Volkswagen AG
PRE-ISSUANCE VERIFICATION LETTERLOW CARBON TRANSPORT CRITERIA OF THE CLIMATE BONDS STANDARD
Type of engagement: Assurance Engagement
Period engagement was carried out: January 2020
Approved verifier: Sustainalytics
Contact address for engagement: De Entrée, 35-37 – 1101BH, P.O. Box 22703 – 1100 DE, Amsterdam, The
Netherlands
Pre-Issuance Engagement Team: Lili Hocke, lili.hocke@sustainalytics.com, (+31) 202 050 040;
Begum Gursoy, begum.gursoy@sustainalytics.com, (+31) 208 887 292

Scope and Objectives
Volkswagen AG (“VW” or “the company”) has engaged Sustainalytics to review and verify that VW’s green
bond meets the requirements under the Low Carbon Transport criteria of the Climate Bonds Standard.
VW is an automobile company based in Wolfsburg, Germany. Its services mainly include the development andproduction of vehicles and components, as well as the sale of vehicles globally. The product segments consistof passenger cars, light commercial vehicles, trucks and busses, power engineering and financial services
that are related to mobility services. VW commits to a 50% reduction of CO2 emissions in total from all itsproduction plants by 2025 compared to 2010, 30% CO2 footprint reduction for its vehicle fleet across thelifecycle, compared to 2015, and to achieve CO2–neutrality throughout the group by 2050.
To demonstrate its commitment towards its sustainability goal, it intends to issue green bonds and use theproceeds to finance or refinance, in whole or in part, existing and future expenses that contribute to clean
mobility, specifically through the development of the Modular -Electrification Toolkit (MEB) technology, which
has been developed to make the manufacture of electric vehicles more efficient.
Climate Bonds Standards Criteria
Pre-issuance requirements under Climate Bond Standards Version 2.1:
•Low Carbon Transport Criteria
Criterion 2: Components for private vehicles: Assets related to the manufacture ofcomponents for private vehicles if it can be demonstrated they are exclusively destined for themanufacture of electric and fuel cell vehicles.

Issuing Entity’s Responsibility
VW was responsible for providing information and documents relating to:•The details concerning the selection process for the Eligible Green Projects•The details of the Eligible Green Projects•The management systems for internal processes and controls for Eligible Green Projects, including:
tracking of proceeds, managing unallocated proceeds and Earmarking funds to Eligible GreenProjects•
The details of commitments for reporting prior to issuance, including: investment areas,
management of unallocated proceeds and frequency of periodic Assurance Engagements

Independence and Quality Control
Sustainalytics, a leading provider of ESG and corporate governance research and ratings to investors,
conducted the verification of VW’s green bond, issued to finance Eligible Green Projects, and provided an© Sustainalytics 2020

Pre-Issuance Verification Letter

Volkswagen Group

independent opinion informing VW as to the conformance of the green bond with the Pre-Issuancerequirements and Low Carbon Transport Criteria of the Climate Bonds Standard.
Sustainalytics has relied on the information and the facts presented by VW. Sustainalytics is not responsible
if any aspect of the Eligible Green Projects referred to in this opinion including estimates, findings, opinions,or conclusions are incorrect. Thus, Sustainalytics shall not be held liable if any of the information or data
provided by VW management and used as a basis for this assessment were not correct or complete.
Sustainalytics makes all efforts to ensure the highest quality and rigor during its assessment process andenlisted its Sustainability Bonds Review Committee to provide oversight over the assessment of the bond.

Verifier’s Responsibility
The work undertaken as part of this engagement included conversations with relevant VW employees andreview of relevant documentation to confirm the green bond’s conformance with the Climate Bonds
Certification Pre-Issuance Requirements, which include:•Conformance of VW’s green bond with the Climate Bonds Standard Version 2.1;
•Conformance with the Technical Criteria on Low Carbon Transport Criteria•Conformance with the Internal Processes & Controls requirements•Conformance with Reporting Prior to Issuance requirements

Basis of the Opinion
Sustainalytics conducted the verification in accordance with the Climate Bond Standard Version 2.1 and with
International Standard on Assurance Engagements 3000 – Assurance Engagements other than Audits orReviews of Historical Information.
Sustainalytics planned and performed the verification by obtaining evidence and other information andexplanations that Sustainalytics considers necessary to give limited assurance that the Volkswagen’s Green
Finance Framework meets the requirements of the Climate Bond Standard. Upon reviewing evidence andother information, Sustainalytics is of the opinion that VW will ensure compliance with Climate Bond Standard
requirements.

Conclusion
VW’s green bond will finance and refinance projects related to Low Carbon Transport (Clean transportation).
Based on the limited assurance procedures conducted, nothing has come to Sustainalytics’ attention thatcauses us to believe that, in all material aspects, VW’s green bond is not in conformance with the Low Carbon
Transport Criteria of the Climate Bond Standard Pre-Issuance Requirements.

2Pre-Issuance Verification Letter

Volkswagen Group

Schedule 2A: Pre-Issuance General Requirements
Selection of NominatedProjects and Assets:

1.1 Statement on the environmental objectives of the bond
1.2 Confirmation that Nominated Projects and Assets meet theClimate Bonds criteria

1.3 Document a list of Nominated Projects and Assets
1.4 Confirmation that Nominated Projects and Assets will not be
nominated to other Climate Bonds

1.5 Confirmation that Net Proceeds of the Green Bond shall not begreater than the value of the Nominated Projects and Assets
Internal Processes and Controls

2.1.1 Tracking of proceeds2.1.2 Managing of unallocated proceeds
2.1.3 Earmarking funds to Nominated Projects and Assets

Reporting Prior to Issuance

3.1.1 Investment area of Nominated Projects and Assets
3.1.2 Intended types of temporary investments for the management of
unallocated proceeds

3.1.3 Approach of Verifier
3.1.4 Whether periodic Assurance Engagement will be undertaken,
and the expected frequency of any periodic Assurance
Engagements3Pre-Issuance Verification Letter

Volkswagen Group

Schedule 2B: Conformance to the Pre-Issuance
Requirements
Procedure Performed

Factual Findings

Verification ofrequirements specified
under Selection ofNominated Projectsand Assets

1.1 The objective of the bond is to primarily use proceeds tofinance or refinance Eligible Green Projects related to thedevelopment and manufacturing of electric vehicle, and echarging infrastructure.

Error orExceptions
Identified
None

1.2 The Eligible Green Projects and Assets meet the Low
Carbon Transport Criteria of the Climate Bond Standard.

1.3 The Eligible Green Projects and Assets include Eligible
Green expenditures related to:•The development of the Modular -Electrification
Toolkit (MEB)•E-charging infrastructure

1.4 VW’s management confirms that the projects shall not be
nominated to other Climate Bonds.

1.5 VW’s management confirms that the net proceeds of thebond shall not be greater than the value of the projects.
Verification ofrequirements specified
under Internal
Processes andControls

2.1.1 VW’s management confirms that proceeds will be tracked
using internal reporting systems and will be exclusively
used to finance Nominated Projects/Expenditures.

None

2.1.2 VW confirmed that pending allocation, the unallocated net
proceeds from the sale of the notes may be invested incash, cash equivalents and/or liquid marketablesecurities, and to be reported in annual reporting until fullallocation.

2.1.3 VW has confirmed that the proceeds from the bond will
be reviewed and selected by the VW Green FinanceCommittee. In addition, VW commits to have an auditor
conduct a verification of its allocation reporting.
Verification ofrequirements specified
under Reporting Prior
to Issuance

3.1.1 VW’s management confirms that the proceeds of thetransaction will primarily be used to develop andmanufacture the MEB and e-charging-related
infrastructure for electric vehicles.

None

3.1.2 VWconfirmed that it will have 100% allocation ofproceeds on issuance. In case of any assets becoming
unallocated, VW confirmed that these will be invested incash, cash equivalents and/or liquid marketablesecurities.

3.1.3 The bond’s offer letter confirms that an approved thirdparty verifier has been appointed to confirm the bond’s

4Pre-Issuance Verification Letter

Volkswagen Group

conformance with pre-issuance requirements of the Low
Carbon Transport Criteria of the Climate Bonds Standard.

3.1.4 VW confirms that it seeks to obtain an approved thirdparty verifier to conduct post-issuance assurance exercise
within a year’s time to reaffirm conformance of the bondwith the Low Carbon Transport Criteria of the ClimateBonds Standard.

5Pre-Issuance Verification Letter

Volkswagen GroupDisclaimer© Sustainalytics 2020. All rights reserved.
The intellectual property rights to the information contained herein is vested exclusively in Sustainalytics. No
part of this deliverable may be reproduced, disseminated, comingled, used to create derivative works,
furnished in any manner, made available to third parties or published, parts hereof or the information contained
herein in any form or in any manner, be it electronically, mechanically, through photocopies or recordings
without the express written consent of Sustainalytics.
As the information herein is based on information made available by the issuer, the information is provided“as is” and, therefore Sustainalytics does not warrant that the information presented in this deliverable iscomplete, accurate or up to date, nor assumes any responsibility for errors or omissions and Sustainalytics
will not accept any form of liability for the substance of the deliverable and/or any liability for damage arisingfrom the use of this deliverable and/or the information provided in it. Any reference to third party names is forappropriate acknowledgement of their ownership and does not constitute a sponsorship or endorsement bysuch owner.
Nothing contained in this deliverable shall be construed as to make a representation or warranty on the partof Sustainalytics, express or implied, regarding the advisability to invest in companies, selection of projects
or make any kind of business transactions. It shall not be construed as an investment advice (as defined in
the applicable jurisdiction), nor be interpreted and construed as an assessment of the issuer’s economicperformance, financial obligations nor its creditworthiness.
The issuer is fully responsible for certifying and ensuring the compliance with its commitments, for theirimplementation and monitoring.

6

Pre-Issuance Verification Letter

Volkswagen Group

Sustainalytics
Sustainalytics is a leading independent ESG and corporate governance research, ratings and analytics firmthat supports investors around the world with the development and implementation of responsible investment
strategies. With 13 offices globally, the firm partners with institutional investors who integrate ESGinformation and assessments into their investment processes. Spanning 30 countries, the world’s leading
issuers, from multinational corporations to financial institutions to governments, turn to Sustainalytics forsecond-party opinions on green and sustainable bond frameworks. Sustainalytics has been certified by theClimate Bonds Standard Board as a verifier organization, and supports various stakeholders in thedevelopment and verification of their frameworks. In 2015, Global Capital awarded Sustainalytics “Best SRI orGreen Bond Research or Ratings Firm” and in 2018 and 2019, named Sustainalytics the “Most Impressive
Second Party Opinion Provider. The firm was recognized as the “Largest External Reviewer” by the Climate
Bonds Initiative as well as Environmental Finance in 2018, and in 2019 was named the “Largest Approved
Verifier for Certified Climate Bonds” by the Climate Bonds Initiative. In addition, Sustainalytics received aSpecial Mention Sustainable Finance Award in 2018 from The Research Institute for Environmental FinanceJapan and the Minister of the Environment Award in the Japan Green Contributor category of the Japan Green
Bond Awards in 2019.
For more information, visit www.sustainalytics.com
Or contact us info@sustainalytics.com

7