUR ROLE IN SOCIETY

SUSTAINABLE WORK LIFENo fatalities or serious injuries at Volvo Cars

REAL-LIFE SAFETYOur vision is that by 2020, no one should be

killed or seriously injured in a new Volvo car

SAFER BY SHARINGKnowledge sharing to improve traffic safety

DIVERSE & INCLUSIVE CULTURE

35% internationally diverse leaders and 35%

female leaders by 2020

CUSTOMER EXPERIENCE

CleanZone leadership

EMBODYING ETHICS AND

HUMAN RIGHTS

Ethical leadership for responsible business

UN SUSTAINABLE DEVELOPMENT GOALS

The UN Sustainable Development Goals (SDGs) are a series of 17 goals agreed on by world leaders in 2015 which aim to help end all forms of

poverty, reduce inequality and tackle climate change. Governments, civil society and business will work towards meeting them over the next 15

years. The SDGs act as our guide, with 12 out of the 17 directly relevant to our sustainability work.

CLEAN

SAFE

RESPONSIBLE

SUSTAINABLE PROFITABILITY AND

GROWTH

• Committed to selling a total of 1m electrified

cars – including fully electric cars and hybrids –

by 2025

• First fully electric car to be launched in 2019

• Will offer plug-in hybrid versions of every model

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ContactsLars Norland

Treasurer

Tel: +46 31 838888

Lars.norland@volvofinans.se

Gunnar Ekeroth

Head of Sustainability

Tel: +46 31 839049

Gunnar.ekeroth@volvofinans.se

Hans Jörgen Möller

CFO

Tel: +46 31 838886

Hans-jorgen.moller@volvofinans.se

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