Annual
Report 2023

Klarna Holding AB (publ). Organization no. 556676-2356

22

Contents
Financial information

3

Letter from the CEO

4

Letter from the CFO

6Report from the Board of Directors

9

ESG Report		ESG Introduction

14

		Sustainability

19

		Environment

27

		Social

43

Corporate Governance61

Key financial and performance measures

69

Group financials

72

Notes with accounting principles

Parent company financials
Notes with accounting principles

Appendix

K L A RN A H O L D I N G A B (P UBL)

12

78

108
111

116

A N N UA L R E P O RT 2 0 2 3
A N N UA L R E P O RT 2 0 2 3

CONTENTS

3

FINANCIAL INFORMATION

Financialinformation

Financial Results - Klarna Holding

The information on this page is presented for Klarna Holding AB (publ), if not otherwise stated.
Strong performance of the business over the year has delivered:

22%

SEK

23.5B

Revenue
YoY growth FY23

17%
Gross merchandise volume 1
YoY growth FY23

60%

Revenue
FY23

SEK

981B

Gross merchandise volume (GMV)
FY23

SEK

11.7B

Gross Profit
YoY growth FY23

Gross profit
FY23

95%

0.38%

Adjusted operating result improvement
YoY FY23

Consumer credit loss rate 3
FY23

2

1

Total monetary value of products and services sold through the Klarna network over a given period of time.

2

Adjusted operating results are defined as IFRS operating results, excluding restructuring costs, share-based payments, related
payroll taxes, Depreciation, amortization and impairment of intangible and tangible assets. A reconciliation of adjusted operating
result to IFRS operating result can be found on p70 of this report.

3

Consumer credit losses as a % of Gross merchandise volume (GMV).

K L A RN A H O L D I N G A B (P UBL)

FY23

FY22

FY23 YoY

Gross merchandise volume
Transaction and service revenue
Interest income from operating activities
Total revenue

980,892
19,7983,707
23,504

837,285
15,403
3,934
19,336

17%
29%
(6)%
22%

Processing and servicing
Consumer credit losses
Funding costs
Transaction costs
Gross profit(5,700)(3,766)(2,356)(11,822)
11,682(5,165)(5,563)(1,327)(12,055)
7,281

10%
(32)%
78%
(2)%
60%

Technology and product development
Sales and marketing
Customer service and operations
General and Administrative (G&A)
Depreciation, amortization and impairments
Other income (expense), net
Operating expenses(3,045)(3,400)(2,420)(3,920)(2,392)
290(14,887)(3,415)(4,893)(2,817)(4,359)(1,639)(633)(17,755)

(11)%
(31)%
(14)%
(10)%
46%
n.m
(16)%

Operating result
Restructuring costs
Share-based payments
Depreciation and amortization
Adjusted operating result(3,204)
665
462
1,699
(378)

(10,474)
501
523
1,639
(7,811)

69%
33%
(12)%
4%
95%

Income tax
Net result for the period

665(2,539)34(10,440)

1,856%
76%

Key ratios
Revenue take rate
Consumer credit loss rate
Gross margin

2.40%(0.38)%
50%

2.31%(0.66)%
38%

4%
(42)%
12pp

Amounts in SEKMA N N UA L R E P O RT 2 0 2 3

CONTENTS

LETTER FROM THE CEO

4

LetterfromtheCEO
K L A RN A H O L D I N G A B (P UBL)A N N UA L R E P O RT 2 0 2 3

CONTENTS

5

LETTER FROM THE CEO

Letter from the CEO

Gross merchandise volume (SEKB)
1,000

750

500

2023 was record-breaking year for Klarna2023 was a year punctuated by many firsts,
each marking a significant milestone in ourrelentless pursuit of accelerating commerce, now
increasingly delivered through generative AI. We
not only achieved our first month and quarter of250

profitability in four years, but also did so while
maintaining a great growth trajectory across all
markets and driving a gross profit margin of 50%.
But those weren’t the only firsts in 2023. In fact, theyear was full of them:

Record improvement in operating result
This year of firsts has delivered an extraordinary
shift in our financial performance based on thesustainable foundations of our business model.
In addition to having achieved some profitability
milestones we also improved our adjusted operating
result by an incredible 95% on an adjusted basis,
while continuing to drive strong GMV growth of 17%
YoY. Our global growth is outpacing digitalcommerce 1 by almost 7 times!

our underwriting and how we are getting better andbetter at lending to people who pay us back and use
Klarna again and again. Consumer credit losses were
down 32% YoY in 2023, with consumer credit losses
as a % of GMV remaining near historic lows of 0.38%
for the year - that’s a 42% improvement compared to2022. Niclas will talk more about our performance in
the CFO section and how we are presenting a moreintuitive financial view of our business model.

As followers of Klarna you’ll know that ensuring Klarnais leading the industry when it comes to responsible
lending and sustainable, fair credit is very close to
my heart. So I’m also incredibly pleased with ourconsumer credit loss performance while continuing
to grow our volumes. This highlights the strength of

While we continue on our journey to long-term
profitability, we made a conscious decision to invest
in growth in the peak shopping season of Q4. We
will continue to invest wisely for growth and focus
on being cost-effective on our path towards annual
profitability.

First full year of
US gross profit

1

Salesforce Shopping Index

K L A RN A H O L D I N G A B (P UBL)

2006

2007

2008

2009

2010

2011

2012

2013

Our products are gaining even more momentum
with consumers as they realize the benefits ofour flexible payments compared to interest-laden
credit cards. As a result, we booked the biggest
month ever in the history of Klarna, with overSEK 100B GMV. It’s incredible to think that in thisone month we delivered higher GMV than in theentirety of 2015. And off the back of this record
GMV, we drove revenue up by 25% YoY in Q423.

2015

2016

2017

2018

2019

2020

2021

2022

2023

Our strong partnerships with global retailers are
key to this success. In 2023 we launched with theworld’s largest hospitality merchant, Airbnb. We
are now live together in 12 markets, helping people
pay for their stays flexibly. We also launched with
iconic UK retailer Selfridges, European e-commerce
powerhouse Zalando, Walmart Canada, Deichmannand launched in new markets with Samsung, Uniqlo
and Nike among many, many others.

Klarna becomes AI-powered2023

While our mission at Klarna remains the same to accelerate commerce and provide the best
possible experience for our consumers andretailers - the introduction of AI is undoubtedly
accelerating our progress. With a wealth of AIpowered ideas in the pipeline, we’re excited about
the next few years as we continue to evolve ourvision of Klarna as a comprehensive personal
financial digital assistant.

-0.9

2014

First month with SEK 100B of GMV

1.4

US gross profit (SEKB)

2022

2005

In 2023, the era of generative AI truly arrived. I
believe this is as transformative as the advent of theinternet. We were quick to adopt generative AI - wewere one of the first brands to build a ChatGPT plugin
and the first bank to launch with ChatGPT enterprise.
Currently, more than half of all Klarnauts use AI
tools - many developed in-house by our own teams- on a day-to-day basis, significantly improving theservices we provide for our consumers and retailers.
At the same time, they are liberating themselvesfrom repetitive administrative tasks, enabling them tofocus on complex problems that only they can solvewith their unique creativity and determination.

It’s also the first year we turned the US market togross profit, and not only did we do that, we madegains quarter on quarter, delivering SEK 1.4B in grossprofit terms in FY23.
We are growing GMV an incredible 40 times fasterthan US digital commerce growth 4.

0

A more personal first, which I was very excitedabout, was to address the finance ministers of
27 EU nations and the President of the European
Central Bank for the first time about the future of
the payments industry. As much as I believe in the
power of digital transformation, sometimes nothingbeats the power of in person communication.
Which is also why it was super important to me
to bring all Klarnauts together for our first face toface Smoooth Week since 2019 in Stockholm.
Finally, I want to take the opportunity to thankour investors, without whose unwavering support
we could not continue on this amazing journey,
our Klarnauts for their commitment and drivethat powers the business, and our retailers andconsumers, for their trust, for which I am always
grateful. I am immensely proud of all the firsts in this
18th year of Klarna. I hope you all are looking forward
to what Klarna has in store for 2024 as much as I am.
Sebastian Siemiatkowski
CEO and Co-founder, Klarna

A N N UA L R E P O RT 2 0 2 3

CONTENTS

LETTER FROM THE CFO

6LetterfromtheCFO
K L A RN A H O L D I N G A B (P UBL)A N N UA L R E P O RT 2 0 2 3

CONTENTS

7

LETTER FROM THE CFO

Letter from the CFO

Financial Results - Klarna Holding
Amounts in SEKM

2023 has served as a definitive testament to the agilityof our business model. We executed our strategy,
fostering sustainable growth, a significant increasein gross profit margin, and substantial efficiencies.
This was achieved at the same time as implementing
generative AI across the company, which continues
to have a transformative impact on our business. As aresult, we improved our adjusted operating result by
95% YoY in FY23.
I wanted to take the opportunity to give you moreof a deep dive into our financial performance.
This is one of the main reasons we have added an
additional view of our income statement, which
you can see on the right hand page. Ultimately ouroperating result and net result remain the same.
This presentation allows me to talk in more detailabout our growth levers, from both a revenue
perspective but also provide more transparency
on our cost evolution, providing more and better
insights into how Klarna operates as a business.
You can find detailed reconciliations to our
statutory financial statements on p70.

FY23 growth

FY23

FY22

FY23 YoY

In 2023 we grew GMV almost 7 times faster thanglobal digital commerce 1 with GMV increasing
17% YoY. In the US, we are outperforming digitalcommerce by 40 times. We’re gaining increased
value from that volume, with global revenue
increasing 22% YoY, largely driven by our fee-basedtransaction and service revenue which increased
29% YoY. And we have plenty of headroom tocontinue to scale in our growth markets as
consumer adoption drives market penetration.

Gross merchandise volume
Transaction and service revenue
Interest income from operating activities
Total revenue

980,892
19,7983,707
23,504

837,285
15,403
3,934
19,336

17%
29%
(6)%
22%

Processing and servicing
Consumer credit losses
Funding costs
Transaction costs
Gross profit(5,700)(3,766)(2,356)(11,822)
11,682(5,165)(5,563)(1,327)(12,055)
7,281

10%
(32)%
78%
(2)%
60%

Unlike conventional banks, ~70% of our revenue
comes from retail partner fees linked to the volume
we help generate, rather than interest on revolving
consumer loans. To provide our consumers withfurther flexibility, we focus on providing fixed termloans that are interest bearing. 74% of these loans
issued in 2023 were 6 months or less in duration.
From our continued pink standards initiatives toremove revolving credit and unnecessary fees,
consumer interest income decreased 6% YoY.

Technology and product development
Sales and marketing
Customer service and operations
General and Administrative (G&A)
Depreciation, amortization and impairments
Other income (expense), net
Operating expenses(3,045)(3,400)(2,420)(3,920)(2,392)
290(14,887)(3,415)(4,893)(2,817)(4,359)(1,639)(633)(17,755)

(11)%
(31)%
(14)%
(10)%
46%
n.m
(16)%

Operating result
Restructuring costs
Share-based payments
Depreciation and amortization
Adjusted operating result(3,204)
665
462
1,699
(378)

(10,474)
501
523
1,639
(7,811)

69%
33%
(12)%
4%
95%

Income tax
Net result for the period

665(2,539)34(10,440)

1,856%
76%

Key ratios
Revenue take rate
Consumer credit loss rate
Gross margin

2.40%(0.38)%
50%

2.31%(0.66)%
38%

4%
(42)%
12pp

Revenue (SEKB)
23.5
19.3

17.2%
19.8
15.4

Klarna GMV

2.5%

3.9

3.7

Global ecommerce

2022

2023

Transaction and service revenue
Interest income from operating activities

1

Salesforce Shopping Index

K L A RN A H O L D I N G A B (P UBL)A N N UA L R E P O RT 2 0 2 3

CONTENTS

8

LETTER FROM THE CFOThis year we have maintained strong control of ourdirect cost base despite inflationary and interest
rate pressures, with transaction costs as a wholedeclining 2% YoY in FY23. Within transaction costs,
processing and servicing fees increased 10% largely
due to the associated increase in volumes but witha growth rate well behind GMV as our growing scaledelivers further cost efficiencies. As we have scaled,
particularly in our growth markets, our proprietary
underwriting models have improved, delivering a
reduction in consumer credit losses of 32% YoY,
contributing to consistently low consumer credit
loss rates — just 0.38% of GMV for FY23. Because
over 81% of our balance sheet turns over in 3
months or less, we can drive improvements in credit
losses across our portfolio very quickly.
We have a unique and conservative approach toliquidity where 82% of our funding is fixed termand has a longer duration than our average loan

Gross profit (SEKB)

portfolio of 40 days. This means we can manage
short term interest rate changes over a longer
period, effectively mitigating the impact of sudden
market shifts. This has also allowed us to continue
to maintain very low funding costs, representing
just 10% of revenue and under 9% of our total costbase, despite the sharpest interest rate increases
in the last decade.
At its core Klarna’s business model, as describedabove, delivers long-term sustainable gross profit.
Klarna demonstrated this through operating
profitability for the first 14 years of its existence.
In 2018 there was a strategic shift to invest in
taking the model and the brand to key larger
growth markets, the US and the UK. As the US hasgenerated increasing gross profits for 5 consecutive
quarters, in FY23 we delivered a Group gross profit
margin of 50%, increasing 12pp YoY, while grossprofit increased 60% YoY.

Consumer credit losses (SEKB)
11.7

7.3

-3.8
-5.6

FY22

FY23

Klarna’s continued growth and scale, coupledwith our focus on cost control and the strategic
utilization of AI for enhancing productivity andefficiency, have positively impacted our operating
leverage. We reduced operating expenses by-16% YoY, including G&A by -10%, technology andproduct development costs by -11% and customer
service and operations by -14% YoY. With ourincreased scale in growth markets and higher
brand awareness, we have increased the efficiencyof every dollar spent, delivering significant growthfor both Klarna and our retail partners while
reducing sales and marketing costs by -31% YoY.
As a result, in FY23, we increased our incremental
volume generated per SEK spent on sales andmarketing by 40%.

K L A RN A H O L D I N G A B (P UBL)

FY22

FY23

Overall our investments over the past 3 years haveallowed us to scale the business and solidify our
network across all the markets. With our key US
growth market now delivering gross profits, 98%of our GMV in 2023 is generating a gross profit,
allowing us to deliver a 50% gross margin. With
our continued investment in AI, coupled withcompounding growth, our overall operating result
has improved by 69% and by 95% on an adjusted
basis.
We are excited about the future and remaincommitted to delivering value to our shareholders
while providing exceptional service to our customers.
Niclas Neglen
Chief Financial Officer, Klarna

A N N UA L R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTSOCIALCORPORATE GOVERNANCE

APPENDIX

9

Report from theBoard of Directors
K L A RN A H O L D I N G A B (P UBL)A N N UA L R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTSOCIAL

10

CORPORATE GOVERNANCE

Report from the Board of Directors
Business overview
The CEO of Klarna Holding AB (publ) hereby submits
the report for the period January 1 – December 31,
2023. This report presents the financial statements
for Klarna Holding AB (publ) and consolidated
financial statements for the company and andits subsidiaries as well as the ESG and corporate
governance reports. The report has been preparedin millions of Swedish kronor (SEK) unlessotherwise stated.

Information about the business
Klarna Holding AB (publ)’s subsidiary, Klarna BankAB (publ) is an authorized bank and is under thesupervision of the Swedish Financial Supervisory
Authority (Finansinspektionen). Klarna was foundedin 2005 in Sweden and has been a fully licensed
bank since 2017, active in 45 markets. We are an AI
powered global payments network and shopping
assistant that accelerates commerce by offering
fairer, more sustainable, innovative solutions. We
are committed to providing a seamless and secure
shopping experience that helps our customers
save time, save money and worry less about theirfinances.

Klarna is on a mission to accelerate commerceby putting customers at the heart of everything
we do. We began by revolutionizing the retailbanking industry before expanding into commerce
solutions with strategic investments to solve real
problems identified through consumer insights in the
shopping journey. Our success is the result of strong
relationships with consumers, retailers, and partners
built on trust. Maintaining this trust, especially inthe finance industry, requires ethical practices
and doing what’s right. These principles are woven
into all aspects of our business, including data
privacy, corporate governance, and fair treatment of
employees.

Business results
Net operating income
In FY23 Klarna’s GMV growth outpaced global
e-commerce 1 by almost 7 times, fulfilling our
mission to accelerate commerce while helping
consumers save time and money, and worry lessabout their finances. GMV increased 17% YoY to
SEK 981B (FY22: SEK 837B) and Total Net Operating
Income increased 23% YoY to SEK 20.6B in FY23
(FY22: SEK 16.7B). Revenue increased 22% to SEK
23.5B (FY22: SEK 19.3B) over the same period.
1

Our commission income - primarily the fees
retailers pay Klarna - increased 30% to SEK
17.8B (FY22: SEK 13.7B). This is due to growing
consumer adoption that boosted payment volumes
processed through the Klarna network and thecontinued growth in global retail partnerships toover 550K.

Financing product. Interest income grew 17% YoY
to SEK 4.8B (FY22: 4.1B) at a significantly slower
pace than revenue and total net operating income.
Interest expenses represent just 12% of total
operating expenses increasing to SEK 2.9BM(FY22: SEK 1.1B) at the end of the period.

The increase was driven by deposits from thepublic increasing YoY to SEK 97.1B (FY22: SEK
81.5B) as our savings accounts in Germany andSweden continue to attract and retain consumers
and we maintain attractive savings rates in linewith interest rate rises.

Operating expenses

Klarna continued to drive volume growth while
reducing credit losses, highlighting its agility
in operating leverage. Credit loss performance
improved 29% YoY with credit losses declining to
SEK 4.0B (FY22: SEK 5.7B) for the period.

Total operating expenses before credit losses
have decreased by 8% YoY to SEK 19.8B(FY22: SEK 21.5B) as Klarna harnessed thepower of generative AI to drive productivity
and efficiency gains.
Average FTEs over the year were 5,545. Headcountat the end of the year was 4,201.

Balance sheet
Outstanding loans at 31 December 2023, loans to
the public, increased 16% YoY to SEK 86.1B(FY22: SEK 74.0B) as a result of significant GMV
growth across key markets. It’s important to note
this does not represent all loans originated in FY23.
Klarna’s balance sheet turns over c12x per year
due to the short duration of our loans thanks to
products such as Pay Now, Pay in 30 and Pay in 3 or
4, meaning 92% of volumes generated during 2023

Klarna’s operating result for the period was SEK -3.2B(FY22: SEK -10.5B), a 69% YoY improvement.
On an adjusted basis the improvement was 95%.
Net result for the period improved 76% to SEK -2.5B(FY22: SEK -10.4B)

were repaid during the year. Outstanding loans at
31 December represent only those loans yet to be
repaid. This rapid turnover rate is a key factor in
our efficient use of capital to generate revenues,
ensuring an asset-light balance sheet, setting us
apart from more traditional banks whose longer
loan durations tie up capital for extended periods.
It also allows us to finely control credit losses andsee any changes we make to underwriting impact
our balance sheet very quickly. The CET1 ratio for
Klarna Holding AB is 16.2%.

Branches abroad
Klarna Bank AB (publ) operates Klarna Bank AB
Danish Branch, Klarna Bank AB French Branch,
Klarna Bank AB Irish Branch, Klarna Bank AB German
Branch, and Klarna Bank AB UK Branch. Klarna

Bank AB Sucursal em Portugal (Klarna Bank AB’s
Portuguese Branch) was closed on 29 December
2023, although Klarna remains an active participant
in the Portuguese market.

Interest income increased primarily due to interest
earned on liquid assets held with other credit
institutions such as our overnight deposit portfolio,
as opposed to consumer interest from our Fair

Salesforce Shopping Index

K L A RN A H O L D I N G A B (P UBL)A N N UA L R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTInteractions with regulators
In Germany, Klarna has actively engaged withnational policymakers and regulators, including
government officials and members of parliament
and the German Bundesbank, on the revised
EU consumer credit directive and the latest EU
payments package.
In the US, Klarna has continued to work positively
with the Consumer Financial Protection Bureau,
although in 2023 it seems their focus has shifted a
bit more to peer to peer payments, digital wallets,
data brokers, and nonbanks broadly. We continue toactively engage with the Biden Administration andCongress to push for proportionate regulation of
BNPL and benefits of AI in financial services.
In Sweden, Klarna responded to the inquiry into overindebtedness, which was published in June. The
inquiry highlighted the pervasive issues contributing
to increasing levels of consumer indebtedness
in Sweden along with some proposed remedial
measures. Klarna supports many of these measures,such as a lowering of the current interest rate cap
and the introduction of a new national debt register.
In the EU, following the publication in the EU
Official Journal in November 2023, European
institutions have finalized their revision of theEuropean Consumer Credit Directive, expected to
be transposed in all 27 EU Member States before
November 2025 and to come into force at the endof 2026. Klarna welcomes the finalization of the text
to reinforce, streamline and modernize consumer
credit rules to ensure they are future proof andbetter protect consumers across the EU and weare pleased to see that the EU political agreement
includes proposals for a proportionate regime for
BNPL. Throughout the process Klarna has actively
engaged in discussions with European stakeholders,
national governments and consumer groups toensure consumer credit rules are fit for purpose andeffectively protect European consumers.

SOCIAL

Significant events
In June 2023, the EU Commission published a seriesof proposed rules looking at modernizing payments
regulation in Europe. Klarna has always believedthat consumers should have control over theirpersonal data, as it belongs to them and that there
is an opportunity to redesign a regulatory payments
environment that enables local fintechs to compete,innovate, and deliver maximum value for European
consumers. We have actively engaged on the topic
with relevant stakeholders, issuing a number ofcomments on the Payment Service Directive 3,
Payment Regulation 1 and Financial Data Accesspackage which are expected to be negotiatedthroughout 2024 and 2025.
In the Netherlands, Klarna, together with other
BNPL providers and in alignment with the Dutch
government, finalized their work on self-regulation toraise industry-wide consumer protections by issuing
the first-European BNPL Code of Conduct in October
2023. The Code includes agreements aroundclear information provision, protecting vulnerable
consumers, avoiding loan-stacking, and clear rules
for excluding minors and was welcomed by theGovernment, supervisor and industry alike. This is a
first step ahead of regulation for the sector expected
as part of the implementation of the European
Consumer Credit Directive (CCD) in 2026.
In the UK, Klarna’s UK entity - Klarna Financial
Services UK (KFSUK) was given authorisation by the
Financial Conduct Authority to provide credit andpayment services.
In November 2023, a meeting was held with theSupervisory College, comprising members from
SFSA, Bafin, Deutsche Bundesbank, FCA, AFM,
and NO-FSA, with the Group Management team ofKlarna. This meeting aimed to discuss key elementsof Klarna’s business operations, focusing on areas
such as AI, Sustainability, Consumer Protection,
Credit Underwriting, Financial Performance, andCybersecurity.

■ During January and February 2023, an additional
31,383 Klarna Holding shares were issued as partof the funding round announced in July 2022.
■ On 23 February 2023, Klarna Holding AB
subscribed for 7,272,875 newly issued sharesin Klarna Bank AB as part of an internal allocationof funds.
■ On 6 March 2023, Klarna Holding AB subscribedfor 3,632,006 newly issued shares in Klarna Bank
AB as part of an internal allocation of funds.

■ On 16 May 2023, Klarna Holding AB issued
SEK 500M floating rate Tier 2 notes.
■ On 16 August 2023, Klarna Holding AB issued
SEK 250M Tier 2 notes.
■ On 12 October 2023, Klarna Holding AB
subscribed for 7,264,011 newly issued shares inKlarna Bank AB as part of an internal allocation offunds.
■ On 15 November 2023, Klarna Holding AB
redeemed EUR 25M notes.

Significant events after the period■ On 1 February Klarna Holding AB issued SEK 1.5B
of Additional Tier 1 Capital Notes.

Future development
Klarna is on a mission to accelerate commerce. We willcontinue to expand our commerce solutions, poweredby generative AI, to better serve our global base of
consumers and retailers. We will continue to invest in

our products and services including the Klarna app,
Card, bank accounts, open banking and our marketing
services to create a strong platform for future growth
as the shopping destination of the future.

Proposed treatment of unappropriated earnings
The Board and the CEO propose to the Annual General Meeting that the non-restricted equity of
SEK 42,539,621,384 on Klarna Holding AB (publ)’s balance sheet at the disposal of the Annual
General Meeting to be carried forward.
Additional Tier 1 instruments
Retained earnings
Net result for the year
Total

K L A RN A H O L D I N G A B (P UBL)

11

CORPORATE GOVERNANCE

0 SEK
42,357,491,149 SEK
182,130,235 SEK
42,539,621,384 SEK

A N N UA L R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTSOCIALCORPORATE GOVERNANCE

12ESG Report 2023
K L A RN A H O L D I N G A B (P UBL)E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTSOCIAL

13

CORPORATE GOVERNANCE

ESG Report contents

Introduction

14

Sustainability

19

Environment

27

SocialAbout Klarna

15

Recognition

20

Climate action

28

Financial wellness

44

A global presence

18

Materiality assessment

21

Environmental sustainability
in business operations

Fighting financial crime46

30

ESG risk assessment

22

Our people

48

Klarna’s climate contributions

31
Commitment to human rights

55

Supply chain

56

Community engagement

57

Political advocacy

59

Global tax commitment

60

Sustainability approach

23

ESG governance24

Stakeholder engagement

Impact partnerships

34

Our planet health initiative

35

26
Vote with your wallet

36

Circular shopping

39

Effortless donations

K L A RN A H O L D I N G A B (P UBL)

43

Corporate Governance

61

42

E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTSOCIALCORPORATE GOVERNANCE

14

About theESG Report

In accordance with the Annual
Accounts Act for Credit Institutions andSecurities Companies (ÅRKL 1995:1559)
chapter 7, 2§, in conjunction with
the Annual Accounts Act (1995:1554)
chapter 7, 31 b§ and chapter 6, 11§,
implementing the EU Directive 2014/95,
Klarna Holding AB (publ) is reporting its
environmental, social, and governancestrategies, progress, activities, andperformance for the entire Group in its
2023 Annual Report and Accounts forthe year ended 31 December 2023.

In deciding what content to cover in thisreport, we have considered the double
materiality assessment we conducted in
November 2021 and the Global Reporting
Initiative (GRI) reporting standards.
The information and data contained inthis report relate to activities carried out
in the 2023 financial year, from January
1, 2023, to December 31, 2023, the same
reporting period as the Annual Reportand Accounts.
Unless otherwise noted, data is as of andfor the year ended December 31, 2023.

K L A RN A H O L D I N G A B (P UBL)E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTSOCIAL

15

CORPORATE GOVERNANCE

About Klarna
Introduction
Klarna’s vision is to set the new standard for how
people shop and pay. Since 2005, our customers
have always been at the heart of how we build smart
solutions for their needs. With around 150 million
global consumers and 2.5 million transactions
per day, Klarna’s fair, sustainable and AI-powered
payment and shopping service empowers
consumers to shop smarter with greater confidence
and ease. More than 550,000 global retailers
partner with Klarna to drive growth and loyalty,
including H&M, Saks, Sephora, Macy’s, Ikea, Expedia
Group, Nike and Airbnb. For more information, visit
Klarna.com.

We became the first fintech to join The Climate
Pledge and Race to Zero campaign and makeannual financial contributions to high-impact
climate projects, including carbon removal,
reforestation and forest protection, and emission
reduction projects.
The information herein focuses on the pillars ofenvironmental sustainability, social responsibility,and governance, which are all directly relevant to
the integrity of Klarna’s business operations.

Business model – value proposition to consumers
Klarna provides spending tools that are affordable,
accessible and transparent. By supporting smart
everyday money habits and discouraging predatory
financial practices, Klarna sets the standard
for more ethical, consumer-first services thatempower a more inclusive society. As a player inthe retail industry, we also have a role to play indriving environmental sustainability. With Klarna’s
range of sustainability features, customers canmake more informed and responsible shopping
decisions.
The Klarna app, now available in 25 markets,
powers an end to end shopping experience, helping
consumers to manage their transactions andoffering a smarter shopping experience. It gives
people access to our payment products and ways
to manage their payments, providing them with an
overview of their finances and spending insights,
a personalized shopping feed powered by AI, a

K L A RN A H O L D I N G A B (P UBL)

shopping lens to visually identify items and whereto shop them by taking a picture and a searchtool comparing thousands of retailer websites.
Other features include shoppable videos, wishlist
capability, a digital loyalty card wallet, exclusive
deals and price drop notifications, friendly
reminder push notifications, 24/7 customer service
through chat, the option to snooze payments,
delivery tracking, return reporting, CO₂e tracking
and the ability to resell items.
The in-app shopping feature makes it possible touse Klarna with all online retail partners who have
not yet integrated with our powerful platform.
Klarna’s browser extension enables consumers toshop with Klarna’s flexible payment options on theirdesktop at every online store, even if the retailer is
not yet a Klarna partner. Klarna is also increasingly
available in physical stores across markets andthrough the Klarna card.

150M
Global consumers

2.5M+
Transactions per day

550K+
Global retail partners

First fintech to join The Climate
Pledge and Race to ZeroE S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTSOCIALThe consumer journey

16

CORPORATE GOVERNANCE*

Inspiration and discovery

At check-out

Post-purchase

Managing personal finances

Discovery shopping feed

Shoppable Video

Flexible, one-click payments

Delivery tracking & Returns

Klarna Bank AccountCategorization

Powered by AI, gives consumers
a feed of personalized productrecommendations in the Klarna
App to help them find and shop
items most relevant to them. The
feed updates in real time andbecomes increasingly tailored, as
it learns more about the user’s
preferences.

Offering shoppers an endlessstream of curated video content
in the Klarna App and the option
to purchase any item directly via
the video.

Providing maximal flexibility
and transparency, whicheverway consumers choose to pay
online or in-store: pay now, pay
later or pay over time.

Providing consumers with an
overview of the status of theiractive deliveries, no matter if
the purchase was made withKlarna or not.

Exclusive Deals

Klarna Card

CO₂e Emissions Tracker

Helping consumers understandexactly where their money
goes and to make more
conscious spending decisions
by automatically organizing
purchases made with Klarna into
product categories.

Offering shoppers curated
exclusive deals and personalized
shopping collections in the Klarna
App that are updated daily.

Bringing Klarna’s flexible,
interest-free payment methods
into a physical card, empowering
consumers to pay how they likeeverywhere they go.

Giving consumers insights
into the CO₂e impact of theirpurchases, displaying theestimated emissions set free
for every step of the product’s
lifecycle.

Offering consumers a free bankaccount with which they canhandle their finances intuitively
with instant account top-ups,
real-time transfers to their friends,
fixed term deposits with highly
competitive interest rates, no fees
for spending abroad, and two free
ATM withdrawals every month.

Search and Compare
Powered by PriceRunnertechnology - a search tool in
the Klarna App that compares
thousands of retailer websites inreal-time to help consumers findwhat they love for the best price.

Browser extension
Offering shoppers flexible
payment options on their desktop
at every online store, even if
the retailer is not yet a Klarna
partner, and enabling couponsand cashback offers to be
automatically added to purchases.

Loyalty Cards
Enabling consumers to store
their physical loyalty cards as
digital versions in one place.

Automatic Coupons
Automatically applying thebest coupons for consumers at
checkout ensuring they get thebest possible deal.

Top Up Donations
Allows shoppers to add a $1
donation to select purchases,
supporting planet healthinitiatives with a focus on
climate, people and biodiversity.

*

Klarna Rewards Club
Members earn “points” forevery payment they make ontime with Klarna, no matter
whether they pay now, pay lateror pay over time, which can beredeemed in the Klarna App for
rewards at world-class brands.

ResellPools
Helping consumers to organize
their savings goals with up to 3
free sub-accounts in the Klarna
Bank Account, for which they can
set a target amount and a time
horizon to start saving and staysaving.

Monthly spending breakdown
Helping consumers track theirspending levels month overmonth and compare them to theiraverage spending via an intuitiveand interactive bar chart.

Budgeting
Helping consumers to set amonthly allowance for themselvesto control how much they spend
with Klarna.

Enabling consumers to speed
up the process of creating
listings on secondhand
marketplaces by pre-filling
product details and images in
the Klarna app.

Availability of features varies by country.

K L A RN A H O L D I N G A B (P UBL)E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENT

Value proposition to retailers and partners
Klarna is a preferred growth partner for more than
550,000 retailers of all sizes worldwide. We engage
new and existing consumers across the shopping
journey and connect them directly to retailers todrive growth as a viable and competitive alternative
to global marketplaces.
We also create new and innovative ways for retailers
to connect to consumers through content creation
partnerships, dynamic search advertising and virtual
shopping. We ensure that our retailer partners can
reduce working capital requirements by providing

simple, safe payment solutions and consumer credit
products across all e-commerce platforms and inphysical stores. Klarna’s offering includes advertising,marketing, technology, credit risk handling, customer
services, administration, and deep consumer insights.
With Klarna, retail partners receive easy integration
with global access and onboarding to a fast andfriction-free checkout solution where they arepaid upfront, meaning they can focus on what they
do best. Klarna assumes credit risks for both theconsumer and the retailer.

Solutions for retailers
Express Checkout

Ads Manager

Helping retailers to boost
conversion and provide shoppers
with a faster checkout by adding theExpress button to their cart page.
With pre-filled data for all Klarna
shoppers, retailers can offer greater
convenience and reduce cart
abandonment, even if consumers
visit their site for the first time.

A self-service advertising platform
for retailers which harnesses
Klarna’s first-party data so retailers
can reach the right shopper at theright time, while ensuring consumers
enjoy a more relevant shopping
experience.

Klarna Creator Platform

Customer RelationshipManagement (CRM)
Campaigns

Helping retailers to find creators
best suited to their brand andenabling seamless collaboration
through instant messaging, gifting,and commission setting.

Highlighting branded content to our
shoppers through various channels
in Klarna’s ecosystem to driveincremental traffic to our brandpartners.

SOCIAL

17

CORPORATE GOVERNANCE

Klarna’s Open Banking Platform
for retailers and partners
Klarna’s world-leading Open Banking platform
provides simple access to more banks than any
other Open Banking provider globally, buildingon all of Klarna’s ecommerce expertise to offer asuite of open banking products and solutions.
Klarna’s Open Banking platform rapidly reduces thetime for new fintech services to reach global scale
while providing the essential building blocks forinnovation in financial services - from payments andaccount insights to identification. It equips financial
institutions, fintechs, and retailers with the essential
connectivity to build the next generation of fintech
apps and services by providing simple and secureaccess to over 11,500 financial institutions in 26
countries around the world through a single API.

Our Open Banking platform enables
simple and secure acces to over

11.5K financial
institutionsin 26 countries
around the world through a single API. Today, ourOpen Banking platform processes close to

1B information requests
to bank accounts each year.

Ads and sponsored content
Helping retailers by highlighting
deals, individual products, and evencollections of 20 or more products
to segmented audiences in the
Klarna App. We help with the designof creatives and provide detailed
analysis and insights on campaign
performance.

K L A RN A H O L D I N G A B (P UBL)

Maintaining our high level of trust
Our success to date is the result of the high degreeof trust we have built with consumers, retailers, andpartners in all markets. This trust is critical in thefinancial sector and when handling personal data.
Maintaining that trust requires us to operate withthe highest ethical standards and strive to do what‘sright every day.

Such standards are upheld across all parts of thebusiness - from handling sensitive personal data
to a robust corporate governance framework andensuring all employees are treated with respect in asecure and welcoming working environment.

E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTSOCIAL

18

CORPORATE GOVERNANCE

A global presence
Klarna has 45 offices
in 27 countries with its
largest office in central
Stockholm, Sweden. To
ensure flexibility andspeed, our overall officestrategy is shifting to anincreased proportion offlexible office space.

North America
USA
Austin, TX
Columbus, OH ■Los Angeles, CA
Las Vegas, NV
New York, NY
Portland, OR
San Francisco, CA

EuropeCanadaMontreal
Toronto*MexicoMexico City

Austria
ViennaBelgium
BrusselsCzech Republic
PragueDenmark
Copenhagen
Nykøbing ■FinlandHelsinki ■FranceParis

Germany
Berlin ■CologneGiessen ■Mannheim
MunichGreeceAthensIrelandDublinItaly
Milan
Netherlands
Amsterdam
NorwayOslo

SwedenGothenburg
Stockholm ■UppsalaPolandWarsaw
Wroclaw
Portugal
LisbonRomania
Bucharest
Spain
Barcelona
MadridSwitzerland
Zurich*UK
LondonManchester

Asia
China
Shanghai
ShenzenAll new offices with lessthan 200 workstations areserviced by coworking
partners.

Japan
Tokyo
South Korea
Seoul

Oceania
Australia
Sydney■ Conventional Office
Coworking Office

New Zealand
Auckland* New in 2023

K L A RN A H O L D I N G A B (P UBL)E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTSOCIALCORPORATE GOVERNANCE

Sustainability
K L A RN A H O L D I N G A B (P UBL)

19

E S G R E P O RT 2 0 2 3

BoD REPORTCONTENTSESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTSOCIALCORPORATE GOVERNANCE

20

Sustainability at Klarna
As Klarna grows, so does our responsibility to
our stakeholders, society and the planet. We
recognize our impact on global ESG issues, suchas climate change, human rights and combating
financial crime, and their effect on our business.
We are tackling climate change by finding
innovative ways to make a systemic impact. The
intention is for this impact to go beyond our own
company and into broader society.
We are tackling climate change by reducing ourown greenhouse gas emissions and addressing
biodiversity loss through our planet healthinitiatives. While we do not have complete
control over climate issues in our value chain,
we support our consumers in finding retailers
having made real efforts to reduce their negativeenvironmental impact, and engage with our

suppliers on how they can reduce their footprint,
to name a few.
We have a direct impact on society by,for example, offering fair, transparent andsustainable payments for consumers, having
measures in place to prevent financial crimesuch as fraud, bribery and corruption ormoney laundering, ensuring an inclusive andempowering environment for Klarnauts (Klarna
employees), and actively engaging in thecommunities where we have a presence.
Klarna has corporate and sustainability
governance procedures in place to gain andmaintain the trust of all our stakeholders. We
believe that good corporate governance isensured by running a business responsibly,
efficiently and as sustainably as possible.

Recognition
This year Klarna was named as the Most
Sustainable Bank in Sweden by the 2023
Sustainable Brand Index.
In addition, we:■ won the Most Disruptive Global Climate
Action Initiative in the CSR Excellence Awards
2023, run by The Business Concept;■ secured a finalist spot in the Reuters
Responsible Business Awards in the Net Zero
Transition Award category for our climate
action approach;and■ won the Plus x Award in the categories
Future Proof and Strategy.

K L A RN A H O L D I N G A B (P UBL)E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTSOCIAL

21

CORPORATE GOVERNANCE

Materiality
assessment
We applied a double materiality methodology 1 andconsidered the impact of Klarna’s business on global
ESG issues and the impact of such issues on Klarna,e.g., climate change and labor rights. As part of theassessment, we conducted qualitative interviews

Climate change ●Data security & privacy ●Impact on planet & societyWith the support of independent experts, we
conducted our first materiality assessment at theend of 2021.

Financial wellness ●with 15 internal and external stakeholders, aconsumer survey in four markets with close to 3,000
respondents, a global employee survey, and internal
workshops to analyze and prioritize the results.
As a result of the materiality assessment, threepriority areas and five focus areas with greaterbusiness relevance and impact on the planet andsociety were identified:Priority topics (material topics):

Climate change

Financial wellness 2

Data security & privacy

Mitigating climate change
impact by reducing greenhousegas (GHG) emissions connectedwith online shopping.

Educating consumers about
responsible spending, managing
personal finances, providing
transparency of expenses andpayables, and fostering accessto new payment solutions andfinancial products.

Ensuring that personal datais stored and used securely,compliant, and responsibly.
Fostering cyber security toensure undisrupted processes,
service quality, and countering
cyber-attacks.

Other impact areas:● Circular economy● Personal data empowerment● Diversity, inclusion and equity● Employee welfare, health,and safety● Natural resources andbiodiversity

K L A RN A H O L D I N G A B (P UBL)

The deep understanding we gained from the assessment
results reflected our existing ESG focus areas of Climate Action,
Financial Wellness, and Diversity and Inclusion and our businessfocus on data security and privacy. It also identified new areas
where we should develop strategic actions, such as the circular
economy, which we embedded in our sustainability approachand have developed further during 2023.
We have highlighted the material topics where they are coveredin this report.

● Circular economy● Personal data empowerment

Employee welfare, health & safety ●Natural resources & biodiversity
Employee learning & development ●Human empowerment ●Informative company disclosure ●●● Diversity, inclusion & equity● Business ethics● Human & labor rights

Community engagement ●Materiality matrix with 50/50 weighting for internal stakeholders(employees, executives) and external stakeholders (consumers,
investors, NGOs, regulators, retail partners).

Business relevance1

The methodology used in our 2021 Double Materiality Assessment predated the requirements for a double materiality
assessment set out in the Corporate Sustainability Reporting Directive 2022/2464/EU (the CSRD). In Q4 2023 we started
updating our Double Materiality Assessment to align with the requirements of the CSRD.

2

Financial Wellness was covered in the materiality assessment by the two topics Financial Stability & Literacy, andFinancial Inclusion & Accessibility.

E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTSOCIAL

22

CORPORATE GOVERNANCE

ESG risk assessment
2023 ESG risk assessment
At Klarna, one of our aims is to achieve sustainablebusiness success by proactively addressing ESG
factors. We recognize that these factors playa critical role in ensuring our business remains
resilient amidst fast evolving economic andcompetitive landscapes. Our commitment to ESG is

Our key ESG risk themes
deeply integrated in our Risk Control Management
approach, as we understand ESG risk as a potential
business risk that can impact our ability to achieve
our strategic goals and as a driver of other risks
across the business.

■ Climate Change

Understanding ESG risks
To gain a comprehensive understanding of ESG
factors, we conduct an annual ESG risk assessment.
This assessment builds upon the work of ourcentral Sustainability team. This process integrates

Based on our extensive research and input fromover 24 stakeholders, including discussions withmore than 20 teams during workshops, we’ve
identified five primary ESG themes for the period2022-2023 including their risk areas:

forward-looking insights regarding upcoming
regulations, guidelines, and protocols. Notably,
it considers the Task Force on Climate-related
Financial Disclosures (TCFD) (see Appendix).

The risk that transitional or physical factors
impact our business model, regulatorycompliance, operations, or credit risk exposures
to consumers or partners resulting in legal,
reputational, and financial impacts for Klarna,
its staff, and its consumers. Managed throughproactive product design, engaging in climatechange research assessments, consumer
engagement, and regulatory intelligence scanning.

■ Modern slavery and human rights
The risk that Klarna or its supply chain does not
appropriately manage modern slavery risks that
result in legal, reputational, and financial impacts
for Klarna, its staff, and its consumers. Managed
through supply chain due diligence processes
and people processes.

■ Diversity, inclusion and equity
The risk that Klarna or its supply chain does
not implement sufficient diversity and inclusion
approaches that result in legal, reputational,
and financial impacts for Klarna, its staff, and its
consumers. Managed through people processes.

■ Data privacy and security
The risk that Klarna’s information is not managed
and secured in an appropriate way resulting
in legal, reputational, and financial impacts forKlarna, its staff, and its consumers. Managed
via modern technology and security systems
supported by specialist engineering experts.

K L A RN A H O L D I N G A B (P UBL)

■ Financial wellness
The risk of Klarna’s action, or lack of action,leads to poor outcomes for customers and legal,
reputational, and financial impacts for Klarna,
its staff, and its consumers. Managed throughspecialist product and consumer servicing
design.

This structured ESG risk assessment ensures that
Klarna is well-prepared to address significant ESG
risks while remaining compliant with regulatorychanges. The comprehensive methodology and ourcommitment to sustainability further enhance ourassociated ESG risk routines. This approach allows
us to respond effectively to stakeholder inquiries
and explore new ESG projects to enhance ourpositive contribution to the society.
The results of the 2022-2023 ESG risk assessment
were summarized in a report that identifies theprioritized risks and associated mitigation actions,the timeline for their implementation, and the keyrisk owners. The list of risks and actions has been
integrated into Klarna’s risk monitoring system
to ensure effective tracking of progress. As an
example of these actions, we recently completed aquantitative analysis focused on Climate Change risk.
This analysis aimed to further assess the potential
long-term impacts of various climate-related
scenarios on our business. The insights gained
from this analysis are enabling us to increase ourunderstanding to consider additional initiatives. Our
approach to this analysis aligns with international
methodologies like the one provided by Network forGreening the Financial System (NGFS).

E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTSOCIAL

23

CORPORATE GOVERNANCE

Sustainability approach
Klarna’s sustainability approach is twofold: addressing
sustainability within our own operations and having
an impact beyond them. Within our operations, we
actively work towards reducing our carbon footprint
and mitigating biodiversity loss. We combat financial
crime while prioritizing cybersecurity and dataprotection. Moreover, we promote financial wellness
and diversity and inclusion, all informed by ourmateriality assessment. However, our commitment
extends beyond our operations. We aim to empower
consumers by providing them with unbiased
information to make smart, informed and responsible

purchasing decisions for example through our in-app
CO2e tracker. Further, our efforts to drive sustainablecredit practices, such as removing revolving credit
and unnecessary fees and offering flexible payment
times, assist consumers in paying on time throughfriendly reminders.

Beyond our continuous efforts to make our operations more sustainable, we have defined six priority areas where Klarna can really make a difference. These are:Financialwellness

Diversity, inclusionand equity

ClimatechangeVote withyour wallet

Circular
shopping

Effortless
donations

Klarna aims to help
consumers save time andmoney and reduce worry,empowering them to makeinformed decisions and takecontrol of their finances.
From spending overviews to
in-app budgeting tools, Klarna
products offer flexibility
with a choice of ways to pay,
including delaying payment
or spreading the cost with nofees or interest over a shortperiod of time.

Klarna believes that diversity
and inclusion are key factors
in the company’s continued
success. Differences arerespected and highly valued
at Klarna, and we strive toprovide everyone with anequal-opportunity workplacethat promotes diversity,
equity, and inclusion.

Klarna has opted to follow theWorld Wildlife Fund (WWF)and Boston Consulting Group(BCG) blueprint for corporate
action on climate and nature.
It guides how companies
measure and display theiremissions, set targets to
reduce them, price what isremaining, and contribute
financially to effective climate
projects.

We understand that not
everyone has the same time,commitment or depth ofunderstanding of the complex
issues involved to make moresustainable decisions. But we
do believe consumers canbecome empowered to makebetter-informed decisions
with the right information
presented at the rightmoment.

Klarna is uniquely positioned
to help consumers maximize
the use of products and to
shop for pre-owned items.
We incentivize consumers
to participate in the circular
economy by highlighting retailpartners offering circularservices, care and repair tips
and options for reselling theirKlarna-purchased products.

We have created several
touchpoints in our ecosystem
where Klarna consumers
can donate to causes theycare about. We believe that
donations should go directly
to the cause, choosing
grassroots organizations tomaximize the impact of each
donation.

K L A RN A H O L D I N G A B (P UBL)E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTSOCIAL

24

CORPORATE GOVERNANCE

ESG governance■ Anti-Money Laundering & Counter
Terrorist Financing Policy
The integration of ESG principles is fundamental
to Klarna’s Strategic framework. Our Leadershipteam handles matters like flexible work, employee
engagement, and inclusion. Our Risk Control teamupholds stringent ESG risk measures, and our
Sustainability teams spearhead measures to makeour operations more sustainable and enables
other teams to incorporate ESG issues to theirwork.
All ESG-related teams report to their respective
members of the Group Management Team. For
instance, the Sustainability teams are led byKlarna’s Sustainability Lead, who reports to theChief Marketing Officer (CMO). The CMO holds
overarching accountability for these programs

within the Group Management Team. The GroupManagement Team is formed of the Chief Executive
Officer, Chief Product and Design Officer, Chief
Operating Officer, Chief Financial Officer, Chief
Marketing Officer, Chief Technology Officer, Chief
Commercial Officer, Chief Risk Officer, Chief
Compliance Officer, Chief Information Security
Officer and the Chief Credit Risk Officer.
At least once per quarter, the Group Management
Team and Sustainability Lead assess and manage
climate-related risks and opportunities alongside
those relating to our other products, services,and operations. ESG risks form part of Klarna’s
business risk reporting, which is presented to theBoard on a quarterly basis.

Governing documents
Klarna conducts its activities credibly and ethicallyand always strives to comply with applicable laws
and business practices. It is not enough to simply
follow the rules, and we actively seek to ensure that
our actions are not harmful to others.
If illegal behavior or activity comes to light, we work
closely with law enforcement authorities to ensure
they receive all the information they need, to theextent permitted by bank secrecy laws.

K L A RN A H O L D I N G A B (P UBL)

Klarna has the following ESG-related
policies and practices:■ Climate Commitment
Klarna’s Climate Commitment outlines
our climate action strategy, our efforts
to reduce Klarna’s carbon footprint, andhow we promote climate action beyond
our own footprint to contribute toa more environmentally sustainable
future. You can read about our climate
commitments below, or find the Climate
Commitment here.

Klarna’s Anti-Money Laundering & Counter
Terrorist Financing Policy establishes
standards and procedures to prevent Klarna’s
products from being used for money launderingand terrorist financing, and to comply with allapplicable regulatory requirements, as well as
establish general responsibilities with regards
to mitigating the risks associated with money
laundering and terrorist financing.

■ Sanctions Policy
Klarna’s Global Sanctions Policy sets
standards and procedures to ensure Klarnaand its employees conduct business inaccordance with applicable sanctions laws
and regulations, and mitigate potential
compliance, regulatory and reputational risks
associated with potential sanctions violations.

■ Data Privacy Policy
Klarna’s Data Privacy Policy sets out a numberof principles that, taken together, constituteKlarna’s approach to data privacy and serve
as a foundation for all other data protection
instructions, and routines, throughout theorganization.

■ Information Security Policy
Klarna’s Information Security Policy defines
the overall goals, roles, and responsibilities
as it pertains to information security acrossthe three lines of defense. It establishes
an information security management
system under which Klarna can manage its
information security risks in a structured waythat is suitable for our size and complexity.

■ Supplier Code of Conduct
Klarna’s Supplier Code of Conduct sets
forth the principles that we expect our
suppliers and their subcontractors to abide
by in their business relationship with Klarnaand promotes lawful, professional, and fair
practices that integrate respect for humanrights, business ethics, and the environment.

■ Vulnerable Consumer Policy
Klarna’s Vulnerable Consumer Policy ensuresthat we have internal rules and guidelines inplace so that consumers are treated in a fairand consistent manner, as we are committed
to providing the highest level of diligence andethical treatment with regard to any consumer
or potential consumer who may be identified as
being vulnerable or being at risk for vulnerability.

■ Global Work Environment Policy
Klarna’s Global Work Environment Policy
sets out a workplace where all employees
contribute to creating and maintaininga healthy and safe work environment. It
provides routines and descriptions for all work
environment-related activities and provides
all employees with knowledge and awarenessof the applicable legislation, risks at theworkplace, and how to contribute to a healthy
environment.

E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORT■ Code of Business Conduct
Klarna’s Code of Business Conduct sets
out the values that shape our behavior andguide us in how we conduct our business. It
serves as a guide to our relationships witheach other, our customers, partners, andother stakeholders.

■ Compliance Policy
Klarna’s Compliance Policy sets out the
key principles for how Klarna ensurescompliance with laws, regulations andinternal governing documents, anddescribes activities and values to establish asound risk culture and the main features of
the Compliance Program.

■ Conflict of Interest Policy
Klarna’s Conflict of Interest Policy ensuresthat Klarna has appropriate and effective
procedures for actively and continuously
identifying, assessing, managing, orpreventing actual and potential conflictsof interest that may arise in our day to day
activities.

ESG INTRODUCTIONSUSTAINABILITYENVIRONMENT■ Ethics Policy
Klarna’s Ethics Policy describes our highethical ambitions and clarifies and illustrates
our ethical principles and standards.

■ Internal Governance andControl Policy
Klarna’s Policy on Internal Governance andControl establishes the principles for how
Klarna shall implement and maintain Internal
Governance and Control and sets theprinciples for risk management, compliance,and outsourcing.

SOCIAL

25

CORPORATE GOVERNANCE

Compliance training
Our employees play a crucial role in Klarnabeing a good corporate citizen by creating trustwith stakeholders and complying with laws
and regulations. All employees must complete
mandatory Compliance training (e-learning),
which requires annual recertification. Amongother things, the training covers Klarna’s Codeof Business Conduct, whistleblowing, conflicts ofinterest, sanctions and, anti-money laundering, andcountering terrorist financing. Additional tailored
training for employees is provided based on therole and responsibilities.

Compliance training

2023

2022

2021

Completion rate of mandatory online compliance training 3(% of total workforce)

86%

91%

90%

■ Whistleblowing Policy
Klarna’s Whistleblowing Policy documents
Klarna’s reporting mechanism for
employees, consultants, outsourced
partners and other third parties who wish toconfidentially report any potential unethical,
illegal, or improper conduct.

3

The completion rate also includes employees on leave (e.g., parental leave, long-term sick leave).

■ Ethical Instructions for Partners
Klarna has established clear ethicalguidelines consisting of some generalprinciples, to prevent our products andservices from being used in unethicalways, which are: Unethical Business
Methods and Practices (Klarna shallnot cooperate with retailers that sell
products or carry out services withmeans and methods that are misleading,
deceptive, abusive, or unfair to customers,
or otherwise unethical or illegal) andUnethical Products and Services (Klarna
will not cooperate with retailers providing
products or services that Klarna considers
unethical under these guidelines in its
sole discretion). The ethical guidelines
apply contractually when onboarding newretailers, and are actively monitored toensure compliance.

K L A RN A H O L D I N G A B (P UBL)E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENT

Stakeholder
engagement
Stakeholder confidence in Klarna is a crucial part ofour business and critical to our success. This trustand confidence are earned by acting responsibly byoffering protection and support to consumers andretail partners and meeting or exceeding society’s
expectations.

SOCIAL

Stakeholder group

Ways to engage interest groups

Consumers

Customer satisfaction surveys
Self-service portal and app
Customer support
Dispute management
Klarna’s Consumer Council
Social Media

Retail partners

Customer satisfaction surveys
Self-service portal
Retailer support

Employees

Workers Council (Germany)
Work Environment Committee (Sweden)
Unionen (Sweden)
Finansförbundet (Sweden)
Employee engagement surveys
Open Slack culture
Performance and development dialogue
Leadership program
Klarna’s Marketing Academy
Annual kick-off and monthly All-hands staff meetings
Internal events
Whistleblowing

Shareholders/investors

Personal meetings
Answering investors’ ESG questionnaires
Participating in investors’ ESG roundtables
Results Calls
Newsletters

Suppliers

Dialogue during the purchasing process

Regulators and supervisory authorities

Supervisory review and evaluation process
Regulatory reporting
Ongoing discussions
Answering inquiries					Community engagement activities

Stakeholder groups
Maintaining and nurturing stakeholder relationships
is key to driving ESG at Klarna. Continuous andtransparent dialogue with our stakeholders
increases our understanding of their priorities andexpectations. Our relationship with them helps us
concentrate our efforts and resources towards
progress on ESG topics.

NGOs

K L A RN A H O L D I N G A B (P UBL)26

CORPORATE GOVERNANCE

Tax authorities

Tax returns
Information exchange in relation to account holders
Constructive engagement regarding tax law changes

Politicians / Policymakers

Policy events
Conference, hearings, & inquiry attendance
Policy submissions
Direct meetings
Ongoing discussions
Answering inquiries

E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTSOCIALCORPORATE GOVERNANCE

Environment

K L A RN A H O L D I N G A B (P UBL)

27

E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTSOCIAL

28

CORPORATE GOVERNANCE

Climate action
MATERIAL TOPIC
Klarna’s Approach to climate action
At Klarna, our approach to environmental
sustainability includes diligently reducing ouroperational environmental footprint, participatingin funding projects that drive environmental
initiatives, and empowering consumers to adopt moresustainable shopping habits. Klarna’s climate action

approach is in line with the leadership practices set out
in the WWF and BCG Blueprint for Corporate Action on
Climate and Nature. We are committed to reducing ourcarbon emissions. Acknowledging the emissions yet tobe mitigated, we’ve implemented an internal carbon tax
which we use to finance impact-focused climate action.

Emissions from Business Travel increased by 19%
year-on-year, primarily due to employee travel toKlarna’s first company-wide in-person meeting in
Stockholm since 2019.
Overall carbon intensity was significantly reduced
by 39% year-on-year to 4.7 tCO2e/mSEK of revenue.
This puts Klarna on track to meet our 2030 targetof reducing carbon intensity by 50% against a 2019baseline of 7.0 tCO2e/mSEK.

Key initiatives that have driven the decrease in our
carbon footprint■ Significant reductions in our supply chain carbon
footprint due to efficiency initiatives that havestreamlined resource use across Klarna’s business.

■ Ongoing commitment to the procurement of
100% renewable electricity for all Klarna offices.

■ Improved data collection methods haveincreased the use of primary activity data in
our carbon footprint calculations, leading tomore accurate results.

Reducing Klarna’s carbon footprint
To ensure a robust foundation for our climate action
strategy, Klarna’s carbon footprint is calculated
annually, following the guidelines of the GHG Protocol
Corporate Accounting and Reporting Standard andthe Corporate Value Chain (Scope 3) Accounting
and Reporting Standard. As is common practice, we
distinguish our emissions by three scopes:■ Scope 1: Direct emissions from operations thatare owned or controlled by Klarna, e.g., the on-siteenergy consumed through the heating of our offices.

■ Scope 2: Indirect emissions from the generation ofpurchased or acquired electricity, steam, heating,or cooling consumed by Klarna, e.g., the electricity
used in our offices.

2023

2022

2021

2020

2019

Direct (Scope 1) GHG emissions (tCO₂e)

67

281

279

341

234

Indirect (Scope 2) GHG emissions (tCO₂e)

52

66

6

1,420

456

Other indirect (Scope 3) GHG emissions 4 (tCO₂e)
3.1 Purchased goods and services
3.2 Capital goods
3.3 Fuel and energy related activities
3.5 Waste generated in operations
3.6 Business travel
3.7 Employee commuting
3.8 Upstream leased assets

109,824
96,61621
159
152
10,1552,616
105

146,928
128,571
2,471
445
718
8,510
5,833
379

152,995
145,028
3,245
241
0
2,423
1,385
388

100,752
95,871
1,830
247
103
1,330
1,119
252

55,73247,431
1,805
151
424
4,694
1,172
55

in Stockholm and Berlin, and the continued
procurement of renewable electricity across all
Klarna offices.

Total GHG emissions (tCO₂e)109,943

147,275

152,710

102,51356,422

4.7

7.6

9.6

9.3

7.0

Procurement-related emissions, which fall under the
categories Purchased Goods and Services and Capital
Goods and accounted for over 87% of Klarna’s overall
carbon footprint, decreased by 26% year-on-year. This
was the result of an overall businesswide efficiency
drive that significantly reduced the volume of carbonintensive goods and services Klarna purchased in
2023 even as revenue continued to grow.

Change in absolute GHG emissions YoY (%)

-25%

-3.7%

+49%

+87%

-

■ Scope 3: All indirect emissions (not includedin scope 2) that occur in Klarna’s value chain,including both upstream and downstream
emissions (e.g., employees’ business travel,
energy used to operate cloud or marketing
services).

Our 2023 carbon footprint
Klarna’s overall 2023 absolute carbon footprint
decreased by 25% compared to 2022. This was driven
by emission reductions across nearly every emission
category, with the exception of Business Travel.
Absolute scope 1 and 2 emissions decreased by
66% year-on-year. This was the result of a strategic
shift to flexible office spaces and a corresponding
consolidation of Klarna’s leased offices (shiftingsome emissions to scope 3), as well as significant
improvements in data quality, such as the collectionof primary data for Klarna’s two largest offices

K L A RN A H O L D I N G A B (P UBL)

GHG emission scope

GHG emissions intensity (tCO₂e per SEK 1M revenue)

4

The breakdown of scope 3 emissions provides an overview of all scope 3 categories that are relevant to Klarna in line with
reporting requirements under the GHG Protocol Corporate Value Chain (Scope 3) Accounting & Reporting Standard. Categories
not listed here are not relevant.

E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTION

Our emission
reduction targets andinitiatives

SUSTAINABILITYENVIRONMENTSOCIAL

29

CORPORATE GOVERNANCE

Targets and Progress

We have set several
milestone targets
to guide us on ourjourney to becoming a
net zero business.

TargetProgress 2023

Progress 2022

Progress 2021

By 2025, all our offices will run on
100% renewable electricity.

All of Klarna’s offices use 100%
renewable electricity since2022, meeting our target three
years early.

All our offices use 100% renewableelectricity.

Majority of our leased offices
switched to renewable electricity,with 12 of 15 leased offices runningon renewable electricity.

4.7 tCO₂e per Revenue Intensity- Total GHG emission for Scope 1,
2 & 3 in tCO₂e relative to 1M SEK
Revenue.

7.6 tCO₂e per Revenue Intensity- Total GHG emission for Scope 1,
2 & 3 in tCO₂e relative to 1M SEK
Revenue

9.6 tCO₂e per Revenue Intensity- Total GHG emission for Scope 1,
2 & 3 in tCO₂e relative to 1M SEK
Revenue.

Klarna’s absolute GHG emissions
decreased by 25%, primarily driven
by reductions of our supply chain
emissions.

Steady improvements in the
carbon intensity of purchased
goods and services resulted inan overall reduction of Klarna’s
absolute GHG emissions of 3.7%.

Driven by a significant increase insupply chain emissions as a resultof strong business growth, Klarna’s
absolute GHG emissions increasedby 49% in 2021.

We will:■ Procure certified green electricity tariffs
where this option is available■ Purchase energy attribute certificates tofill any gaps

By 2030, we will reduce our revenue-basedcarbon intensity by 50% across scope 1, 2
and 3 from a 2019 baseline. 5
We will:■ Continue to use 100% renewableelectricity across global Klarna offices■ Encourage our suppliers to measure andreduce their emissions■ Work to establish a zero-carbon cloudinfrastructure■ Continue to reduce emissions frombusiness travel■ Explore innovative reduction
opportunities
for our upstream emissions

By 2040, we aim to reach net-zero scope
1, 2 and 3 GHG emissions. 6
We will:■ Reduce our our value chain emissions to
as close to zero as possible■ Remove the remaining emissions throughpermanent carbon sequestration

K L A RN A H O L D I N G A B (P UBL)

5

The wording of this commitment has been changed since the previous year to provide additional clarity on its substance. Furthermore, the currency in the intensity metric has been changed to
SEK from USD to align with Klarna’s overall financial reporting.

6

The wording of this commitment has been changed since the previous year to provide additional clarity on its substance.

E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTSOCIALCORPORATE GOVERNANCE

30

Environmental
sustainability inbusiness operations
Waste management
Klarna’s waste management strategy across its
offices focuses on implementing the waste hierarchy:
avoiding and reusing waste where possible, increasing
recycling rates, and diverting remaining waste awayfrom landfill.
Since Klarna’s operations are office-based, withrelatively low overall waste volumes, the main focus
is to ensure opportunities for fractional recycling in
the office spaces and to minimize non-recyclable
office waste. Our Global Office Services teampromotes and facilitates recycling as much as

possible and encourages action through events like
our Global Earth Week, where Klarnauts could learn
about conservation and recycling through engaging
educational events.
The recycling rate across the two primary Klarnaoperated offices in Stockholm and Berlin is 16% andrecycling rates across nearly all of Klarna’s WeWork
offices, which account for close to 75% of Klarna’s
flexible working desks, exceed 40%, with manycertified as Zero waste to Landfill.

IT equipment
As a technology-driven company, providing our
employees with optimal IT equipment is critical to
our success. Having the right tools is a necessity tofurther develop and maintain the innovative products
and services we offer to our consumers and partners.
Klarna strives to ensure sustainable consumptionof physical electronic goods as much as possible.

K L A RN A H O L D I N G A B (P UBL)

We reuse as much of our IT equipment as possible
and ensure that each device is fully utilized anddepreciated before it is recycled. When recycling,
we work with various partners around the globe torefurbish and recycle used equipment of a greater
value (e.g. laptops, mobiles, and screens), most ofwhich are repaired and resold.

E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONENVIRONMENTSUSTAINABILITY

SOCIAL

31

CORPORATE GOVERNANCE

Klarna’s climate contributions
Klarna’s internal carbon tax
While we are on our journey to reduce ouremissions to net zero by 2040, Klarna will have
GHG emissions that are yet to be reduced. Klarna istaking responsibility for these emissions by levying
an internal carbon tax on our annual emissions andusing these funds to finance climate action.
Notably, Klarna is financing Beyond Value Chain
Mitigation (BVCM) in a contribution model. In
this model, rather than buying carbon credits to“offset” our emissions, we contribute the funds
raised through our carbon tax to a portfolio ofclimate projects focused on maximizing overall
climate impact. Like many experts, we believethat this approach is a much-needed evolution

Funds raised from our internal carbon tax (USD)of the way companies have traditionally financed
climate action and Klarna is amongst the first large
businesses pioneering it worldwide.
We apply the internal carbon tax annually, basedon our annual carbon footprint calculation.
Specifically, we price those emissions that are
more directly under our control (i.e. Scope 1, 2,
and business travel emissions) at USD 100 per
metric ton and more indirect emissions (i.e. allother Scope 3 emissions) at USD 10 per metric ton.
In the fiscal year 2023, our carbon tax amounted to
2.0M USD, contributing to a total of 7.0M USD
of finance for climate projects since 2020.

Total

2023

2022

2021

2020

7.0M

2.0M

2.3M

1.7M

1.0M

Klarna’s contribution to the Climate
Transformation FundThe funds generated by the internal carbon tax
are donated to projects selected by the Climate
Transformation Fund (CTF). The CTF is a charitable
fund, curated by Milkywire, that enables companies tofund impactful climate solutions to help reach global
net zero. Established in 2021 with the collaborationand support from Klarna, the fund has supported 30
projects to date.
To address the climate crisis, a range of solutions isrequired, including reforestation, renewable energy
implementation, carbon capture, and policy changes.
The CTF supports three impact pillars: 1) nature
protection and restoration, 2) decarbonization, and 3)
carbon dioxide removal.

re-greening practices. The decarbonization pillar
accelerates climate policy ambitions, emphasizing thesubstitution of fossil fuels. The carbon removal pillar
promotes the development and deployment of newtechnical solutions and scales mature options likebiochar. These projects often generate environmental
and social co-benefits.
As of 2023, Klarna has contributed over USD 5M to
the CTF. From our 2023 contribution, we will receive
8,877 credits for carbon removal, meaning we paid toremove 8,877 tons of CO₂e from the atmosphere.

With a focus on maximizing long-term CO₂ reduction
or removal per dollar spent, the CTF scales
existing nature-based climate solutions, prevents
deforestation, and supports socially sustainable

In this way, we aim to drive catalytic climate action
while also supporting those most affected by the
impacts of the climate crisis. We believe this approach
can inspire other companies to follow our example:
to also set ambitious targets, put a price on theiremissions, and contribute to the vital climate solutions
the planet needs.

Klarna paid a carbon tax ofKlarna paid a carbon tax of

As of 2023, Klarna has contributed overWe paid to remove

USD 100

USD 10

USD 5M

8,877

Per metric ton for emissions under Klarna’s
control (Scope 1, 2 and travel emissions).

Per metric ton for indirect emissions(rest of scope 3).

to the Climate Transformation Fundsupporting 30 projects.

tons of CO₂e from the atmosphere.

K L A RN A H O L D I N G A B (P UBL)E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTSOCIAL

32

CORPORATE GOVERNANCE

Projects supported by Klarna’s contribution to the Climate Transformation Fund in 2023:

Carbon removal
Silicate harnesses the power of mineral weathering
to permanently remove carbon dioxide from theatmosphere using enhanced weathering of concrete(waste product) that is spread on fields to sequester
carbon, eventually becoming limestone.

Takachar employs patented technology to convert
crop residues into biochar offering multiple benefits:
avoiding the burning of those residues, carbon capture
through the use of biochar, reduction of the use ofsynthetic fertilizers, and minimization of wildfire risks.

USD 250K

USD 150K

InterEarth grows a multi-species selection of highly
adapted coppicing woody plants in Australia. Following
periodic trimming, the harvested biomass is buried andencapsulated in dedicated subterranean chambers
for long-term storage to permanently store the carbon
captured within the biomass.

Mission Zero Technology employs a direct-air
mineralisation technique to capture atmospheric CO2,
converting it into rock within three days. This carbon isstored as durable carbonates, useful in construction or
responsible landfilling, simplifying the CO2 capture andmineralisation process with lower energy intensity.

USD 300K

USD 100K

Husk transforms rice husk waste into highly effective
biochar in Cambodia, helping to boost soil fertility,
increase revenues for smallholders and draw downcarbon into the soil, where it remains for hundreds ofyears.

Octavia Carbon designs and constructs Direct Air
Carbon Capture (DACC) machines to filter CO2 fromthe air, which is then permanently stored undergroundutilizing Kenya’s basaltic geology to mineralize CO2.

USD 50K
Carbon Capture Scotland utilizes bespoke technology
to capture waste biogenic CO2 from whisky distilleriesin Scotland, which is then cleaned, liquefied, andgeologically stored. Through this process, they explore
the largely untapped carbon removal potential offermentation sources, with future plans to enhancebiodiversity in the Scottish Highlands.

USD 100K

USD 100KTotal

USD 1.45M

USD 100K
Parallel Carbon advances a novel direct air capture(DAC) technology, merging mineral-air reactions,electrochemistry, and clean power to extract
atmospheric CO2. This CO2 is then supplied topartners for long-term mineralization or undergroundgeological storage.

USD 100K

SeaO2 uses electrochemical oceanic carbon capture
technology to treat water and capture and store
its CO2 content, returning the treated water to theocean’s surface layer where it can continue to absorb
more CO2.

TerraFixing’s technology captures carbon dioxide
directly from the air using ADsorption technology andstores it permanently through geological sequestration.
Their process is designed to operate in cold remotelocations where extracting CO2 from the air is easierand cheaper, and where there are high potentials forrenewable wind energy to power the units.

USD 100K

USD 100K

K L A RN A H O L D I N G A B (P UBL)

Inplanet focuses on enhancing rock weathering byspreading silicate rock powder on tropical agriculturallands, a method especially promising in these regions
for capturing carbon in soil leachates and waters,
eventually storing it in ocean sediments. Addressing
the knowledge gap on tropical soil weathering
processes, Inplanet ensures safety by using certified
rock powders.

E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENT

Restoring and protecting nature
Plant with Purpose simultaneously
addresses environmental
degradation and poverty alleviationby sharing knowledge with ruralcommunities on nature restoration
and regenerative agricultural
practices.

USD 83K
Justdiggit and their partner LEAD
Foundation are teaching farmers to
use simple and natural methods togrow the tree stumps they alreadyhave into large mature ones.

USD 83K
Planète Urgence is a global
conservation organisation,
particularly active in Indonesia.
The CTF-funded project combats
ecological detriments from shrimp
farming and deforestation in
Borneo’s Mahakam Delta andAdang Bay.

USD 74K
The Ceibo Alliance, an Indigenousled organization operating in
the Upper Amazon (Ecuador,
Colombia, and Peru), empowers
Indigenous communities to combat
deforestation and preserve thesevital carbon sinks. They map andmonitor forests, assisting community
patrols in detecting and deterring
rainforest-harming activities.

USD 74K

SOCIAL

Decarbonisation and advocacy
Landesa aims to protect andrestore mangrove forests in the
Bay of Bengal and Southeast Asia,
benefiting coastal communities’
livelihoods and mangrove health.
This project includes securing
forest tenure, sustainable land
management, reforestation, andafforestation. Landesa collaborates
with six regional governments toadvance sustainable mangrove
management, blending on-theground restoration efforts withadvocacy for secure tenure rights.

USD 74K
Warsi in Indonesia helps local
communities to get forestry
licenses for their land so they
have the legal right to it and canprevent the rainforest from being
cut down to make room for palm oil
plantations or livestock.

USD 46K
Total

USD 434K

New Energy Nexus (NEX) supports
clean energy entrepreneurs in Asia
and Africa. This project specificallyfocuses on establishing policy
and regulatory frameworks that
support the growth of clean energy
technology startups in Indonesia.

USD 55K

Clean Air Task Force has createdan African energy and climate
innovation program to lay thefoundation for a clean energy future.
They are focused on local needs,
enabling growth and economic
development, not just microgrids forhousehold consumption.

USD 74K

Human Rights Watch is a NGO
advocating for human rights andsustainability. They actively engage
in initiatives to combat the impactof fossil fuels, for example in Bosnia,
they halted a coal-fired power plantand promoted renewable energy laws.
In the US, they supported a lawsuit
against new fossil fuel facilities in“Cancer Alley.” HRW plans to continue
these initiatives in oil-producing
countries like the UAE and Iraq.

Carbon Market Watch is a prominentorganization striving to influence
EU carbon removal policies. CMW
proposes a novel approach to monitor
the EU’s carbon removal targets,preventing the risk of discouraging
mitigation efforts due to the absenceof distinct reduction and removal
targets. This approach aims to achievenear-zero emissions for the benefit ofboth the climate and society.

USD 74K

USD 66K

Industrious Labs is a new organization
dedicated to decarbonizing heavy
industries, with a specific focus on the
cement and aluminum sectors. Shiftingfrom carbon-intensive Portland cement
to existing, low-carbon technologies
can significantly reduce emissions
in this sector. Their aluminum
campaign aims to decarbonize the U.S.
primary aluminum industry, leading
to a substantial reduction in its CO2
footprint.

The Bungin Island Decarbonization
Project is an ambitious initiative
aimed at transforming the traditional
fishing practices of Indonesia’s mostdensely populated island. Through theintroduction of electric boat motors
and solar-powered cold storage,
this project seeks to significantly
reduce carbon emissions, setting
a sustainable example for fishingcommunities worldwide.

USD 87K
Beyond Zero is an independent thinktank working on net-zero pathways
for Australia, highlighting pathways
that show how the green transition isbeneficial for the economy.

USD 26K

K L A RN A H O L D I N G A B (P UBL)33

CORPORATE GOVERNANCE

USD 87K
Total

USD 469K
Find out more about the projects we aresupporting here.

E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTSOCIAL

34

CORPORATE GOVERNANCE

Impact partnerships
Collaboration is a crucial ingredient for successful climate action.
That is why we partner with corporate climate leadership initiatives to go further, faster. As of 2023, we:are committed to The Climate Pledge

K L A RN A H O L D I N G A B (P UBL)

have joined the Race to Zeroare active members of
Leaders for Climate Action

continue to disclose our climate
governance, initiatives and performancein the CDP Climate Change Questionnaire

E S G R E P O RT 2 0 2 3

BoD REPORTCONTENTSESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTSOCIALCORPORATE GOVERNANCE

35

Our planet
health initiative
Give OneIn April 2021, Klarna pledged 1% of all future funding
rounds to Give One, our planet health initiative.
Based on three investment rounds, this commitment
now totals USD 24.5 million by the end of 2023.
Together with our strategic sustainability partner,
Milkywire, we support change-makers on thefrontlines of environmental challenges and showcase
their work being done on the ground. We strongly
believe that the growth of our business needs tosupport conservation, mitigation, and restoration
efforts for climate and biodiversity.
To make sure we select the right organizations, Give
One has an Advisory Board, a group of experts intheir fields who provide the initiative with invaluable
scientific knowledge and extensive experiencein environmental development, conservation,and project financing. We have summarized
the progress Give One has made in the Give
One Progress Report 22/23, where we havedocumented in detail how the funds pooled by ourGive One initiative have been used.

Employee donations
During 2023, we launched several employee
engagement formats, including internal climate
competitions and hackathons on planetary
health and climate change education. As part ofthis engagement, we donated an additional SEK
1,212,921 to various Give One projects.

Give One supports over 50 organizations throughout North America, South America,
Africa, Europe, and Asia. Some highlights include:

43,000 people

61,000 people

benefitted in livelihood improvement activities
relating to forest conservation in Kenya andGhana in 2022 alone

have engaged in activities throughGive One to restore and protect our planet –including government officials, schools, andcommunity members

900,000 hectares

3.4 million trees

2.2 million acres of habitat across the globe
have seen positive impact thanks to
Give One-supported organizations

have been planted to restore and reforest
important ecosystems by organizations
supported by Give One

K L A RN A H O L D I N G A B (P UBL)E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITY

Vote withyour wallet
More than ever, consumers are aware of
how their purchasing behavior impacts theenvironment and in turn, vote with theirwallets by choosing brands and products thatalign with their values.
Consumers are actively seeking information
to guide their purchasing decisions.
According to Klarna’s latest Shopping Pulse
Survey nearly 1 in 3 consumers state theimportance of brands and retailers to act inan environmentally sustainable way.

Klarna carries out

2.5M
transactions per day. By providing

150M
global consumers with better information
as they shop with Klarna, we can make an
impact on environmental and social aspects.

We know that not everyone has the sametime, commitment, or depth of understandingof the complex issues involved to makesustainable choices. Still, we believe inempowering our consumers to make betterinformed decisions by providing them with theright and easy-to-understand information at
the right time - all without judgment.

K L A RN A H O L D I N G A B (P UBL)

We are committed to increasing sustainability
awareness amongst our consumers byproviding them information at both brandand product level. At the brand level, we
provide our consumers with pre-purchaseinsights into the sustainability performanceof retail partners on various sustainability
achievements based on vetted 3rd party
data including Good On You and Clarity AI.
This information allows shoppers to makeinformed decisions, helping them to discoverbrands that align with their values.
On the product level, consumers havethe opportunity to access pre-purchase
information and choose products based on
third-party sustainability certifications, such
as Global Organic Textile Standard (GOTS),
People for Ethical Treatment of Animals(PETA), and Cradle to Cradle. Additionallythey can access post-purchase information,
including insights into the CO₂ emissions dataof the products they purchased and learn
more through sustainability tips about how totake care of their products.

ENVIRONMENTSOCIAL36

CORPORATE GOVERNANCE

Targets and Progress
TargetProgress 2023

Progress 2022

Progress 2021

Empowering ourconsumers to makebetter-informed decisions
by providing them witheasy-to-understandinformation at the righttime.

● Upgraded the CO₂Emissions Tracker toinclude insights into theenvironmental impactof 150 million products
within Home & Garden,
Jewelry & Accessories,
Health & Beauty andElectronic categories.

● Upgraded CO₂e
Emissions Tracker
to provide shoppers
worldwide with CO₂eemissions data at a
product level for nearly
60 million fashion
items.

● Launched CO₂e
Emissions Tracker inall markets, offering
consumers CO₂e
insights for shopping
purchases.

● Launched new
touchpoints andfeatures in the
shopping experience
in-app to highlightsustainability
information aboutbrands to consumers.
In 2023 we had 4.75
million purchases fromconscious brands.
● Launched a conscious
shopping touchpoint
on klarna.com to serveas the main accesspoint to Klarna’s wide
range of sustainability
related information andservices.

● Launched Conscious
Collections highlighting
105 fashion brands in
18 markets, enabling
consumers to findconscious brands in the
fashion category.
● Highlighted
environmentallyconscious brands,
showcasing theoutstanding
environmental effortsof electronics brands.

● Highlighted moresustainable products,
emphasizing reuse andupcycling through inapp lists to consumers.
● We highlighted thesustainable effortsof our retailers andencouraged consumers
to shop consciously
through our Vibes
program. As a result,
our consumers received
twice as many Vibes forconscious shopping in
April.

● Launched sustainability
campaigns thatshowcase thesustainability efforts ofour retail partners to
consumers.

● Launched newsustainability
search filters toenable shoppers to
discover productsthat received thirdparty sustainability
certifications.

E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTSOCIAL37

CORPORATE GOVERNANCE

Product Level Sustainability information
CO₂e Emissions Tracker
Consumers are taking brands to task anddemanding tools that help them shop moresustainably. In response to that growing demand
for a better understanding of the impact of
their purchases, in 2021 we introduced Klarna’s
CO₂e Emissions Tracker. The CO₂e Emissions
Tracker provides insights into the estimated CO₂eemissions of purchases made by consumers via
the Klarna app. By displaying the estimated kgCO₂e value of each transaction, we aim to raise
consumers’ awareness of the emissions related
to their purchases and encourage them to act
on these emissions by either learning how toshop more sustainably or donating directly to the
Climate Transformation Fund via the Klarna app.
Since the CO₂e Emissions Tracker’s launch in April
2021, 7.26 million consumers have used it and on
average, over 280K consumers track their carbon
footprint every month.
In 2023, in conjunction with our partner Vaayu,
we elevated the CO₂e Emissions Tracker to give
consumers even deeper insights into the emissions
related to their purchases. The CO₂e Emissions
Tracker now provides the estimated CO₂ on productlevel for the following product categories: Fashion,
Home & Garden, Jewelry & Accessories, Health& Beauty and Electronics. We provide estimatedCO₂e emissions data for 150 million products
across all categories. In addition to this we alsoenhanced the CO₂e Emissions Tracker to include
advanced insights into the CO₂ emissions tied topast purchases, meticulously analyzed at a productlevel. The improved version provides an in-depth
breakdown of a product’s CO₂ emissions, touchingon every step of the product’s lifecycle – from raw
material extraction and processing, to productassembly and delivery to the end user.

K L A RN A H O L D I N G A B (P UBL)

Sustainability Tips

Sustainability Search Filters

We are continuously working towards adding newfeatures to our product offering to help those
consumers who want to adopt a more conscious
lifestyle.

In our latest Klarna Pulse Survey Q2 2023, 42%of our consumers globally think it’s importantthat brands use sustainable materials in theirproducts. We believe that third-party sustainability
certifications can enable consumers to makepurchases in line with third party certifications thatmatter to them.

In addition to the CO₂e Emissions Tracker, in 2023
we have included an educational section to informconsumers on best practices around how to takecare of their products while using them. The aim is tohelp consumers understand how they can maintainthe value of their products and keep them in use.
Consumers can learn about how to extend the life of
their products after the purchase, minimize the CO₂eemissions during usage and find practical steps suchas adhering to care labels and repairing well-wornitems.

In 2023 Klarna introduced new sustainability
certification filters enabling consumers to identify
products by third-party sustainability certifications
such as Global Organic Textile Standard (GOTS),
People for Ethical Treatment of Animals (PETA),
and Cradle to Cradle. The feature is available in our
search and compare tool online and in the Klarna
App. In the future we aim to enhance and extend thefilters to cover more product categories.

E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENT

Brand Level Sustainability information
Consumers are increasingly looking for brands
that share their values 7. Our goal is to empower
consumers to shop more consciously by providing
the right information at the right time. Our approachis to be facilitative - helping people to make smart
choices, without restricting those choices. We
remain a neutral platform that helps consumers
shop based on their values.
Showcasing sustainability information at the brandlevel is complex. There is no accepted definition ofwhat makes a company more sustainable and there
is no cross-industry alignment. With this in mind,
and in response to consumer demand, we havedecided to identify a retail partner’s sustainability
efforts through third-party sustainability ratings. We
carefully select our partners to provide consumers
with accurate and trustworthy information aboutbrands’ environmental efforts and achievements.
In 2023 we worked on integrating sustainability
information at the brand level more seamlessly into
the consumer journey, both pre and post purchase.

Conscious fashion brands with
Good On You
In February 2022, we officially launched ourpartnership with Good On You. Good On You ratings
enable consumers to understand the impact offashion brands on people, the planet, and animals,
and examines more than 1,000 data points todetermine a brand’s rating from 1 “We Avoid” to
5 “Great”. Good On You scores brands based on
the brand’s own external reporting, independentcertifications, and other standards-based systems(e.g., Fair Trade), and third-party reports and indices(e.g., the Fashion Transparency Index).

7

Brands rated 4 (Good) or 5 (Great) by Good On You
are highlighted in various touch points in the Klarna
App, in 18 markets.
In 2023 we were able to increase the numberof Klarna brands assessed by Good On You andhighlighted in the App. We also started a pilot withsome fashion brands to help them improve their
Good On You ratings.

SOCIALCORPORATE GOVERNANCE

38

Conscious electronics brands withClarity AI
According to the Q3 2023 Klarna Shopping Pulse
Survey, 39% of our global shoppers say thatsustainability when shopping for electronics isimportant to them.
In December 2022, we launched our partnershipwith Clarity AI to enable consumers to explore
electronics brands and learn more about theirenvironmental efforts. Clarity AI is an independent
sustainability technology platform that recognize
specific achievements and targets of brands within
environmental sustainability. This information
provides consumers with a simple and reliable way
to identify brands that are proactively addressing
climate change and indicate when a company, basedon publicly reported data, has lower greenhousegas emissions than comparable companies,
sources more than 90% percent of its energy fromrenewable sources, has a climate change policy androadmap to positively impact climate change, andwhen a company is transparent in reporting climaterelated information. In 2024 we plan to expand
our partnership with Clarity AI and broaden theassessment of brands to additional categories suchas Health & Beauty, Home & Garden.

Earth Week Initiative 2023:
Buy It For LifeAs part of our Earth Week Initiative in 2023, wepartnered with Reddit to compile a list of the mostpopular durable products. This was based on
consumer insights gathered from the r/BuyItForLife
community.
We employed ChatGPT and manual analysis
to scan r/BuyItForLife for the most frequently
mentioned products during 2022. This initiative
led to substantial media exposure, with key results
including close to 140 million press coverage
impressions and a total of almost 223 million
impressions. With this awareness campaign wewanted to help our consumers make smarter
shopping decisions considering durability andalso highlight our other related initiatives likecircular shopping and resell. Learn more about
the campaign here.

Q2 2023 Klarna’s Shopping Pulse

K L A RN A H O L D I N G A B (P UBL)E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG INTRODUCTION

ESG REPORTSUSTAINABILITY

Circular
shopping
At Klarna, we are well positioned to help
consumers maximize the use of products,
and we can help them purchase pre-owned
items. Our goal is to enable consumers toresell, donate or recycle pre-owned items,
and empower them to minimize waste andextend the life of products through circularservices.

There are four phases of thecircular economy:
We have identified two phases in the circular
economy process flow where Klarna can help
the industry transition to a circular economy:
the ‘Use’ and ‘Reuse’ phases. Using a T-shirt
as an example, the ‘Use’ phase examines
how we can take care of the product throughmeasures such as maintenance, repair, andredesign. This is where we see the greatest
potential to influence consumer behavior. In
the ‘Reuse’ phase, consumers have alreadylost their love for their favorite T-shirt, so weneed to look for ways to resell, donate, orotherwise extend the life of the product. At
this stage, we not only have the opportunity
to engage the consumer, but also our retailpartners.

39

CORPORATE GOVERNANCE

Progress 2022

Progress 2021

To incentivize ourconsumers to participate
in the circular economy,
we will add pre-owned
products throughout the
shopping journey andmake it convenient forthem to maximize thelifespan of their items
by providing options
and insights on how toreuse products they havepreviously purchased
through Klarna.

● We expanded the“Shop Circular”
Collection to moremarkets, to 19 in total.

● We launched the“Shop Circular”
collection in 12
markets, whichshowcase our
retailers’ circularservices to consumers.

● We introduced
shopping lists forsecondhand purchasesof luxury items for our
consumers.

● We continued to offer
edutainment content
to consumers about
the circular economy
through different
campaigns andactivities.
● We launched our
first Resell featurein Sweden, enabling
consumers to resell
products from past
purchases with Klarna.

● We launched several
circular economy
campaigns forour consumers,
highlighting
secondhand products
and educating
consumers on how
to care for theirproducts.

● We partnered with anumber of retailers
that sell pre-owned
goods, such as
Sellpy and Vestiaire
Collective. In 2021,
consumers placed
more than 540,000
orders with these
two retailers throughKlarna.

● We launched asustainability tips
section in our CO₂e
Emission Tracker
giving consumers tips
on how to extend thelife of the fashion andelectronics products
purchased via Klarna.

D
M A ESI
NU G
F

D
AN RE
TU

C
T H LOE

Progress 2023

AC

U

E
SU

Target

N

NG
SI OP
LO

RE
K L A RN A H O L D I N G A B (P UBL)

SOCIAL

Targets and ProgressSE

The circular economy is a system designed
from the outset to restore and regenerateresources. It ensures that materials andproducts never become waste but maintaintheir integrity and retain their highest value
for as long as possible.

ENVIRONMENTE S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTSOCIALCORPORATE GOVERNANCE

40

Shop circular collection
In 2023 we continued to highlight Klarna partners
contributing to the circular economy. The “Shop Circular”
collection was expanded to 19 markets and features
products and services from our partners that encourage
consumers to buy secondhand, use care and repair
services as well as take-back schemes to extend thelifespan of their products. We will explore further prepurchase touchpoints to show this information beyond
shopping lists in our app home feed.

Resell feature
In January 2023 Klarna achieved a significant milestone
as we launched a new resell feature within our app for our
Swedish consumers. This new feature transforms Klarna
into a one-stop-shop for both selling and buying.
The feature launched in collaboration with Tradera,
Sweden’s leading secondhand marketplace, and allows
users to list purchases bought using Klarna, for saledirectly via the Klarna App. By auto-populating listingson Tradera with images and product descriptions, we’ve
made it effortless for consumers to list items no longer
wanted for sale. This initiative provides our consumers
with an easy way to participate in the circular economy.
The launch received significant exposure with over 21.5
million impressions in paid and earned media. To date,
24.5 million products in the Klarna app are eligible forreselling. Since the launch the feature enabled 2,064
listings on Tradera. Looking ahead, our long term vision
is to make Resell available to more consumers acrossdifferent markets as well as continually integrating
circularity features throughout the Klarna ecosystem.

K L A RN A H O L D I N G A B (P UBL)E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTSOCIALCORPORATE GOVERNANCE

41

Climate Week NYC 2023
During Climate Week NYC in September 2023, we
took part in various events and panel discussions
to spotlight our latest sustainability-focused
products. Alongside this, we rolled out an
educational circular shopping campaign across
New York City.
The campaign also introduced a conscious
shopping touchpoint on klarna.com to serveas the main access point to Klarna’s wide
range of sustainability related information andservices. On the dashboard shoppers can try
our conscious shopping tools and read our tips
on how to extend the life of their items. This
engagement led to substantial visibility, with over
285 million total impressions.

K L A RN A H O L D I N G A B (P UBL)E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENT42

CORPORATE GOVERNANCE

SOCIAL

Effortless donations
We want to help our consumers to take action forthe planet so have created several touchpoints in
our ecosystem where Klarna consumers can donate
to environmental projects they care about, and also
receive more information about what their donations
contribute to.
Our strategic sustainability partner Milkywire,
supports us in finding and evaluating organizations toensure quality and impact and provides transparent
reporting on the impact of Klarna’s and ourconsumers’ donations.

Targets and Progress
TargetProgress 2023

Progress 2022

Progress 2021

By 2025, we aim to reach SEK 2 billion
worth of consumer donations throughour channels.

● 4.5M total consumer
donations this year.

● SEK 1.8M total consumer
donations this year.

● SEK 1.5M total consumer
donations this year.

● Made by 202K consumers.

● Made by 10K consumers.

● Made by 17K consumers.

Consumer donations

Add $1 to your purchase

Klarna Checkout donations

Season of Giving campaign

Since the launch in 2020, 230K Klarna consumers
have donated more than SEK 7.8 million through ourdonation touchpoints to planet health. The donations
have been distributed between our five main causes:
Protecting wildlife, restoring forests and landscapes,
fighting climate change, saving oceans and seas, andsupporting environmental defenders.

In 2023, we introduced a feature allowing our shoppers
to add a $1 donation whenever they choose to pay
with ‘Pay in 4’. This new initiative, available currently
in the US, enables shoppers to support non-profit
organizations while making their purchases with Klarna.

With the launch of Klarna’s Give One initiative in
April 2021, we have introduced several donation
touchpoints across the Klarna ecosystem. One of themost prominent donation touchpoints for consumers
is the donation banner we display on the purchaseconfirmation screen in Klarna Checkout. During2023, 7.5K consumers donated more than SEK 950K.
The feature is available in Sweden, Norway, Finland,
Denmark, Germany, Austria, and the Netherlands.

As part of Klarna’s Holiday Campaign, Season of Giving,
we let Klarnauts and Klarna consumers vote on how
USD 1.5 million from our 1% pledge should be allocated.
Klarnauts and Klarna consumers could choose
between two different causes - restoring forests andlandscapes, or supporting environmental defenders.
Once they completed their vote, we offered them thechance to also support the planet by donating to theirchosen charity. The campaign reached 2.5M shoppers
and more than 58.9K cast their vote on their preferredcause and the funds were split between the two causes
based on the voting proportions.

230K

193K

7.5K

Klarna consumers have donated more than

Klarna consumers have donated more than

Klarna consumers have donated more thanSEK 7.8M

SEK 2.2M

SEK 950K

K L A RN A H O L D I N G A B (P UBL)

Having launched in June, this initiative has been
met with a powerful response: over 193K consumers
have seized the opportunity to contribute, raising an
impressive total of SEK 2.2M so far. This accomplishment
not only underscores our commitment to sustainability
and ethical practices, but also reflects our customers’
increasing interest in making a positive difference.

58.9K
Klarna consumers voted on how to allocate

USD 1.5M
from our 1% pledge

E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTSOCIALCORPORATE GOVERNANCE

43

SocialK L A RN A H O L D I N G A B (P UBL)E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTSOCIAL44

CORPORATE GOVERNANCE

Financial wellness
MATERIAL TOPIC

We exist to help people spend their money
in a smarter way by offering alternative, fair,and flexible payment options, money-savinghacks, valuable rewards, and effortless money
management. All in all, we help customers makethe most of every dollar, enabling smart purchases
and sustainable spending habits. From detailed

spending overviews, and in-app budgeting tools
to auto discounts and our AI powered unbiased
search tool, we allow consumers to find the bestproducts at the best price and offer flexibility
with a choice of ways to pay, including delaying
payment or spreading the cost interest-free over ashort period of time.

Products supporting consumers’ financial wellness
We want to be part of driving change in the credit
and payments industry by making our productoffering more sustainable. We rolled out several
improved consumer-friendly products in 2023.
Klarna’s Financial Overview dashboard in the Klarna
App makes it easy for consumers to understandtheir spending habits and manage their budgets.
It offers a set of tools that gives them transparency
and control over their personal finances, such tools
include:Budgeting● LIVE GLOBALLY

Consumers can set a monthly allowance forthemselves to track how much they are spending.
The bar graph indicates to the user how much is leftof the set limit and the user is notified when they
are reaching or have passed their set limit.

Categorization● LIVE GLOBALLY

All transactions in the Klarna app are automatically
categorized based on product category so it’seasy for users to understand exactly what they are
spending their money on.

K L A RN A H O L D I N G A B (P UBL)

Monthly spending breakdown “Money Out”
● LIVE GLOBALLY

Money Story

Saving Calculator● LIVE IN GERMANY, SWEDEN AND THE UK● LIVE IN GERMANY

In January 2023, Klarna launched a personal
spending summary in Germany, Sweden and the
UK that provides consumers with useful insights
into their spending habits for the preceding year
and helps them be informed and in control of theirfinances. In order to help consumers translate theinsights from their Money Story into smart spending
habits and financial goals, each user’s Money Storyalso includes nudges to discover and test Klarna’s
free money management tools, such as the budget
tracker and the monthly spending breakdown.

This tool allows users to select a potential amountthey wish to put aside in their Klarna’s savings
account. Once the amount is determined, the tool
will display projected savings over a specific term 6 months, 1 year, 3 years - with clear views of bothmonthly and yearly returns. By providing these
explicit saving forecasts, we want to encourage
our customers to manage their finances more
intentionally, with an eye on future growth.

Spending Deviation Insights● LIVE IN THE UK

UK Credit Opt-out

Consumers can track their spending levels monthover month and compare them to their averagespending via an intuitive and interactive bar chart.
Each chart is color-coded to reflect what proportionis spent on each category, making it easy to see how
spending patterns change over time.

We offer consumers a fun and engaging way to getinsights into their spending habits, by receivinga monthly push notification if their spending has
increased or decreased more than 10% compared totheir average spending.

An in-app tool to give consumers more choice over
how and when they access Klarna’s credit products,
helping them save time and money, and worry lessabout their finances. First launched in the UK,
the tool gives consumers the ability to ‘switch off’Klarna’s credit products without losing access toKlarna’s shopping features or ‘Pay Now’.

Money In

Connected Accounts

Saving Accounts● LIVE GLOBALLY● LIVE IN AUSTRIA, BELGIUM, FRANCE, GERMANY,NETHERLANDS, SWEDEN AND THE UK● LIVE IN SWEDEN AND GERMANY

Consumers can track all their incoming payments
month over month - especially useful for Klarna
Card users and consumers who have connected
external accounts in the Klarna app - and comparethem to their average received money via an
intuitive and interactive bar chart, making it easy tosee how much money they’ve received over time.

● LIVE IN SWEDEN AND GERMANY

Through our aggregation feature, consumers canconnect external bank accounts in the Klarna app,so that they can see all their account informationsuch as balances and transactions in one place.

In Sweden and Germany, our consumers can savemoney with our fixed and flexible saving accounts
with competitive interest rates. In Germany, we havetaken the flexible savings accounts one step further,allowing consumers using the Klarna Bank Accountto organize their savings goals through our “Pools”
feature. Pools are sub-accounts in your Klarna Bank
Account that help you build a saving habit with
automated saving “Rituals” and goal setting. The“Goal Getter” ritual allows users to select a specificamount to be deposited into the pool weekly, whilethe “Roundup” ritual rounds up each card payment
to the nearest euro and deposits the excess change
into the pool, allowing users to save continuously
and conveniently on the side.

E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTSOCIALCORPORATE GOVERNANCE

45

Financial wellness initiatives
Money Management Pulse survey

Wikipink

The quarterly consumer survey assesses consumer
spending habits and preferences. It is conductedacross 18 countries and includes a minimum of
1,000 respondents per country.

We strive to earn our consumers’ trust every timethey engage with us. To create a transparent andfact-based discussion about consumer loans,
we launched our Wikipink sites in the Nordics in
2021 and in Germany in 2022. The sites present,among other things, data on reminder fees anddebt collection and enforcement cases not only
for Klarna, but the wider credit industry, where webelieve new, better standards need to be set.

UK Financial Literacy event
In December 2023, Klarna headline sponsoredand hosted a panel in the ‘New Year, WealthierYou’ event hosted by UK financial literacy platform
Pennies to Pounds, discussing money management
tools and how to use credit responsibly to help
attendees make a plan and better manage theirfinances ahead of the new year.

Money Talks
With the purpose of helping break the stigma
around money and sparking genuine and meaningfulconversations around spending, saving andshopping, in 2023 Klarna relaunched the Money
Talks card game that was first launched in 2021.
Informed by the Social Vulnerability Scale, which
is proven to foster closeness in conversation
through mutual vulnerability, the game comprises
three levels and a wildcard round, with eachlevel touching on a different theme including
relationships, personal habits, mindsets andfinancial basics. Money Talks is live in Germany andthe UK.

K L A RN A H O L D I N G A B (P UBL)

Sustainable payment research project
Klarna has an ongoing partnership with the
Sustainable Finance Lab in Sweden to conduct
a research project that aims to improveunderstanding of the Swedish consumer credit
market and propose concrete solutions to address
the existing problems.
Behavioral characteristics will be identified thatlead borrowers to take on too much debt, choose
costly credit, and other factors that may run
counter to borrowers’ interests. On the supply
side, researchers will examine, for example, how
product design can influence borrowers’ negativedecisions and the extent to which lenders engage inunderpricing of lending.
When completed, the study’s newfound insights
will contribute to a deeper understanding of theroot causes of the challenges, and make a soundcase for new regulatory reforms and better industry
practices that can contribute to a more sustainablecredit market.

E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTFighting
financial crime
The financial sector has a key role to play insociety’s prevention of – and fight against – financial
crime. Strong financial crime prevention practices
can modernize and digitalize activities and identify
the people behind such activities.

The main forms of financial crime that Klarna has
identified as having a significant impact on society –and which we can work to prevent – are:■ Fraud■ Bribery and corruption■ Money laundering and terrorist financing■ Cybercrime■ Sanctions evasion

How we prevent financial crime
Klarna takes the prevention of financial crime
extremely seriously. We actively manage the risksof financial crime through policies, instructions,and routines across Klarna. The Fraud prevention
domain at Klarna has the overall responsibility forpreventing fraud. We have multiple functions inplace to prevent money laundering and terrorist
financing and ensure compliance with internationalsanctions. The Compliance team is responsible for
our Anti-Corruption Program to ensure that Klarnaand its employees are not participants in bribery or
corruption, unintentionally or otherwise.

K L A RN A H O L D I N G A B (P UBL)

Employee training is key to fighting financial
crime. Our mandatory e-learning modules on
Code of Business Conduct, Whistleblowing,
Conflicts of Interest, Anti-money Laundering,Countering Terrorist Financing, and Sanctions
ensure all employees understand the importanceand the detail of the processes we have in place.
Completion of the annual training is monitored toensure it is completed by all employees.

SOCIAL46

CORPORATE GOVERNANCE

Anti-money laundering, countering terrorist financing
and sanctions
Klarna has no tolerance for establishing ormaintaining business relationships if there issuspicion of a customer using, or intending to use,
Klarna’s products or services for money laundering(ML) or terrorist financing (TF). The same applies if
there is insufficient knowledge of the customer tomanage the risk of ML/TF or to monitor and assess
the customer’s activities. In all, Klarna has the aim
to, within reasonable bounds and as required by
the relevant regulations and rules, minimize the riskof being used for all types of money laundering or
terrorist financing.
Additionally, Klarna has no tolerance for sanctions
evasion, as such, in accordance with our internal
governing documents, we utilize a number ofdifferent measures to comply with applicablesanctions regulations including screening
customers against the appropriate sanctions lists,
conducting a periodic review of our sanctions
exposure through a sanctions risk assessment, andproviding periodic training on relevant sanctions
topics to Klarna employees.
Klarna continuously identifies, manages, andmitigates risks, improves the measures taken,
and applies the three lines of defense model aspart of its risk-based approach for both antimoney laundering and sanctions compliance.
Where applicable, and as required by anti-money
laundering and countering terrorist financing laws
and regulations, Klarna has systems and routines
in place to perform “Know Your Customer” where

measures such as risk assessment, customer
due diligence, and transaction monitoring areused. Klarna has no tolerance towards facilitatingtransactions for individuals or entities that havebeen identified as being listed in relevant sanctions
regimes and takes required measures to mitigate
against this risk.
Klarna is committed to conducting business using
ethical practices. Klarna stands against all forms ofcorruption, including offering or accepting bribes,
kickbacks and other improper payments. Employee
acceptance of monetary gifts, gift cards, or cash
equivalents are never allowed. Klarna employees
need to be particularly cautious when engaging withauthorities and government officials. Klarna hassystems in place to escalate potential issues andconflicts related to accepting or providing gifts andentertainment.
Moreover, Klarna has Anti-Money Laundering
controls in place to identify customers who
are Politically Exposed Persons, monitor theiractivity to identify suspicious activity, and file theappropriate reports with authorities. Relevant
Klarna teams are responsible for monitoring theperformance of Klarna’s efforts to combat ML/TF
and sanctions non-compliance and always taking
action when required. Further, Klarna has periodic
reporting, including standardized key performanceindicators, that enable senior management and theBoard to track the performance of Klarna’s efforts
within this area.

ML/TF employee training 8, 9

2023

2022

2021

Completion rate (% of total workforce)

86%

91%

90%

8

The ML/TF employee training is part of the mandatory Compliance online training.

9

The completion rate also includes employees on leave (e.g., parental leave, long-term sick leave).

E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTSOCIAL47

CORPORATE GOVERNANCE.

Data privacy

Cybercrime and security

MATERIAL TOPIC

MATERIAL TOPICAt Klarna, we place a high priority on consumer
privacy. As a financial institution, we understand theimmense responsibility that comes with handlingpersonal data daily. We aim to use this data toenhance our customers’ shopping experiences,while ensuring their privacy is not compromised. Our
approach to data privacy is geared towards striving
for compliance with all applicable regulations,
whether they pertain to our consumers, ouremployees, or our business associates.

In 2023, we have made significant strides in our data
privacy initiatives. These include:■ Redesigning and updating our data privacy
training material to make it more practical andrelatable for our employees.

Trust is core to our business. Klarna is committed
to the security of our services and protecting
our customers from cybercrime and fraud. We
aim to have the best security in the industry andare focused on protecting the confidentiality ofcustomers’ information and ensuring our services’availability, reliability and integrity.

■ Streamlining our privacy governance into asingle, dedicated team for a more coherent andeffective implementation of our privacy policies.

To prevent fraud and protect our customers, we:■ strive to ensure that products are secureby design by following a Secure Software
Development Life Cycle (SSDLC).

■ perform security testing through our dedicatedin-house team, through a community of
security researchers as part of our vulnerability
disclosure policy and private bug bounty
program delivered through HackerOne, andthrough independent third-party testing.

■ have robust processes to detect and respond
Our commitment to data privacy goes beyond
compliance. We view evolving legislation as anopportunity to build trust with our consumers byoffering transparency, flexibility, and choice in how
their data is used. At Klarna, data privacy is not justa regulatory requirement—it’s an integral part of our
product and system development process.

■ Proactively monitoring the rapidly evolving

to preemptive cyberattacks, risks, and threats
including 24/7 monitoring to detect and respondto security incidents.

regulatory landscape in the U.S. and swiftly
updating our policies to reflect new regulations.

■ Continuing our journey towards a data-driven■ continue investing in internal resources andcapabilities for proactive and reactive measures
to better respond to fraud and cybercrimeattempts.

■ actively push for collaboration on the topics

approach to governance, facilitating informed
decisions that benefit our customers.

of fraud and consumer protection across thefinancial industry. We hold membership withand are active participants in fraud prevention
collaboration discussions with organizations
such as Cifas as well as with local governments
including the UK fraud prevention agency andthe Bedrägeriforum organized by the Swedish
Ministry of Finance.

We are committed to continuously improving ourprocesses and tools to support consumer rights,
ensuring that data privacy remains a cornerstoneof our operations.

While Klarna is under the supervision of relevant
financial supervisory authorities and ensurescompliance with all applicable regulations, werecognize it takes more than words to establish
trust. We regularly conduct security audits andcertifications based on globally recognizedframeworks and certification bodies for third-party
assurance of security, including ISAE 3402 and3000 assurance reporting and PCI DSS certification.

■ require all employees to complete annual
Data privacy employee training 10

2023

2022

2021

Completion rate (% of total workforce)

92%

91%

96%

security awareness training to ensure thatthey understand their role in helping combat
security breaches and ensure their knowledge
keeps pace with the ever-evolving cyber threat
landscape.

Security awareness employee training 11

2023

2022

2021

Completion rate (% of total workforce)

88%

92%

96%

10, 11K L A RN A H O L D I N G A B (P UBL)

The completion rate also includes employees on leave (e.g., parental leave, long-term sick leave).

E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTSOCIALCORPORATE GOVERNANCE

48

Our people
2023 has been a year of both challenges andaccomplishments for Klarna. At the outset, ourprimary focus was on improving profitability, which
led us to a thorough review of business operations
to ensure cost efficiency. By summer, our collective
efforts paid off as we achieved profitability,
meeting a challenging goal that brought all teams
together in a shared achievement. This experiencehighlighted Klarna’s adaptability and collaborative
spirit, demonstrating how our people are willingto step up and contribute wholeheartedly when it
matters most.
In September, we celebrated our achievements
during the Smoooth week, a valued Klarna tradition,
where we all gathered in Stockholm. Over two days,
we engaged in team building activities, knowledge

sharing and personal development, whichsignificantly boosted engagement and enriched
our organizational culture. This was a new andenriching experience for many of our employees,
who hadn’t had this opportunity before due to thepandemic and prior economic constraints.
In November 2023, after discussions andnegotiations, we decided to join the Employers of
the Financial Sector (BAO), by January 1st, 2024,
and reached an agreement with Finansförbundet tosign the Collective Bargaining Agreement (CBA), also
including Swedish Confederation of Professional
Associations (Saco). We believe that this action
focuses on our employees’ best interests, andallows us to continue our work, to serve consumers
better than any bank has ever done.

Klarna’s Global Work Environment Policy
Our Global Work Environment Policy provides a
proactive framework for maintaining a healthyand safe work environment for all Klarnauts. It
contains routines and descriptions for all work
activities related to the work environment andprovides Klarnauts with knowledge and awarenessof the applicable legislation, risks in the workplace,and how they can contribute to a healthy work
environment. It also establishes important routines,
such as regular employee engagement surveys andincident reporting. The policy is linked to local work
environment policies, which set our conduct in local
markets and include instructions on issues such as
discrimination, health and well-being, and alcoholand drug use in the workplace.

K L A RN A H O L D I N G A B (P UBL)

In order to maintain compliance with our Global
Work Environment policy, Klarna conducts an annual
review of the policy in collaboration with the Work
Environment Group (composed of Klarna employer
representatives and employees). To ensure
adherence to the policy by all employees, newhires are required to partake in work environment
training. Additionally, all leaders undergo mandatory
work environment training. Furthermore, Klarnaorganizes various annual initiatives, including
lectures and the provision of tools, to address topics
related to the work environment.

E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTAt the beginning of the recruitment process, we
identify which competence area best suits thecandidate and where they want to develop theirskills and abilities. Candidates are evaluated fromboth a behavioral and competence-related skills
perspective, and Klarna always strives for an
inclusive and unbiased process. Employees are able
to move in and out of roles, based on e.g. company
priorities or individual preferences.

Performance
Klarna promotes a healthy feedback culture fromthe very beginning of each Klarnaut’s journey. We
celebrate and recognize continuous feedback andhave more proactive and standardized processes
across competences. Every Klarnaut is responsible
for both giving and seeking feedback.

Klarnauts have the opportunity to reflect on
their own performance based on the feedback
they receive throughout the year. Going forward,
there will be increased focus on feedback indifferent forms to further improve and standardize
feedback.

A great onboarding journey starts long before thefirst day in the office. To ensure the best possible
start for new Klarnauts, the company has designed
a Pre-boarding Learning Portal where new hires
learn more about Klarna, such as its products,
culture, and operating model so they feel part ofKlarna even before they arrive on their first day.
In their first two days, all new hires are assigned
a “Klarna Check-In” anytime self-study pathway
on Looop, our digital learning platform, that divesdeeper into topics such as Klarna’s vision andmission, workplace and security rules, operating
model, products, marketing and leadershipprinciples. It is tailored to prepare new Klarnauts
for the company’s fast-paced and ever-changing
environment and it is mandatory for all new
employees.

K L A RN A H O L D I N G A B (P UBL)

Women

2023
Men

Total Women

2021
Men

Total

Employees by level
Group Management TeamManager
Non-Manager

1
523
1,116

10
824
1,727

11
1,347
2,843

1
221
2,126

6
376
2,711

7
597
4,837

2
235
2,272

7
412
2,855

9
647
5,127

Employees by type
Permanent
Temporary

1,632
8

2,550
11

4,182
19

2,331
17

3,068
25

5,399
42

2,460
49

3,230
44

5,690
93

Employees by region
Asia
EuropeNorth America
Oceania

0
1,411
220
9

2
2,356
193
10

2
3,767
413
19

1,986
324
38

4
2,804
262
23

4
4,790
586
61

2,090
364
55

3
2,934
287
50

3
5,024
651
105

Employees by age
<30
31-50
>50

554
1,073
13

726
1,788
47

1,280
2,861
60

1,139
1,188
21

1,132
1,913
48

2,271
3,101
69

1,375
1,118
16

1,350
1,866
58

2,725
2,984
74

Total

1,640

2,561

4,201

2,348

3,093

5,441

2,509 3,2749

5,783

Women

2023
Men

Total Women

2022
Men

Total Women

2021
Men

Total

Employees by level
Group Management TeamManager
Non-Manager

0.1%
31.9%
68.0%

0.4%
32.2%
67.4%

0.3%
32.1%
67.7%

0.0%
9.4%
90.5%

0.2%
12.2%
87.6%

0.1%
11.0%
88.9%

0.1%
9.4%
90.6%

0.2%
12.6%
87.2%

0.2%
11.2%
88.7%

Employees by type
Permanent
Temporary

99.5%
0.5%

99.6%
0.4%

99.5%
0.5%

99.3%
0.7%

99.2%
0.8%

99.2%
0.8%

98.0%
2.0%

98.7%
1.3%

98.4%
1.6%

Employees by region
Asia
EuropeNorth America
Oceania

0.0%
86.0%
13.4%
0.5%

0.1%
92.0%
7.5%
0.4%

0.0%
89.7%
9.8%
0.5%

0.0%
84.6%
13.8%
1.6%

0.1%
90.7%
8.5%
0.7%

0.1%
88.0%
10.8%
1.1%

0.0%
83.3%
14.5%
2.2%

0.1%
89.6%
8.8%
1.5%

0.1%
86.9%
11.3%
1.8%

Employees by age
<30
31-50
>50

33.8%
65.4%
0.8%

28.3%
69.8%
1.8%

30.5%
68.1%
1.4%

48.5%
50.6%
0.9%

36.6%
61.8%
1.6%

41.7%
57.0%
1.3%

54.8%
44.6%
0.6%

41.2%
57.0%
1.8%

47.1%
51.6%
1.3%

Total

100%

100%

100%

100%

100%

100%

100%

100%

100%

%

Onboarding
Another key element of the Klarna onboarding
journey is the buddy program. It consists of apeer buddy program that primarily supports new
Klarnauts and integrates them into the Klarna
culture. The program combines informative sessions
with shadowing and regular opportunities forquestions and feedback. By pairing new employeeswith more experienced colleagues in similar roles,
Klarna’s new employees benefit from the knowledge
exchange at both a professional and social level.
Our domains and competences provide additional
onboarding programs covering the specifics of therespective organization.

49

CORPORATE GOVERNANCE#

Global talent management
At Klarna, we hire for a competence such as
analytics, engineering or marketing at Klarna - notfor a specific role. The competence structure
equips us with the right skills to deliver the bestproducts and services for our global consumers
and retail partners. It allows us to allocate talenteffectively to different teams and problem spaces.
Our candidates come through various channels:
sourced by recruiters, employee referrals, job post
applications, internal moves, graduates, and interns.

SOCIAL

Total Women

2022
Men

E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTSOCIALCORPORATE GOVERNANCE

50

Operating model
As of 2017, Klarna has a team-based and agile
operating model that optimizes for high speed,
flow, quality, and accountability. It evolved from amore traditional organizational structure to instead
working in cross-functional teams of up to eight
employees to maintain the agility and innovation
found in start-ups. Each team consists of members
from different competences who own and workon a specific business purpose within Klarna,
which we call a ‘problem space.’ Teams take fullaccountability for creating and delivering value
propositions to their main internal or external

stakeholders, aligned with Klarna’s overall visionand strategy. For this to work smoothly, Klarna’s
workplace culture embraces change and continuous
improvement.
To ensure an aligned vision throughout thecompany, teams follow Klarna’s ways of working
and best practices, which include a regular teammeeting culture and check-ins with different internal
stakeholders. While adhering to all relevant banking
regulations and guidelines, team accountability andflexibility are at the core of how Klarna operates.

Flexible working
Klarna genuinely believes in the power of regularface-to-face interactions to build close connections
with team members. At the same time, we believethat remote teams work effectively, and combining
both is key to success.
Therefore, Domain leads can decide on office days
- it is up to each Domain and Domain Lead how theywant to apply the flexible policy, and in some cases,
some teams and domains have a best practice ofcoming to the office 1-3 days a week. While flexibility
is key, we still ask Klarnauts to follow a number ofrecommended ways of working:■ Upholding the operating modeland team practices
Our operating model is core to how we operate
and work, and includes daily stand-ups, weekly
planning, team retros, and demos.

■ Have regular physical meetups
Teams not located in the same office areencouraged to regularly meet their teamphysically to enable brainstorming, creative
problem-solving, and strengthening team spirit.

K L A RN A H O L D I N G A B (P UBL)

■ Teams in different time zones/
geographies
For teams that are spread across different timezones, the best practice is to have a workday thatoverlaps at least 4 hours.

■ Travel time to the office
Employees can work flexibly in their employment
country (or State or Province in the case of US
and Canada employees). Employees have tocover their travel costs to and from their main
Klarna office themselves. The best practice isnormally to live close to the office to enable
employees to come in on office days.

■ Working abroad
At Klarna, we boast a dynamic and diverse global
workforce. To accommodate our international
context, we provide the flexibility for our
employees to work abroad as part of the Klarna
Work Policy. This policy allows for up to 20
workdays per calendar year for working in alocation outside the country of employment.

E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTSOCIAL

51

CORPORATE GOVERNANCE

Leadership
Klarna operates in a high-change business environment with great demands on leadership, making competence
and accountable leads at Klarna a key group in driving the company’s growth.

Klarna has eight leadership principles that all Klarnauts live by and that are together with the operating model part of the foundation of Klarna’s culture:

Customerobsession

Deliver quality
results

Courage

Hire and develop
exceptional talent

Challenge thestatus quo

Start small andlearn fast

Detailed
thinkers

Let theteam shine

Leaders see the worldfrom the customer’s
perspective. They
understand that to keep
trust, the customer
needs to come above
anything else.

Leaders don’t hesitate
or make excuses.
They deliver value
consistently anddon’t shy away fromdelivering outside theirnormal responsibility.

Leaders are not afraid
to make decisions
or engage in difficult
conversations. They
know that nothingcomes of waiting, andthey step up and makethe call.

Leaders choose, coach,and fight to keep
exceptional talent.
They recognize others’
talents and paths anddon’t hold them back.

Leaders embracechange and nevermiss an opportunity to
disrupt the industry.
They find simple
solutions fast andexperiment by adapting
their ideas.

Leaders test theirideas to learn andimprove tomorrow.
They understand that
constraints breed
resourcefulness,
self-sufficiency, andinnovation.

Leaders know that
disrupting the industry
requires detailed
thinking. They are aunique combination of
ambitious, free-thinkers
with meticulous eyesfor detail.

Leaders understand thevalue of differences andbuild on the strengthsof others. Leaderslead by example withintegrity, earning trust
and respecting others.

The purpose of these principles is to encourage
accountability and continuous professional andpersonal growth for all Klarnauts. It is pivotal that firstand foremost all leaders inspire, act as role models, andcreate conditions that enable employees and teams tothrive. This is especially important as Klarna operates in aunique way with having an accountable and competenceline in place that requires different types of leaders.

K L A RN A H O L D I N G A B (P UBL)

To support those types of leaders each new leadmust take the mandatory “Leading at Klarna” trainingthat is delivered online for self-paced learning andoffers role specific content, and covers topics suchas how to run a development talk, good practices
for leading remotely, and an introduction to diversity
and inclusion.

Furthermore, leads have on-demand access to online
resources that support them in their role, addressing a
range of topics, including the art of feedback or creating
and sustaining high-performing teams. In addition,
the competences offer their leads tailored learning
opportunities such as e.g. the Engineering onboarding
series for leads.

In 2023, Klarna also ran the Leadership Mentoring
program twice, which pairs up less experienced andmore experienced leads and offers a guided 5 months
growth journey for mentor and mentee, supported byrecorded keynotes on topics of interest, i.e. coaching,decision making.

E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENT

Employee engagement
Nurturing the connection between the leadershipteam and Klarnauts is a priority, with several
initiatives created to address any perceived
gaps that could arise from a fast-paced work
environment.

Internal communication
Frequent and open dialogue in management chats,business uwpdates, and group All-Hands meetings
strengthen the bond and dialogue between
management and employees while keeping theinformation flow as direct as possible. Additionally,
all team and domain leads are encouraged toprovide weekly updates on challenges and progressin their workstreams. This way, all Klarnauts canreceive relevant updates from other work streams
that may impact their own, streamlining the sharing
of information and our efficiency as a company andcelebrating shared success.
In 2023, Klarnauts were invited to dial into 11“What’s cooking” sessions hosted by Klarna’s CEO
Sebastian Siemiatkowski and other members of theGroup Management Team. We have restructured
our approach to company wide All Hands meetings,
now organizing them on a bi-monthly basis under
the title of ‘The Forge.’ To date, Klarnauts haveparticipated in 14 of these engaging sessions.

52

CORPORATE GOVERNANCE

Learning and development
This first version we focused on the following topics:■ overall experience■ overall engagement■ motivation (including feeling challenged)■ leads’ performance (AL and CL)
This transformation in our engagement survey
method comes as a response to the recognizedlimitations of the static question format which often
glosses over the depth of employees’ feelings andmotivations. Our previous approach (traditional
survey), despite having notable response rates,
sometimes missed out on garnering precise insights
due to its rigid format. This conversational format,
paves the way for a more organic disclosure of
employees’ thoughts, thus promising a moreauthentic understanding of their needs, motivations,and concerns. The objective remains to traverse
beyond mere numerical scores and delve into thesubtleties of employee engagement which can act
as drivers for tangible organizational improvements.

Employee engagement survey

As this is a significant deviation from our previous
engagement survey methodology, the results
garnered from the new tool are not directlycomparable to the past data. While we will stillpresent last year’s results for reference, we believe
the findings from our new tool provide a moreaccurate representation of the current engagement
landscape within Klarna.

In September 2023, we revamped our approach
to measuring employee engagement by adopting
a more interactive and nuanced methodology
through the deployment of AI-driven chatbot. This
tool involves a 20-minute dialog, entailing around
20 (open-ended and scaling) questions, with theability to pose follow-up questions based on theemployee’s preliminary responses.

In the tables below, we have displayed theengagement scores extracted from our new tool
alongside the scores from last year’s survey.
Through this evolved approach, we aspire to
maintain an environment where Klarnauts feelheard and motivated, thus propelling a culture ofcontinuous improvement and high engagement
across the organization.

Employee engagement survey 12

2023

2022

2021

Employees who took the annual employee engagement survey

68%

86%

81%

Overall satisfaction score from employee engagement survey

71%

64%

75%

12

SOCIAL

Klarnauts can grow in different ways at Klarna,for example, through learning in their role,
participation in change projects, internaland external learning programs, and network
participation. Klarna offers a wide range of learningavailable through our digital learning platform,
Looop. Here, various subjects, such as leadership,presentation skills, communication, diversity andinclusion, and productivity are covered in courses
for Klarnauts to take.

Moreover, we provide several methods and tools
to facilitate learning, i.e. use of educational budget
for taking up formal learning and continued
education. We also believe internal mobility is key
to professional development, making it simple for
employees to apply for new roles and tackle newproblem spaces and challenges.

To enhance our learning culture, Klarna
acknowledges the essence of transparency for our
employees, and has heavily invested in building acomprehensive Klarna Wiki, where all information
about Klarna is housed in one accessible location
for all employees. Through open collaboration andby utilizing a wiki-based editing system, all Klarnauts
can contribute to, edit, and provide input for ourcollective knowledge base.

Training
Number of mandatory trainings on Looop

2023

2022

2021

31

36

34

As this is a significant deviation from our previous engagement survey methodology, the results garnered from the new tool are not directly comparable to the past data.

K L A RN A H O L D I N G A B (P UBL)E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG INTRODUCTION

ESG REPORTSUSTAINABILITYENVIRONMENTDiversity, inclusion and equity
Klarna believes that diversity, inclusion and equity
are key factors in the company’s continued
success. At Klarna, differences are respected andhighly valued, and the company strives to provide
everyone with an equal-opportunity workplacethat promotes diversity, inclusion and equity. With
employees of more than 100 nationalities, we areproud of our strong cultural diversity.
We strive every day to become an even more diverse,
inclusive and equitable organization. To achievethis, we have standardized interview procedures,
diversified interviewers, conducted bias training, andintroduced inclusive job descriptions.
Klarna fosters an inclusive work environment
where everyone has equal access to opportunities,
resources and rights. It values diversity and ensuresfair treatment, irrespective of background, role, orlevel within the organization.
Klarna emphasizes equitable pay structures, ensuringthat employees are fairly compensated for their work.

We continuously strive to improve our genderbalance at all management levels, focusing onsenior leadership positions where the genderbalance is significantly skewed in favor of men.
That includes a monthly review of our gender data,
which not only looks at Klarna’s gender balance
as a whole but also highlights the balance in all
domains and competencies and at all career levels,from entry to management. The frequent data
reviews allow us to focus our efforts where they
are most needed to ensure that we achieve genderbalance in all areas of the company.

Parental leave
Examining our gender data also sheds light on
Klarna’s parental leave practices in terms offinancial impact and support for returning parents.
We have market-leading parental leave policies
available to all parents at Klarna, as we believe thatparenthood should not have a negative impact on
your career or salary.

SOCIALWe aim to ensure that no one is financiallydisadvantaged when taking parental leave by including
them in salary reviews and promotion cycles during
their absence. We also know that returning to work
can be daunting, especially in a company as fastpaced as Klarna, where the constant pace of change
can leave you feeling overwhelmed or left behind. We
have put in place a number of support mechanismsthat our returning parents say have really eased
the transition back to work. One example is for our
employees in the US, we provide a child support
subsidy, a reimbursement up to $250 per month forsix months on child care expenses such as daycare.

Discrimination and harassment

Overall gender split

39.0%

61.0%

43.2%

56.8%

43.4%

56.6%

New hires

34.5%

65.4%

42.6%

57.4%

47.4%

52.6%

Internal and external initiatives

Group Management Team

9.1%

90.9%

14.3%

85.7%

22.2%

77.8%

Managers

38.8%

61.2%

37.0%

63.0%

36.3%

63.7%

Non-Managers

39.3%

60.7%

44.0%

56.0%

44.3%

55.7%

To promote diversity, inclusion and equity within
Klarna and in the technology and business world
at large, we have supported a number of external
initiatives that focus particularly on empowering
women and employee resource groups.
Here are some of the 2023 highlights:■ Employee resource group: “Be you”

Total employees 13

2,577

3,532

6,109

420 (16.30%)

392 (11.10%)

812 (13.29%)

Of which took parental leave

13

This statistic is higher than other figures in this report since it includes all employees who at some point during 2023 worked at Klarna.

K L A RN A H O L D I N G A B (P UBL)

Women in Tech is an initiative launched in 2019
to empower women in all areas of expertise at
Klarna. The group strives to raise awareness ofdiversity issues, discuss daily challenges andimprove the working environment for women at
Klarna. In 2023 they hosted two “Klarna Women@ Work” panels.

■ Initiative: Collaboration with
Kodcentrum

2021
Women
Men

Total

■ Employee resource group:“Women in Tech”

Klarna has clear company-wide internal policies
detailing what constitutes inappropriate conductthat will not be tolerated and how to deal with it
when such behavior occurs. An example is the AntiDiscrimination, Harassment, and Bullying Instruction
which is based on national and internationallaw governing discrimination. Klarna has also
implemented various reporting mechanisms andwhistleblowing tools that allow employees toreport conduct or incidents while maintaining
confidentiality and anonymity. Dedicated resources
address these individual cases.

2022
Women
Men

2023
Men

The LGBTQIA+ employee resource groupprovides an opportunity for the community tocome together on a professional level and builda support network. The goal is to support eachother and discuss the issues and experiences
faced in the workplace and how this impacts
career development and workplace inclusion.

■ Initiative: “Women in Tech Stockholm”

2023
Women
Men

Women

■ Employee resource group: “LGBTQIA+”

Discrimination, harassment, and bullying of any
kind based on ethnic or national origin, citizenship,gender, sexual orientation, age, skin color, faith,religion, disability, marital status, or any othercharacteristic will not be tolerated at Klarna.

Gender split

Employees who took parental leave

53

CORPORATE GOVERNANCE

Klarna supports and collaborates with Women in
Tech in Stockholm. This organization strives toinspire and educate women already in the techindustry to stay in the field by providing themwith the network and experience of successful
people from the wonderful world of technology
and media.

In 2023, Klarna teamed up with Kodcentrum,a non-profit that introduces young people —primarily girls and those from socio-economicallychallenged areas — to programming and digitalcreation, with the aim of giving them theopportunity to explore the exciting world ofengineering through a hands-on coding course at
our headquarters in Stockholm.

■ Initiative: “Diversity Charter (NL)”
To act as a catalyst for improving the current
state of diversity and inclusion in the
Netherlands, Klarna has been a signatory to theDiversity Charter since 2021. The charter is partof the Dutch Social and Economic Council (SER)
infrastructure that actively supports companies
in developing, implementing, and monitoring theirdiversity plans.

“Be you” was the first employee resource groupof its kind at Klarna, founded by employees inlate 2017 to promote diversity and inclusion fromthe grassroots. Since then, the group has evolved
into a community that provides a safe space for
marginalized groups and allies and promotes
diversity to ensure that all employees can betheir authentic selves.

E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENT

Health and safety

SOCIAL

Compensation and benefits

PeopleOfficesA healthy work environment leads to healthy
employees and increased well-being and forms
successful business results. For that reason, Klarna
prioritizes employees’ health and safety by creatinga safe, healthy, and productive workplace. We aim
to enable a healthy lifestyle for all Klarnauts andoffer various health benefits, such as wellness
allowances, flexible working hours, parental
benefits, and health and rehabilitation insurance.
Locally adapted health and safety training isavailable in Klarna’s internal training program inseveral countries, covering local rules and routines.

Klarna mitigates and minimizes workplacerelated risks associated with the physical officeenvironment through appropriate health and safetymeasures. Each Klarna office also has appropriate
plans in place for emergencies, and local safety
teams operate with systematic fire prevention
management. Ongoing initiatives include first aid
and Cardiopulmonary Resuscitation (CPR) training,as well as annual evacuation training for employees.
Some Klarna offices provide indoor parking forbicycles, this is depending on the landlord and theoffering in the property.

Klarna has a remuneration structure that recognizes
the importance of balanced but differentiatedremuneration based on business and local market
needs, as described in our Remuneration Policy. The
objective of the remuneration structure is to support
the ability to attract and retain talent in any position,
promote equal and fair treatment, and ensure that
our remuneration is consistent with efficient risk
management and compliant with existing regulations.
We work with cash and equity-based compensationand perks and benefits to create an attractive
total compensation offering. Klarna’s benefits
package includes, e.g., insurance benefits, pension
contributions and health insurance (whereapplicable), parental leave, and wellness benefits(e.g. gym memberships). Depending on local market
practices, we may also offer benefits such as mealvouchers and catered breakfasts, etc.

Gender pay gap
Our Remuneration Policy supports equal andfair treatment of all Klarnauts and applies theprinciple of non-discrimination. Equal treatment

Compensation and benefits
Number of employees participating in
RSU program

K L A RN A H O L D I N G A B (P UBL)54

CORPORATE GOVERNANCE

of all, regardless of gender, is a cornerstone
in determining compensation. Differences inremuneration are analyzed and addressed annuallyin all our locations to ensure that remuneration
decisions are made based on performance, skills,
and contribution without taking other factors into
account.

Restricted stock units (RSUs)
An important part of Klarna’s total compensation
offering is the long-term element in the form of
restricted stock units (RSUs). They enable our
employees to become owners of the company andinvest in Klarna’s financial success and continued
growth. RSUs are a “promise” to receive a certain
number of Klarna shares in the future, contingent on
continued employment at Klarna.
While in many other companies share compensation
is usually limited to executives or management
employees, at Klarna we aim for broad-based shareownership with many RSU program participants inall countries and all employee groups, except forentry-level positions.

2023

2022

2021

3,956
(94.17%)4,678(85.98%)3,773(67.40%)E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTSOCIALCORPORATE GOVERNANCE

55

Commitment tohuman rights
Human rights are basic rights for individuals. They
form the foundations for freedom, justice, andpeace. They apply equally and universally in all
countries, irrespective of the legal framework.
As a global company, we have a clear responsibility
to support governments and civil society groups inensuring human rights are upheld and respected
in all the countries we operate in. Klarna firmly
believes that, although governments have theprimary duty to protect and ensure the fulfillment of
human rights, business entities have a responsibility
to respect human rights and can play a positive rolein the communities where they operate.
Klarna complies with all relevant international legal
obligations and all relevant local legal obligations in
the countries in which it operates. We also work toprotect human rights in our own operations throughour internal policies and procedures regarding thetreatment of employees, as well as by ensuring
compliance from both retail partners and suppliers.
Klarna respects employee human rights
as established in the International Labour
Organisation’s Declaration on Fundamental
Principles and Rights at Work, including nondiscrimination, prohibition of child and forced labor,
as well as safe and healthy working conditions. We
offer equal opportunities and equal rights to all,irrespective of national or ethnic origin, religion or
belief, age, gender or gender identity or expression,sexual orientation, or disability.

K L A RN A H O L D I N G A B (P UBL)

During 2023, we reviewed and updated internal
policies, instructions, and governance, which
requires employees to raise concerns regarding
any identified or suspected non-compliance, as
well as confirms that employees will not suffer any
detriment for raising such concerns.

Modern slavery and human trafficking
Klarna is committed to ensuring that our businessand supply chains are free from modern slavery.
Klarna takes a zero-tolerance approach to modern
slavery and will not knowingly support or deal withany business or supplier involved in such practices.
For more information, read our Modern Slavery and
Human Trafficking Statement here.

The Finance Coalition
Klarna is part of the Finance Coalition in Sweden(Finanskoalitionen), led by ECPAT Sweden, achildren’s rights organization working to combat
the sexual exploitation of children. The Finance
Coalition is made up of banks and payment
providers in Sweden with the specific aim ofpreventing and stopping payments that facilitate thesexual exploitation of children in Sweden.

E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTSOCIALCORPORATE GOVERNANCE

56

Supply chain
In 2023, Klarna purchased goods and services worth
SEK 10B from 2,161 suppliers. We recognize that ourpurchasing activities not only have an impact on theenvironment but also on people within our supply
chain and communities in the suppliers’ markets.
To ensure that our suppliers share Klarna’s values

and the common goal of operating in an ethical andlaw-abiding manner, we introduced our Supplier
Code of Conduct in 2021 and started a supplier risk
identification process in 2022, which is an iterative
process that continued in 2023.

Supplier Code of Conduct
Klarna’s Supplier Code of Conduct articulates avision of responsible business behavior. It sets forth
the principles that we expect our suppliers andtheir subcontractors to abide by in their business
relationship with Klarna and promotes lawful,professional, and fair practices that integrate
respect for human rights, business ethics, andthe environment. Klarna supports adherence tothe supplier code of conduct principles throughessential training, awareness, and operational
control.

Since its introduction at the end of 2021, we havebegun to implement the Code in our procurement
process. New suppliers should now sign the Supplier
Code of Conduct as part of their contract withKlarna while existing suppliers sign the Code when
renewing their contracts.

Supplier risk assessment
Climate change and modern slavery were identified
as two key supply chain risks in our 2022-2023 ESG
risk assessment. Climate change, especially acutephysical risks such as extreme weather events,
can disrupt Klarna’s value chain by impacting our
suppliers and subcontractors, for example in thetransportation and distribution of goods. Modern
slavery risks may, but are not expected to, appear in
Klarna’s indirect supply chain.
As a result of the ESG risk assessment, we havedeveloped a supplier risk assessment that examines
the inherent risk of modern slavery and climatechange based on publicly available information. We
used the following sources as inputs to assign a
supplier risk rating (low, medium, or high) dependingon the product or service being procured:

Assessing the risks of modern slavery and climatechange helps Klarna mitigate its legal, financial,and operational risks. The risk assessment has
been integrated into the procurement process
for Klarna employees when sourcing a productor service. The risk assessment enables contract
owners to understand the ESG risk of the companies
and countries from which they source goods andservices. The inherent risk score encourages thecontract owner to engage with relevant Klarna
teams to understand how to assess the high risks ofmodern slavery and climate change and therefore
whether further due diligence and monitoring are
required.

■ Modern slavery
Global Slavery Index, US Bureau of International
Labor Affairs (ILAB) List of Goods Produced byChild Labor or Forced Labor, and guidelines
from Walkfree Foundation, International Labor
Organization, Anti-Slavery International, and AntiSlavery Australia.

■ Climate change
Climatewatchdata.org for absolute country
emissions (or “total CO2e”) and Worldbank.org
for CO2e emissions per capita.

K L A RN A H O L D I N G A B (P UBL)E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTSOCIALCORPORATE GOVERNANCE

57

Community
engagement
We strive to bring about positive change in the communities where we operate by supportingorganizations that represent both Klarna’s values and those of our employees. We have and createdprograms to help people through financial support and using Klarna services. Here are some of thehighlights of our community engagement in 2023:

Angel City Football ClubThis year, Klarna continues its partnership withAngel City FC (ACFC) of the National Women’s
Soccer League in Los Angeles, United States.
The partnership is rooted in making the ACFC
fan experience smooother while also positively
impacting the Los Angeles community at large.
In 2023, ACFC and Klarna created their second
exclusive merchandise collection. The collection,
made in collaboration with Suay Sew Shop, features
items made entirely from upcycled and recycledmaterials - a windbreaker, bucket hat and fannypack - with each item incorporating fabric froma custom tifo (large banner created by the club’s
supporters) displayed by ACFC supporters at theirinaugural game.
ACFC and Klarna continue their commitment toclothing donations to the Downtown Women’s
Center. Building on last year’s community
partnership, 10% of the merchandise sales will goto supporting the Downtown Women’s Center’ssocial enterprise, MADE by DWC Resale Boutique,which focuses on promoting a circular economy
of sustainable fashion while empowering womenin Los Angeles to combat homelessness throughemployment. Klarna further supported the LA
community and sustainable shopping habits bymatching this donation of sales.
In addition, in order to promote the circular
economy, Klarna hosted two clothing donation
events during games, and during the last game ofthe season collected 8,783 items.

K L A RN A H O L D I N G A B (P UBL)E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTSOCIALCORPORATE GOVERNANCE

58

Mighty Hoopla 2023
In 2023, Klarna sponsored Mighty Hoopla Festival,
a pop festival in the UK that is a flagship eventin the LGBTQ+ calendar uniting the community
through music, fashion and inclusivity. As the official
payments partner for the festival for a third year,
Klarna added value to the community with free facepainting and giveaways for Mighty Hoopla festival
go-ers, as well as at Brockwell Bounce, London’sbiggest free festival for children, in the days leading
up to Mighty Hoopla. Paid media strategies in the run
up and during the festival supported local LGBTQ+
creators and publishers (Attitude Magazine).

Chicago Bulls
In 2023, we worked with the Chicago Bulls and
G.E.A.R. to show up in the local community toupcycle Bulls jerseys and pink basketballs tomembers of Marshall High School thereby giving

them a second life and promoting a circular
economy. Bulls legend Kendall Gill and Bulls Youthcoaches led a clinic at the school for the players topractice in the off-season.

Cancerfonden
Cancerfonden and Klarna agreed to a long-term
strategic collaboration that began in the firstquarter of 2020. The main driver for Cancerfonden
was to explore new technologies and alternative
tech platforms to modernize and digitize the donor
experience. To support Cancerfonden in theirimportant work, Klarna applied a not-for-profit
pricing model to cover the structural costs of eachtransaction. Cancerfonden has integrated Klarna for
its gift shop and all donation touchpoints on

K L A RN A H O L D I N G A B (P UBL)

its website, simplifying the process for people
to donate online and even become monthly
donors. Further, since 2021, Klarna’s QR-code
has facilitated donations at Cancerfonden’sannual fundraiser “Tillsammans mot Cancer”.
In connection with this annual event, Klarna has
provided Cancerfonden with marketing placementsin the Klarna app pro bono to engage with potential
donors through articles, push notifications, andsocial channel advertising.

E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTSOCIALCORPORATE GOVERNANCE

59

Political advocacy
As a leading global business, we are responsible
for engaging transparently and ethically with
political and policy stakeholders. We believe it isimportant to continue to improve our business andthe global digital economy in the best interests ofour consumers and retail partners. We believe it isimportant to engage with policymakers debating
policy and regulatory issues relevant to Klarna andour stakeholders and speak to trade associations,
think tanks, consumer groups, governments, andlegislatures in the countries where we operate.

Spend on public affairs activities
Total (SEK)

Political contributions
Klarna is not a politically affiliated organization, nordoes it support political parties through donations
or otherwise.

In our day-to-day processes and the engagement
we do, we make sure to always operate according
to the highest ethical standards and Klarna’s corevalues. We put our customers and their interests at
the heart of everything we do and constantly strive
to inspire innovation and transparency.
In some of the countries where Klarna operates,
we use public affairs agencies who support us byproviding monitoring and commissioned strategic
advice. We apply the same high ethical standards
when engaging with agencies and expect them to do
the same.

2023

2022

2021

12.95M

34.1M

19.1M

Memberships
To continue improving our business in the best interestof consumers, we engage with several trade associations.
EU:● European Payment Institutions Federation● European Third Party Providers Association● European Tech Alliance● Ecommerce Europe● European Fintech Association● European Digital Payments Industry Alliance● Swedish FinTech Association● Swedish Tech Alliance● Stockholm’s Chamber of Commerce● Nordic Payments Council● Danish Chamber of Commerce● Vereniging van Financieringsondernemingen Nederland● Fédération Bancaire Française
● France Fintech● Bitkom● Bevh● Swedish Chamber of Commerce for Germany
UK:● UK Finance● Innovate Finance● Swedish Chamber of Commerce for the UK
USA:● Financial Technology Association● Financial Health Network
Canada:● Canadian Lenders Association
Australia:● Australian Finance Industry Association

K L A RN A H O L D I N G A B (P UBL)E S G R E P O RT 2 0 2 3
E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTSOCIALCORPORATE GOVERNANCE

60

Global tax commitment
Klarna is committed to paying its fair share of taxes
and we will always strive to pay and report what is fairand reasonable. Achieving a fair tax level means that
Klarna’s tax positions are aligned with our business
operations and support genuine commercial activity
that complies with applicable tax law and Klarna’s
ethics and policies.

Low-tax territories

Our commitments

Transparency and reporting
compliance■ We always aim to apply the spirit as well as theletter of the law in all territories in which we
operate.

■ We do not engage in any aggressive tax planning or
tax avoidance. We define aggressive tax planningas transactions that are carried out solely or withthe principal purpose of avoiding tax. We define tax
avoidance as tax planning that frustrates or runs
counter to the intention or spirit of the law for the
purpose of reducing a tax burden, without being
strictly illegal.

■ We do not artificially transfer profits into a low-tax
jurisdiction.

■ In dealings with tax authorities, we engage
proactively, constructively and transparently,
and in a timely manner.

Our business
Taxes are one of many considerations in how werun and organize our business. This is common to allbusinesses with a global scale. When tax is a factor in
deciding where or how we do business, the decisions
we make are consistent with our tax commitments
and policy, as well as Klarna’s ethics. Profits are taxed
where the economic activity that generates themtakes place, in accordance with international transfer
pricing rules. Transactions that artificially transfer
profits into a low-tax jurisdiction are not in line withour commitments, our internal policy or our ethics.

K L A RN A H O L D I N G A B (P UBL)

Klarna does not have material business operations in
low-tax jurisdictions. All profits generated in the Klarna
corporate group are subject to corporation tax at thelevel required by the tax residence of the relevant
subsidiary.

Klarna is committed to meeting the heightened
expectations of transparency in respect of its tax
management. We shall make the best effort to comply
with local requirements and disclose all relevant
information in accordance with applicable tax
legislation in all jurisdictions where business is carriedout. At the same time, Klarna shall always consider
external and internal rules on data protection andconfidentiality. We are committed to fulfilling ourreporting obligations to tax authorities relating to bothour own obligations and customer information.
This covers local reporting and adherence to third
party requests as well as international exchange of
information according to the multilateral Convention
on Mutual Administrative Assistance in Tax Matters,
The United States’ Foreign Account Tax ComplianceAct (FATCA), and the Organisation for Economic Cooperation and Development’s Common ReportingStandard (CRS) and other initiatives designed to foster
greater transparency.
Klarna also complies with the Arm’s Length Principle
as defined in the OECD Transfer Pricing Guidelines
for Multinational Enterprises and Tax Administrations
and included in Article 9 of the OECD Model Tax
Convention. Furthermore, in line with the UK FinanceAct 2016, Schedule 19 part 2, a UK tax strategy ispublished in relation to our UK activities.

E S G R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTSOCIALCORPORATE GOVERNANCE

61

Corporate
GovernanceK L A RN A H O L D I N G A B (P UBL)A N N UA L R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTSOCIAL62

CORPORATE GOVERNANCE

Corporate Governance
Shareholders in General Meeting

About Klarna
Klarna Holding AB (‘Klarna’) (corporate registration
no. 556676-2356) is a Swedish public limited liability
company. Its subsidiary, Klarna Bank AB, is licensed
to carry out banking activities under the supervisionof the Swedish Financial Supervisory Authority(SFSA). Klarna is categorized by the SFSA as acategory 2 institution. 14
Klarna Bank AB provides its financial services
in other EEA countries through passporting its
license in accordance with EU directive 2013/36/
EU and by establishing local branches. Klarnaalso offers its financial services outside the EEA
through the establishment of local subsidiaries incertain jurisdictions. Klarna’s corporate governanceframework and approach apply to Klarna
Holding AB, Klarna Bank AB and all branches andsubsidiaries.
The Corporate Governance Report is produced
according to the Swedish Annual Accounts Act(SFS 1995:1554). Klarna is not obliged to nor doesit comply with the Swedish Corporate Governance
Code (SCGC).
When signing the annual accounts on February 27,
2024, the Board of Directors also approved the
Corporate Governance Report.

GovernanceGood corporate governance means ensuringthat Klarna is run sustainably, responsibly and as
efficiently as possible. Maintaining the confidence
and trust of our stakeholders is vitally important toKlarna’s continued success. This chapter describes
Klarna’s corporate governance framework andresponsibilities of the various corporate bodies.

Board

Internal Audit

Audit, Complianceand Risk Committee

Internal Framework
Risk Control

CEO+Group Management Team

Executive Credit and
Fraud Committee

Elected / appointed by

Capital and Liquidity
Committee

Compliance

Audit, Complianceand Operational Risk
Committee

Framework for corporate governanceCorporate Governance Structure

External Framework

Klarna’s corporate governance structure
distributes rights and responsibilities between theshareholders, the Board and the CEO according to
the relevant laws, rules and internal processes. We
believe well defined reporting lines and distributionof distinct responsibilities are essential to good
corporate governance. Our high ethical andprofessional standards and a sound risk culture arealso vital in ensuring good governance. The image
below provides a summary of how governance andcontrol are organized at Klarna.

In addition to general laws, rules and industry
practices, Klarna must also comply with the detailed
regulations specific to banks and payment service
providers. These include the Swedish Banking and
Financing Business Act (SFS 2004:297) and rules andrecommendations issued by the SFSA with regard to,among other things, capital and liquidity requirements
as well as rules on internal governance and control.
As Klarna has corporate bonds listed at Nasdaq
Stockholm, Klarna is also subject to the Rule Book for
Issuers of Fixed Income Instruments.

In order to ensure compliance with external
regulations Klarna operates an internal framework
which incorporates the external requirements on
corporate governance.

The categorization aims to reflect Klarna’s systematic importance and is based on its size, complexity and scope of activities.

K L A RN A H O L D I N G A B (P UBL)

Risk management andinternal control framework

Articles of Association,
Rules of Procedure of
the Board including CEO
Instruction, policies,
instructions, routines,
guidelines, Code of
Conduct and Klarna’svalues.

Reporting to / informingInternal Framework

14

Remuneration
Committee

External FrameworkLaws, regulations, good
credit market practice,prescribed practices or
ethical standards (Code of
Conduct), authorities’ rules
and recommendations.

Of primary importance are the Rules of Procedureof the Board (which include how to address conflictsof interest for Board members and instructions
for the operation of the Board’s committees), theInstructions for the CEO, the Policy for Suitability,

Training and Diversity of the Board, Management
and Key Function Holders, and the Policy for Klarna
Board Committees. These documents have been
adopted by Klarna’s Board. Additionally, Klarna’s
Code of Business Conduct provides an ethicalframework for the conduct of all members ofgoverning bodies and employees.
Klarna has a framework of approved policies andinstructions. These are important tools for the
Board and the CEO in their governing and controllingroles, as well as defining the roles, requirements
and expectations of the second and third lines ofdefense within risk ownership and all employees in
the fulfillment of their roles. These policies include,for example, the Risk Policy, Compliance Policy,
Credit Policy, Insider and Disclosure Policy, Conflictsof Interest Policy, Anti-Money Laundering andCounter Terrorist Financing Policy, Remuneration
Policy, and the Global Work Environment Policy.
These mechanisms, together with the Articles of
Association, constitute the internal framework that
regulates corporate governance at Klarna.

A N N UA L R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENT

Articles of Association
The articles of association are the overall setof rules for the company which are decided by
the shareholders at the General Meeting. The
Swedish Companies Act sets certain minimum
demands on what information they should contain.
The Articles of Association are available at theSwedish Companies Registration Office and on
Klarna’s website. Amendments to the Articles of

SOCIAL63

CORPORATE GOVERNANCE

Klarna’s qualified shareholders
Association are resolved by the General Meeting
pursuant to Swedish law and are subject to theapproval of the Swedish Financial Supervisory
Authority.

Klarna Holding shareholders >10% are as follows:

Klarna’s Articles of Association can be found athttps://www.klarna.com/international/about-us/
corporate-governance/investor-relations/

Funds advised by Sequoia

Shareholder% of votes/ownership20.37%

Heartland

10%

Klarna Bank AB is 96.73% owned by Klarna Holding AB.

Klarna’s organization
Klarna is structured into various Business Units,internally known as “Domains”. Each of theseBusiness Units is composed of multiple Groups,
which in turn are composed of Teams. The
responsibilities of each team, group and domain isclearly defined and documented.
Within each Business Unit, there is a dedicatedBusiness Unit Manager overseeing operations, The
Business Unit Managers report to a member of theGroup Management Team.
Klarna’s organization is divided into domains. Eachdomain is responsible for a subset of Klarna’s
operations and is led by a domain lead who reports
to a first line CXO. Each CXO reports to the CEO

and the CEO reports to the Board. There are also
three independent control functions outside of thedomains: Risk Control, Compliance and Internal
Audit. Risk Control and Compliance are both directly
subordinated to the CEO and the Board. Internal
Audit, which reports directly to the Board, has been
outsourced to an external party.
The Group Management Team is formed of the CEO,
Chief Product and Design Officer, Chief Operating
Officer, Chief Financial Officer, Chief Marketing
Officer, Chief Technology Officer, Chief Commercial
Officer, Chief Risk Officer, Chief Compliance Officer,
Chief Information Security Officer and Chief Credit
Risk Officer.

General meeting
The General Meeting is Klarna’s highest decisionmaking body where shareholders exercise theirvoting rights. At the General Meeting decisions
are taken regarding matters including the annual
report, the income statement and balance sheet,dividend, election of the Board of Directors andauditors, and remuneration for Board members andauditors.

Voting rights
All shareholders, registered in the Shareholders’Register and having notified their attendance
properly, have the right to participate in the General
Meeting and to vote for the full number of theirrespective shares.

K L A RN A H O L D I N G A B (P UBL)

Mandate to repurchase andconvey own shares
The annual general meeting 2023 neither decided
on authorisation to acquire nor convey own sharesin Klarna. Consequently, the Board of Directors did
not have such authorisations in 2023.

Mandate to issue shares and warrants
The annual general meeting held on June 26, 2023,
authorized the Board to issue 3,013,594 shares and3,013,594 warrants.

The Board
The Board is the highest decision-making body in
Klarna’s structure for management and control.
The Board is responsible for the company’s
strategy, organization and for the managementof the company’s operations. The Board also
holds the ultimate responsibility for ensuring that
Klarna’s corporate governance arrangements meet
expectations, and are implemented effectively
throughout the organization.
The Board members are elected by the shareholders
at the Annual General Meeting (AGM) for a one-year
term of office extending through to the next AGM.
Klarna is not required to have a nomination committee
and as such the Board has not adopted a nomination
policy. In practice, the Board members are proposedby some of the largest shareholders and appointed by
the general meeting.

■ evaluating the effectiveness of operations inrelation to the agreed strategy, framework andobjectives on a regular basis.
■ ensuring that the business is organized in such a
way that the accounting, treasury management
and financial conditions in all other respects
are controlled in a satisfactory manner and thatthe risks inherent in the business are identified,defined, measured, monitored and controlled
in accordance with external and internalframework, including the Articles of Association.
The board is also responsible for setting Klarna’s
risk appetite and policies establishing theprinciples for risk management.
■ deciding on major acquisitions and divestments
as well as other major investments,

The Board has adopted Rules of Procedure that
regulate the Board’s role and ways of working as wellas policies for the Board’s committees. The Board
has overall responsibility for the activities carriedout within Klarna and has the following duties, among
others:■ selecting, monitoring and planning the
succession of the Board members,■ deciding on the nature, direction and strategyof the business as well as the framework andobjectives of the activities.

■ deciding on appointment and dismissal of theInternal Auditor (outsourcing partner and/or
individual).

■ appointment or dismissal of the CEO, the Chief
Risk Officer, the Chief Compliance Officer andthe Chief Information Security Officer.

■ deciding on remuneration of the CEO and theGroup Management Team.

A N N UA L R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENT

Board members
Sarah Smith, Board member

Michael Moritz, Chairman of the Board

Omid Kordestani, Board member

Michael is a senior adviser and Board Member of
Sequoia Heritage and was a Partner at Sequoia
Capital between 1986 and 2023. Michael has servedon the Boards of companies such as Google, Yahoo,
PayPal, and Stripe. He has served on the Board ofKlarna since 2010.

Omid was Senior Vice President of Worldwide Sales
and Business Development at Google from 1999
to 2009. He held several other positions within
the company, including Chief Business Officer
and Senior Advisor for Google. He has also been aboard member of Spotify and Vodafone, as well as
chairman of the board of Twitter Inc. He has been
Chairman of Pearson plc since March 2022.

As the co-founder and CEO of Klarna, Sebastianhas spent nearly the last two decades challenging
the big banks and revolutionizing the world of
e-commerce both in Sweden and abroad. Using his
degree from the Stockholm School of Economics andyears of sales experience, Sebastian has led Klarna
to become one of the top global payments andshopping service providers in the world.

Mikael Walther, Board Member
Mikael is the managing director at Rosfelt
Enterprises AB. He previously led investmentcompany Navos Capital and has broad experience
within investment banking and other financial
companies. He has previously worked for Cevian
Capital and Goldman Sachs.

Lise Kaae, Board member
Lise most recently comes from Svenska
Handelsbanken AB where she was a Board member
from 2015 to 2020. She has also been a memberof that Board’s committee for credit, auditing, andrisk. In addition to this, Lise has been a member ofthe Danish Financial Supervisory Authority’s board(Finanstilsynet). Lise also joined the board of directorsin Pleo Financial Services A/S in November 2022.

Sarah has over 20 years of experience in banking.
She worked at Goldman Sachs from 1996 to
2021, having served as Chief Compliance Officer,
Controller and Chief Accounting Officer. She serveson the boards of Via Transportation, 98point6,
PCAP, and AON. She is also a member of the Boardof Trustees of the Financial Accounting Foundation.

Roger W. Ferguson Jr., Board member

The Chairman of the Board organizes and leads
the work of the Board. According to the Rules ofProcedure, the Chairman will maintain regularcontact with the CEO, ensuring that the Board
receives sufficient information and documentation

to effectively assess Klarna’s current position,
financial plans, risks and risk management andfuture development, and deliberate with the CEO
on strategic issues

Chief Executive Officer
Klarna’s Chief Executive Officer (CEO) is
responsible for the day-to-day management of theGroup’s activities in accordance with the external
and internal frameworks. The CEO reports to theBoard and at each board meeting they submit
a report on the performance of the businessincluding updates on strategic priorities set by the
Board.

when the CEO’s work is evaluated. Other membersof the Group Management Team participate as
required by invitation from the Board or CEO.
As part of the Rules of procedure of the Board, theBoard has adopted an instruction for the CEO’s
work and duties which also regulates the divisionof responsibilities and the interaction between the
CEO and the Board. The CEO appoints the headsof corporate functions (CXOs). The Board appoints
the heads of the control functions and the Money
Laundering Reporting Officer (MLRO). The CEO is
Sebastian Siemiatkowski.

Roger is the Steven A. Tananbaum Distinguished
Fellow for International Economics at the Council
on Foreign Relations. He was the president and CEO
of TIAA and the former Vice Chairman of the Boardof Governors of the U.S. Federal Reserve System.
He serves on the boards of Alphabet, Corning, andInternational Flavors & Fragrances.

Klarna’s CEO is also a Board member andparticipates in all board meetings, except on
matters in which the CEO has an interest that may
be in conflict with the interests of Klarna, such as

Matt Miller, Board member

The reputation, experience and assignmentsof the Board and the CEO

Matt is a Partner at Sequoia focused on early andgrowth stage investments in technology companies
across the US and Europe. Over the last 12 years at
Sequoia, Matt serves on the boards of Confluent,
Grafana, dbt Labs, Hex, Graphcore , Yokoy and
Tecton. Matt moved from California to London in
2021 to help launch Sequoia’s European office. Prior
to Sequoia, Matt worked at Goldman Sachs andgraduated from Brigham Young University.

Board members bring a wealth of relevant
professional experience to Klarna, including
expertise in banking and finance, e-commerce,
technology, payment cards, risk management,
governance, accounting, international sales,
venture capital, entrepreneurship, and leadership.
Additionally, their diverse backgrounds provide
valuable knowledge and insight into the conditions
and requirements for conducting business in the
different markets where Klarna operates.

Suitability assessment
To ensure Klarna’s Board members and CEO havethe right skills, knowledge and experience, theBoard has adopted the Suitability, Training andDiversity Policy. This policy looks at the person’s
experience and reputation and makes sure they’re

K L A RN A H O L D I N G A B (P UBL)64

CORPORATE GOVERNANCE

The Chairman● Michael Moritz, Chair of the Board● Sebastian Siemiatkowski, CEO● Sarah Smith● Mikael Walther● Lise Kaae
● Omid Kordestani● Roger W. Ferguson Jr.
● Matt Miller

Sebastian Siemiatkowski, CEO

SOCIALa good fit for the company. It also evaluates theirability to commit the time and effort needed to
do their job well. The Chief Operating Officer is
responsible for the assessment at appointment
and then subsequently at least every two years
or sooner if events observed through the ongoing
monitoring process suggest a review would be
prudent. When a new Board member or a new
CEO assumes their duties, they are also externallyassessed by the SFSA. The CEO’s performanceand qualifications will be evaluated the same way
as Board members. According to the Rules ofProcedure of the Board, the Board ensures that
the CEO fulfills his duties. The Board is responsible
for appointing and retains the authority to dismiss
the CEO of Klarna.

A N N UA L R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTDiversity
Klarna understands that having a diverse Board
is crucial to ensure the Board can do its job welland has the knowledge and experience needed tonavigate the various social, business and cultural
conditions of the markets Klarna operates in andthe activities the company is involved in.
The Suitability, Training and Diversity Policy adopted
by the Board lays out the diversity requirements
Klarna’s Board is expected to meet. This policyemphasizes that all Board assignments should bemade based on merit and with the goal of maintaining
and enhancing the Board’s overall effectiveness.
In order to achieve this, the company looks for awide range of qualifications and competencies, andplaces a strong emphasis on diversity in terms of age,gender, geographical background, and educational
and professional experience.

Number of assignments
Klarna must evaluate the number of positions heldby the Board members and CEO to ensure that

ESG INTRODUCTIONSUSTAINABILITYENVIRONMENT

it is reasonable and appropriate. The evaluation
takes into account the specific circumstances
and the nature, scale, and complexity of Klarna’s
business operations. The company has determinedthat all Board members’ assignments comply withregulatory requirements.
A detailed presentation of the members’
background and other assignments can be foundon www.klarna.com/international/corporategovernance/the-board/.

Training
The Board sets a training plan every year, and it is
the responsibility of the Compliance function to
implement the plan for the Board. The training plan
includes an orientation program for new Board
members and ongoing training on important topics
for individual members and the Board as a wholein matters that have been considered important by
the Board itself. This is to ensure that the Board iscontinuously informed and updated on the relevant
matters that affect the company.

Board committees
The overall responsibility of the Board cannot bedelegated. The Board has established two separate
working committees, the Remuneration Committee
and the Audit, Compliance & Risk Committee, toassist the Board in fulfilling the responsibilities
outlined above. The duties of the Board
Committees, as well as working procedures, aredefined in the Policy for Klarna Board Committees.
Each committee regularly reports on its work to theBoard. Committee members are appointed by the
Board for a period of one year at a time.

Remuneration Committee
The Remuneration Committee (RemCo) is
responsible for preparing and presenting proposals
to the Board on remuneration issues. This
duty includes proposals regarding the Group’s
Remuneration Policy and on remuneration tomembers of the Group Management Team, which
includes CXOs and heads of control functions.
Klarna’s Board has adopted a Remuneration

K L A RN A H O L D I N G A B (P UBL)

Policy which creates standardized remuneration
structures throughout the organization. This isrevised when necessary and at least annually.
The RemCo makes a competent and independent
evaluation of the Remuneration Policy and Klarna’s
remuneration system, and presents it to the Boardon at least an annual basis. The RemCo handles
matters within its responsibility on an ongoingbasis through correspondence between thecommittee members. Any formal decisions notcovered by its delegation authority are reported
to and documented by the Board at the closest
following Board meeting. Under the oversight of
RemCo, Klarna has established a Remuneration
Policy and processes, securing sound andstandardized remuneration structures throughout
the organization.

SOCIAL

65

CORPORATE GOVERNANCE

Audit, Compliance & Risk Committee

updates to the Board on matters pertaining to
its responsibilities. More information about the
number of meetings and attendance can be foundbelow.

The Audit, Compliance & Risk Committee (ACRC)
is responsible for oversight and preparation of
all matters related to audit (both internal andexternal), compliance, risk and financial reporting
and related internal control arrangements. ACRC
held 9 meetings in 2023 and provided regular

Members during 2023: Sarah Smith (Chair), Mikael
Walther and Lise Kaae.

Meetings and attendance
The table shows the number of meetings held in 2023 15 by the Board of Directors and its committees as wellas the attendance of the individual Board members:

KHAB Boardof directors

KBAB Boardof directors

Audit ,
Complianceand RiskCommittee

Remuneration
Committee

24

14

9

5

2023
Number of meetings

Independence
in relation to
the Company

Independence
in relation tosignificant
shareholdersNo

Yes 16(of which are email resolutions)

17

7

0

3

Michael Moritz

24

14

-

5

Sebastian Siemiatkowski

24

14

-

-

No

No

5

Yes

Yes
No

Sarah Smith

24

14

9

Lise Kaae

24

14

9

-

Yes

Mikael Walther

24

14

9

-

Yes

No

Omid Kordestani

24

14

-

5

Yes

Yes

Roger W. Ferguson Jr.

24

14

-

-

Yes

Yes

1

1

-

-

Yes

No

Matt Miller

Group Management TeamThe CEO works together with Klarna’s GroupManagement Team. The Group Management Teamconsists of CXOs and heads of control functions
and is responsible for matters of common concern
across corporate functions, strategic issues,
business plans, financial forecasts and reports. The
Group Management Team usually meets weekly or
when the CEO convenes a meeting.

Members during 2023: Omid Kordestani (Chair),Michael Moritz and Sarah Smith.

The Group Management Team consists of:● Sebastian Siemiatkowski, CEO● David Fock, Chief Product and Design Officer● Camilla Giesecke, Chief Operating Officer● Niclas Neglén, Chief Financial Officer● David Sandström, Chief Marketing Officer● Yaron Shaer, Chief Technology Officer● David Sykes, Chief Commercial Officer● Joachim Reuss, Chief Risk Officer● Joaquín Calderón, Chief Compliance Officer● David Currie, Chief Information Security Officer● Arvind Varadhan, Chief Credit Risk Officer

15

As of December 29, 2023.

16

The committees in the table are committees of the Klarna Bank AB Board. As the members of the ACRC (and all Klarna Bank
Board members) are also members of the Klarna Holding Board, the Klarna Holding Board has the benefit of consideration
undertaken and recommendations made by the ACRC.

A N N UA L R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENTGroup management committees
The CEO has, besides the Group Management Team,
three separate committees at his disposal for the
purpose of managing operations:

Capital and Liquidity Committee, which is
responsible for assessment and decision within theinternal capital assessment process.

Executive Credit and Fraud Committee, which is
responsible for reviewing credit risk results andtrends as well as steering the company’s overall
generation of credit risk.

Audit, Compliance and Operational Risk Committee,
which is responsible for providing oversight andretaining executive responsibility for all Audit,
Compliance and Operational Risk related matters.

Risk management, risk reporting, and control functions
Risk management is central to Klarna’s operating
model and underpins all activities conducted
throughout the organization. The purpose of risk
management is to safeguard Klarna’s long-term
viability, mitigate volatility in financial performance,enhance operational resilience and performance,
and facilitate informed decision-making.
Klarna’s risk management governance model
encourages a risk-aware culture combined with
control structures which are monitored andenforced by independent control functions. Key
controls are documented and assessed on aregular basis, with assessments considering both
effectiveness of design and operation. The risk
strategy is a natural extension of the businessmodel that focuses on identification, assessment,
management and monitoring of the material risks
that Klarna is exposed to.

Risk GovernanceKlarna operates a financial services industry
standard three lines of defense model for risk
management and control. The model allocates
responsibilities of activities among teams orfunctions in three independent lines as outlined
below:

Business Line Management

Risk Control and ComplianceInternal Audit“Risk ownership”
1st line of defence“Control functions”
2nd line of defence“Risk assurance”
3rd line of defence

Owns risk and risk
management activities.

Establishes policies and framework,
provides advice, facilitates risk
assessment and independent control
including reporting of adherence torisk appetites, limits and frameworks.

Tests, validates and assess efficiency
in governance, risk management
and internal control processes andactivities.

K L A RN A H O L D I N G A B (P UBL)66

CORPORATE GOVERNANCE

The ultimate responsibility for risk management rests
with the Board, which sets Klarna’s risk appetite
limits and policies establishing the principles for risk
management. It also oversees and promotes a soundrisk culture of risk awareness and understanding
across the organization to encourage informed
decision making. The Board is supported by the Audit,
Compliance, and Risk Committee (ACRC) in performing
its duties regarding risk management.
The Group Management Team are responsiblefor implementing the risk strategy. They are also
accountable for the management of risks within eachof their areas of responsibility, and to promote asound and effective risk culture across their teams
and the Klarna Group as a whole.
Business Line Management, in the first line of defense,are responsible for the risks, and the management ofthese, within their respective area of responsibility.
They are responsible for ensuring that the appropriateorganization, procedures and support systems are
implemented to ensure a sufficient system of internal
controls.
The second line of defense, consisting of the functions
Risk Control and Compliance, oversees risk. These
functions set the principles and framework for risk
management, facilitate and challenge risk assessments,
perform independent control testing, and report onadherence to risk appetites, limits and frameworks.
The control functions are independent of businessline management. They attend and report to the Audit,
Compliance and Risk Committee (ACRC) and theBoard.

Board and Group Management Team Overall Responsibilities

Performs necessary controls
to secure acceptable risk exposure.

SOCIALInternal Audit, in the third line of defense, provides
risk assurance through independent periodic reviewsof governance structures and control systems. This
includes regular evaluation of Klarna’s framework forrisk management and a yearly review of the control
functions in the second line of defense. Internal audit
reports directly to the Board of directors.

Risk Strategy and Appetite
Klarna’s risk strategy is set by the Board and outlines
the nature of risks that the business is exposed to,its willingness to take these risks and how they are
managed. It is formed through Klarna’s business plan,established by the Group Management Team andapproved by the Board; the Risk Policy, which forms

the basis of Klarna’s risk management framework; theCredit Policy which sets out Klarna’s credit strategy;
and the Internal Capital and Liquidity Adequacy
Assessment Process.
The risk appetite framework outlined in the Risk
Policy reflects Klarna’s willingness to take and limit
risk. The appetite is set by the Board and reviewed
and updated regularly, at least on an annual basis.
This annual review is an integral part of the annual
business planning process, ensuring alignment of thebusiness strategy, planned business activities andKlarna’s risk exposures.
The Board and Executive Management also issue
specific written policies and instructions for managing
risks, which are complemented by detailed routine
descriptions within the organization. The second linefunctions provide an independent assessment ofKlarna’s risk profile to the Group Management Teamand the Board on at least a quarterly basis.

Risks
Klarna categorizes the key risks it is exposed tointo six types. These categories are subsequently
further refined and managed within theorganization. These risk categories form the basisof how Klarna identifies, assesses, manages, andreports against risk.
Credit risk is defined as: the risk of loss due toa counterparty failing to meet its contractual
obligations or concentrations of exposures.
Credit is fundamental to Klarna’s mission ofproviding consumers a smooth payment experience,
better financial management and supporting
partners’ growth. It is a risk that Klarna takes toachieve its business objectives.
Klarna ensures that the consumer credit portfolio
is resilient to volatile economic conditions byoffering short duration credits and low averageorder value. Klarna limits the concentration of
non-performing loans and large single exposuresin the consumer credit portfolio. This, together
with the dispersion of millions of customers acrossmultiple countries and continents and low averageorder value, ensures that the consumer portfolio isdiversified. Klarna takes precautions to ensure thatapproved consumers have the ability to pay their
obligations.

A N N UA L R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORT

Exposures and losses stemming from partners,
payment and bank counterparties are managed bylimiting single exposures based on the risk classof the counterparty as well as the aggregatedexposure and concentration to different segments.
Exposures to partners are managed using mitigation
tools to increase Klarna’s collateral, such as
payment delays, rolling reserves, insurances andwithholding payments.
Klarna uses financial guarantees to provide
protection for part of its portfolio of consumer
exposures. The guarantee can reduce theregulatory capital the bank is required to hold for
unexpected losses and the guarantee is fully fundedwith eligible collateral.
Market Risk is defined as: the risk of impacts on
earnings or capital as a result of market pricemovements.
Klarna does not actively take market risk but due to
its multi-currency business and different durationof its assets and liabilities is exposed to it. Klarna’s
exposure to interest rate risk is via a mismatch ofterms in assets and liabilities. The risk arises whereKlarna’s funding has a different duration than thecredits granted to consumers. Klarna seeks tomitigate this risk by matching assets and liabilities
to reduce the risk to economic value and earnings.
Currency risk is mitigated by entering into offsetting
currency transactions in order to minimize theimpact that changes in currency rates may have on
Klarna’s realized earnings.
Klarna does not invest in financial instruments otherthan for liquidity, interest rate and currency risk
management purposes. From time to time Klarna
makes strategic investments in other companies toaccelerate innovation and/or expand and improve
its product offering. Equity risk, the risk thatthe value of these investments may increase or
decrease, is a natural consequence of this activity.
The risk of losses arises due to the potential foradverse price changes of an investment. This
exposure is limited through Board mandates.

ESG INTRODUCTIONSUSTAINABILITYENVIRONMENT

Liquidity Risk is defined as: the risk of being unable
to meet financial obligations as they fall due, or
unable to fund operational needs without incurring
unacceptable costs.
Klarna is dependent upon the effective managementof liquidity risk to realize the company’s strategy.
The risk of insufficient funding being available would
have implications on future growth, the company’s
ability to meet financial obligations, and in an
extreme scenario, the breach of regulatory limits.
Klarna is primarily exposed to liquidity risk due tothe potential for unexpected increased demand for
credits. There is a risk that Klarna does not have asufficient capacity to acquire additional funding ata reasonable cost in a timely manner, or does nothave sufficient levels of liquid assets to convert
to cash during such times. Klarna keeps sufficientlevels of liquidity at hand at all times, ensuringthat sufficient funds are available to support thebusiness and that regulatory requirements areadhered to.
Klarna actively manages its liquidity risk exposureand sources of liquidity by calculating, forecasting
and managing the size of the High Quality Liquid
Assets (HQLA) portfolio and the funding needs toensure that Klarna always has the ability to fulfill its
commitments as they fall due and meet regulatory
requirements. Klarna invests in financial instruments
for liquidity management purposes, and mostly
in high credit quality sovereign and municipal
government securities.
Operational Risk is defined as: the risk of
inadequate or failed processes, personnel,
products or third parties.
Operational risk is a natural consequence ofKlarna’s business model and operations. The
continued delivery of Klarna’s services to customers(partners and consumers) relies on resilience andstability in how processes, personnel, products
and third parties are managed. To manage these
inherent risks Klarna operates a robust operationalrisk management framework.
Klarna maintains an operational risk management
framework as outlined in the Operational Risk
Policy. This is supported by more detailed risk
specific approaches. On an annual basis, businesscritical products and services are identified andK L A RN A H O L D I N G A B (P UBL)

SOCIAL67

CORPORATE GOVERNANCE

a risk assessment completed, including review
of internal controls and identification of any
additional mitigation activities required. This
includes maintaining a business continuity plan toensure continuation of services during a business
continuity event.
To sustain operational delivery, outside of business
continuity, a mandatory Incident management
process provides a structured approach forcontinuous learning and improvement throughanalysis of past incidents.
A driver of operational risk is major change. Klarna
operates a change management approval process(the NPA process) to ensure a sound understandingof the business change and capture associatedrisks. All major changes undergo a risk assessment
led by the owner of the change to identify andassess the risks associated with the change, andto implement adequate controls and/or mitigation
actions.
Klarna has no appetite for its products and services
being misused for financial crime. It does not accept
any deliberate, inadvertent or systemic breachesof applicable AML/CTF laws and regulations, or
relevant sanctions regimes, as further elaborated in
the AML & CTF Policy.
ICT and Security Risk is defined as: the riskof failures or breaches in information orcommunication systems or physical security
including system outages, software failures, data
breaches, physical security breaches or cyberattacks.
Klarna is subject to ICT and security risk as aconsequence of its business and operational
processes. This risk can occur in several ways that
can impact on one or more of the confidentiality,
integrity or availability of data and systems suchas stemming from human actions, system or
technology failures or processes not operating as
expected as well as adjusting to the continuously
evolving cyber threat landscape.
Klarna uses many automated and standardized
security measures in a layered approach to protect
systems. To manage ICT and Security risks, Klarna
maintains a specific ICT management framework.
This includes regular IT security/vulnerability
assessments and testing, ongoing systemmonitoring, software change management controls,
strict access management controls and regular ICT

and employee training, including security awarenesstraining and exercises. Key ICT and Security risk
controls are tested and measured at least annually
through an independent assurance reporting audit
as well as through the use of compliance as code.
Business Risk is defined as: the risk of suboptimal
strategy selection or ESG factors impacting theachievement of Klarna’s business objectives oraltering the long term valuation or viability of thebusiness.
Klarna’s strategy is delivered through its businessplan, which enables an informed decision making
process for assessing business risks. The businessplan defines Klarna’s objectives and the steps
needed to reach those objectives and is designed
to be resilient to changes in external economic
and competitive conditions. Klarna aims for asustainable strategy and business model andtherefore expects to achieve the business planwith minimal variation.
As a part of the business planning cycle, Klarnaassesses the up and down-side risks of the planand considers the impact of competitor and market
conditions to test the plans achievability under
different circumstances. The achievement of thebusiness plan is then reviewed monthly by the CXOs
with updates on key financial and business metrics,
including exposure against Board risk appetite
limits. Where Klarna sees opportunities or risks,
it adjusts approaches as appropriate to preserve
achievement of the plan.
ESG risks are identified through a periodic double
materiality assessment to determine the key
themes that could impact Klarna. Action plans aredeveloped to further manage the individual risks.
To deliver its sustainable, global growth strategy inan efficient way, Klarna starts small with lower risk
products that it can quickly test, iterate and scale.
Launches of new products or markets go througha structured assessment and decision making
process to ensure risks have been captured.
More information on Klarna’s approach toEnvironmental, Social and Governance, including
ESG risks is included in Klarna’s ESG report,
published on Klarna’s sustainability website https://www.klarna.com/international/sustainability/
and in the Risk Management in the Notes withAccounting Principles, Note 3.

A N N UA L R E P O RT 2 0 2 3

CONTENTS

BoD REPORTESG REPORTESG INTRODUCTIONSUSTAINABILITYENVIRONMENT

Risk reporting

Internal Audit

In the Risk Policy the Board has established how
and when it shall receive information about Klarna’s
risks and risk management. The periodic, recurringrisk reporting in Klarna provides reliable, current,
complete, and timely information, reflecting thenature of different risk types as well as market
developments. The Board, the ACRC, the CEO, and
the Group Management Team, as well as otherfunctions that require such information, receive
regular reports on the status of risks and risk
management to ensure they are aware of material
risks and control weaknesses.

Klarna’s Internal Audit Function is independent of thebusiness, reporting directly to the Board. The Board
has adopted a Policy on Internal Audit.

Internal Control and Financial Reporting
Klarna maintains risk management processes andinternal controls relating to financial reportingwhich are designed to ensure accuracy of financial
records, appropriate application of accounting
policies and compliance with relevant regulations
and provide management with accurate and timely
financial reporting in order to accurately view theGroup’s performance and make informed decisions.

The responsibility of Internal Audit is to provide
reliable and objective assurance to the Board andthe CEO regarding the effectiveness of controls,
risk management, and governance processes byperforming independent periodic reviews of thegovernance structure and the system of internal
controls.
The Board has decided to outsource Klarna’s
Internal Audit Function to an external party and has
appointed Deloitte as Internal Auditor.
The Internal Audit Function reports regularly to theBoard and ACRC the results of its audits, including
identified risks and suggestions for improvements.
Internal Audit also informs the CEO, the GroupManagement Team and the relevant departments
on internal audit matters. The Board annually
establishes a plan for the internal audit work.

SOCIALCORPORATE GOVERNANCE

68

Insider administration
Insider administration is organized according to theapplicable EU and national level laws and regulations.
The Board has approved Group-wide policies
and instructions to provide clear instructions for
employees to ensure inside information is identified
and handled appropriately.
Insiders are identified on a case-by-case basis
whenever inside information is detected andare subsequently registered in a related insider
register and notified of their insider status. All
identified insiders are then prohibited from dealing
in the financial instrument(s) to which the inside
information relates until that information is madepublic or otherwise no longer deemed to be inside
information, and the insider register is closed.
As Klarna’s shares are not admitted to trading ona regulated market, Klarna’s obligations under the
EU Market Abuse Regulation No 596/2014 (MAR)relate only to its corporate bonds listed on Nasdaq
Stockholm. Klarna does not maintain a permanent
insider register under EU Market Abuse Regulation
No 596/2014 (MAR).
The responsibilities of Klarna’s insider administration
include evaluating whether information is inside
information or not, training of and providing
information to employees who are exposed to inside
information to make sure that they are aware of
the restrictions and obligations placed on insiders,setting up and maintaining insider registers as well
as monitoring compliance with the insider rules. The
rules are put in place to mitigate the risk of insider
dealing and other forms of market abuse, and theoverall responsibility for making sure that a highlevel of knowledge of and compliance with theserules is maintained lies with Klarna’s Governanceand Company Secretary team reporting to the Chief
Financial Officer.

External Audit
Klarna’s external auditors are formally elected at
the General Meeting on an annual basis in line with
Swedish Company law. Ernst & Young AB was reelected at the 2023 AGM as external auditor for theperiod up to the 2024 AGM.
The ACRC receives reports from the auditor, which
include details of significant internal control mattersthat they have identified, and meets with the auditor
on a regular basis.
The ACRC oversees appropriate procedures tomaintain the independence of the external auditor,
this includes Klarna’s non-audit services policy
which sets out those services that the auditor ispermitted to provide and the requirements for preapproval by ACRC in advance of provision of nonaudit services.

K L A RN A H O L D I N G A B (P UBL)A N N UA L R E P O RT 2 0 2 3

CONTENTS

KEY FINANCIAL AND PERFORMANCE MEASURES69

Key Financial andperformance measures

K L A RN A H O L D I N G A B (P UBL)A N N UA L R E P O RT 2 0 2 3

CONTENTS70

KEY FINANCIAL AND PERFORMANCE MEASURES

Reconciliation of alternative performance measures

Financial Results - Klarna Holding
FY23

FY22

FY23 YoY

Gross merchandise volume
Transaction and service revenue
Interest income from operating activities
Total revenue

980,892
19,7983,707
23,504

837,285
15,403
3,934
19,336

17%
29%
(6)%
22%

Processing and servicing
Consumer credit losses
Funding costs
Transaction costs
Gross profit(5,700)(3,766)(2,356)(11,822)
11,682(5,165)(5,563)(1,327)(12,055)
7,281

10%
(32)%
78%
(2)%
60%

Technology and product development
Sales and marketing
Customer service and operations
General and Administrative (G&A)
Depreciation, amortization and impairments
Other income (expense), net
Operating expenses(3,045)(3,400)(2,420)(3,920)(2,392)
290(14,887)(3,415)(4,893)(2,817)(4,359)(1,639)(633)(17,755)

(11)%
(31)%
(14)%
(10)%
46%
n.m
(16)%

Operating result
Restructuring costs
Share-based payments
Depreciation and amortization
Adjusted operating result(3,204)
665
462
1,699
(378)

(10,474)
501
523
1,639
(7,811)

69%
33%
(12)%
4%
95%

Income tax
Net result for the period

665(2,539)34(10,440)

1,856%
76%

Amounts in SEKM

Klarna uses certain alternative performancemeasures for financial performance. These include
revenue, gross profit, and adjusted operating results.
Klarna believes these measures are important forassessing performance as they reflect underlying

business activity and performance. This includes
growing revenue and core profitability, and managing
expenses, since these measures exclude items
that are generally not a function of the company’s
underlying operating performance.

Reconciliation of revenue to total net operating income
Amounts in SEKM
Revenue (Management view)
Commission expenses
Net result from financial transactions
Interest expenses
Interest income from liquidity assets
Total net operating income (Statutory financial accounts)

2.40%(0.38)%
50%

2.31%(0.66)%
38%

4%
(42)%
12pp

FY22

23,504(1,003)(150)(2,860)1,139
20,62919,336(724)(1,050)(1,050)192
16,703

Revenue is defined as total net operating income in accordance with IFRS excluding; commission expense,
interest expense, net result from financial transactions and interest on liquidity assets not related directly
to the core business. Interest on liquidity assets that are not directly related to the core business stems
from loans to credit institutions and other interest income (see note 5).
Klarna believes Revenue is the best indicator of how much value we are sustainably generating from ourbusiness and that this approach is in-line with our peers.

Reconciliation of total net operating income to gross profit
Amounts in SEKM

Key ratios
Revenue take rate
Consumer credit loss rate
Gross margin

FY23

Total net operating income (Statutory financial accounts)
Including
Processing and servicing
Consumer credit losses
ExcludingInterest expenses*
Commission expenses*
Net result from financial transactions*
Gross profit (Management view)

FY23

FY22

20,62916,703(5,700)(3,766)(5,165)(5,563)

(44)
(772)
296
11,682

(48)
(635)
(623)
7,281

* of which are not directly related to revenue-generating activities.
Gross profit is defined as total net operating income in accordance with IFRS, including costs related toprocessing and servicing (within statutory metric, general administrative expenses) and consumer credit
losses (within statutory metric, credit losses, net). Costs of which are not directly related to revenuegenerating activities within interest expenses, commission expenses and net result from financialtransactions are excluded.
Klarna believes gross profit is the best indicator of the core profitability of the company’s business activities
before the deduction of indirect costs.

K L A RN A H O L D I N G A B (P UBL)A N N UA L R E P O RT 2 0 2 3

CONTENTS71

KEY FINANCIAL AND PERFORMANCE MEASURES

Reconciliation of gross profit to operating result
Amounts in SEKM
Gross profit (Management view)Operating expenses
Operating result (Statutory financial accounts & Management view)

FY23

FY22

11,682(14,887)(3,204)

7,281(17,755)(10,474)

Operating result is defined as Gross profit after including all operating expenses which are not directly
related to revenue generating activities.

Reconciliation of IFRS operating results to adjusted operating result
Amounts in SEKM
Operating result
Restructuring costs
Share-based payments
Depreciation and amortization*
Adjusted operating result

FY23

FY22

(3,204)
665
462
1,699
(378)

(10,474)
501
523
1,639
(7,811)

Adjusted operating result is defined as IFRS operating result, excluding Restructuring costs; Sharebased payments and related payroll taxes and; Depreciation and amortization.
* During the year, Klarna conducted a comprehensive review of its assets to optimize operational
efficiency. As a result of this review, the company made a strategic decision to right-size its office
footprint and early terminate certain lease agreements, and to cease certain activities resulting in awrite down of certain intangible assets. The total one-time financial impact in 2023 as a result amounted
to SEK 693 million. These are shown in restructuring costs in the above table but appear underDepreciation, amortization and impairment of intangible and tangible assets in the income statement.

K L A RN A H O L D I N G A B (P UBL)A N N UA L R E P O RT 2 0 2 3

CONTENTS

GROUP FINANCIALS

72

Group financials
K L A RN A H O L D I N G A B (P UBL)A N N UA L R E P O RT 2 0 2 3

CONTENTS

73

GROUP FINANCIALS

Income Statement, Group

Five Year Summary, Group
Amounts in SEKm

2023

2022

2021

2020

Amounts in SEKm

Note

2023

2022

Interest income

5

4,845

4,125

7,202

Interest expenses

6, 7(2,860)(1,050)Net interest income

1,985

3,075

8

17,826

13,714

Commission expenses

9(1,003)(724)

Net result from financial transactions

10

(150)

(1,050)

1,971

1,688

20,62916,703

2019

Income statement
Total net operating income

20,62916,703

13,948

10,094

Operating result(3,204)(10,474)(6,595)(1,538)(1,044)

Net result for the year

(2,539)(10,440)(7,123)(1,305)(868)

Balance sheet
Loans to credit institutions

4,502

3,818

5,048

2,620

1,913

Loans to the public

86,10873,98362,08541,71829,655All other assets

47,32647,42439,72917,482

8,321

137,936

125,225

106,862

61,82039,889Total assets

Liabilities to credit institutions

1,636

2,829

713

2,415

4,940

Deposits from the public

97,096

81,47059,67230,835

12,288All other liabilities

17,125

16,73021,957

14,23513,006

Total equity

22,07924,196

24,52014,335

9,655

137,936

125,225

106,862

61,82039,889Total liabilities and equity

Commission income

Other operating income
Total net operating income
General administrative expenses

7, 11, 12(17,409)(19,820)

Depreciation, amortization and impairment of intangible and tangible
assets7, 13(2,392)(1,639)(19,801)(21,459)

828(4,756)

Total operating expenses before credit losses
Operating result before credit losses, net
Credit losses, net

14

Operating result(4,032)(5,718)(3,204)(10,474)

Key ratios and figures1
Return on equity(13.8)%(43.0)%(33.9)%(12.8)%(14.4)%

Return on assets(1.9)%(9.0)%(8.4)%(2.6)%(2.5)%

Debt/equity ratio

4.7

3.8

3.3

3.2

3.7

Equity/assets ratio

16.0%

19.3%

22.9%

23.2%

24.2%

Own funds (Total capital)2

12,56015,54819,855

13,5308,448

Capital requirement2

5,743

5,487

4,947

3,391

2,116

Total capital ratio2

17.5%

22.7%

32.1%

31.9%

31.9%

Average number offull-time equivalents3

4,972

6,011

4,789

3,238

2,248

Income tax
Net result for the year

15

665

34

(2,539)(10,440)(2,421)(10,339)

(166)

(145)

48

44

(2,539)(10,440)

Whereof attributable to:Shareholders of Klarna Holding AB (publ)
Non-controlling interests
Additional Tier 1 capital holders
Total

Statement of Comprehensive Income, Group
Amounts in SEKm

2023

2022

(2,539)(10,440)

Exchange differences on translation of foreign operations

(178)

433

Other comprehensive income for the year, net of tax

(178)

433

(2,717)(10,007)(2,599)(9,907)

(166)

(144)

48

44

(2,717)(10,007)1

See "Definitions and Abbreviations" for definitions of how the ratios are calculated.

2

Figures refer to Klarna Holding AB (publ) group. In accordance with the capital adequacy regulations, the consolidated situation is made up ofKlarna Holding AB (publ) and its subsidiaries. All subsidiaries are fully consolidated in the Group.

Net result for the year

3

Number of employees (headcounts) as at December 31, 2023 amounted to 4,201 (5,441).

Items that may be reclassified subsequently to the income statement:

Total comprehensive income for the year
Whereof attributable to:Shareholders of Klarna Holding AB (publ)
Non-controlling interests
Additional Tier 1 capital holders
Total

Unlike the balance sheet, which shows a snapshot of assets and liabilities as at 31 December, the credit losses in theincome statement reflect provisions for future losses and realized losses associated with all lending activities during
the year.

K L A RN A H O L D I N G A B (P UBL)A N N UA L R E P O RT 2 0 2 3

CONTENTS

74

GROUP FINANCIALS

Balance Sheet, Group
Amounts in SEKm

Statement of Changes in Equity, GroupNote

31 Dec 2023

31 Dec 2022

Assets
22,028Cash and balances with central banks

Net result

Noncontrollinginterests Total equity

Amounts in SEKm
Balance as atJanuary 1, 2023

3

41,569756

532(8,432)(10,295)

24,13363

24,196

Reclassification

-

3

-

-

-

-

3

-

3

Transfer of previous
year's net result

-

-

-

-

(10,295)

10,295---

Net result for the year

-

-

-

-

-

(2,373)(2,373)(166)(2,539)17

7,267

10,713Loans to credit institutions

18

4,502

3,818

Loans to the public

19

86,10873,983

Bonds and other interest-bearing securities

20

506

864

345

338

21

12,05012,773

Intangible assets

Retainedearnings

Total equity
excl. noncontrollinginterests

16,085

Treasury bills chargeable at central banks, etc.

Other shares and participations

Sharecapital

Other
Additional
capitalTier 1
2
contributed Reserves instruments

Other comprehensive
income, net of tax
Total comprehensive
income for the year

-

-

(178)

-

-

-

(178)

-

(178)

-

-

(178)

-

-

(2,373)(2,551)(166)(2,717)515

Tangible assets

7, 22

1,228

2,044

Deferred tax assets

15

282

395

New share issue

-

515

-

-

-

-

515

-

Share warrants

-

5

-

-

-

-

5

-

5

Share-based payments

-

-

-

-

332

-

332

-

332

Restricted stock units
Additional Tier 1
instruments1

-

-

-

-

-

-

-

162

162

Other assets
Prepaid expenses and accrued income

23, 24

2,775

3,189

25

845

1,023

137,936

125,225

Total assets

Liabilities

-

-

-

-

(48)

-

(48)

-

(48)

Redeemed Additional
Tier 1 instruments

-

-

-

(256)

(30)

-

(286)

-

(286)

-

-

-

-

(72)

-

(72)

(11)

(83)

3

42,092578

276(18,545)(2,373)22,031

48

22,079Retainedearnings

Net result

Total equity
excl. noncontrollinginterests(7,017)24,282

Liabilities to credit institutions

26

1,636

2,829

Changes in noncontrolling interests

Deposits from the public

27

97,096

81,470Debt securities issued

28

651

1,676

Balance as at
December 31, 2023

5912

7, 24, 29

11,972

11,074

Accrued expenses and prepaid income

30

3,618

2,653

Provisions

31

128

112

Subordinated liabilities

32

751

303

115,857

101,029

Deferred tax liabilities
Other liabilities

Total liabilities

15

Amounts in SEKm
Balance as atJanuary 1, 2022

EquityShare capital
Other capital contributed
Reserves

3

3

42,092

41,569

578

756

Share
capital

Other
Additional
capitalTier 1
contributed Reserves2 instruments

Noncontrollinginterests Total equity

3

32,280324

506(1,814)73

24,355

Transfer of previous
year's net result

-

-

-

-

(7,017)

7,017

-

-

-

Net result for the year

-

-

-

-

-

(10,295)(10,295)(145)(10,440)

Other comprehensive
income, net of tax

-

-

432

-

-

-

432

1

433

Total comprehensive
income for the year

-

-

432

-

-

(10,295)(9,863)(144)(10,007)

New share issue

-

9,289

-

-

-

-

9,289

-

9,289

Transaction costs

-

(19)

-

-

-

-

(19)

-

(19)

Share warrants

-

19

-

-

-

-

19

-

19

Share-based payments

-

-

-

-

481

-

481

-

481

276

532

Retained earnings(18,545)(8,432)

Net result for the year

(2,373)(10,295)

Restricted stock units

-

-

-

-

-

-

-

128

128

Total equity attributable to parent

22,031

24,13348

63

Tax effect on
Restricted stock units

-

-

-

-

(6)

-

(6)

-

(6)

22,07924,196

Additional Tier 1
instruments1

-

-

-

276

(44)

-

232

-

232

Redeemed Additional
Tier 1 instruments

-

-

-

(250)

-

-

(250)

-

(250)

Changes in noncontrolling interests

-

-

-

-

(32)

-

(32)

6

(26)

3

41,569756

532(8,432)(10,295)

24,13363

24,196

Additional Tier 1 instruments

Non-controlling interests
Total equity

Total liabilities and equity

137,936

125,225

Balance as at
December 31, 2022

Loans to the public represents only the amount of outstanding loans receivable, as at 31 December, and is net ofallowance for future credit losses (see note 19 for breakdown). This balance is only partially comparable to credit losseson the income statement as the income statement reports all activity during the year from 1 January to 31 December,while the balance sheet is a snapshot of lending outstanding as at 31 December.

K L A RN A H O L D I N G A B (P UBL)

1

Amounts in Additional Tier 1 instruments column consist of issued instruments, while amounts in Retained earnings column consist of interest
and cost of issuance of these issued instruments.

2

The reserves consist of exchange differences from foreign operations.

Equity is in its entirety attributable to the shareholders of Klarna Holding AB (publ), non-controlling interests andits Additional Tier 1 capital holders.

A N N UA L R E P O RT 2 0 2 3

CONTENTS

75

GROUP FINANCIALSCash Flow Statement, Group
Amounts in SEKm

Note

2023

2022

Operating result(3,204)(10,474)

Income taxes paid

(115)

(214)

2,392

1,639

Operating activities

Adjustments for items in operating activities
Depreciation, amortization and impairment

7, 13

Gain/loss from disposal of shares in group companies(8)-

Share-based payments

535

954

6

19

Provision for credit losses

(608)

148

Financial items including unrealized exchange rate effects

(321)

670

Change in loans to the public(12,049)(10,897)

Change in liabilities to credit institutions(1,172)

1,828

Change in deposits from the public

16,727

21,234

Change in other assets and liabilities

6,367(2,531)

Cash flow from operating activities1

8,550

2,376

Provisions excluding credit losses

Changes in the assets and liabilities of operating activities

Investing activities
Investments in intangible assets

21

(890)

(949)

Investments in tangible assets

22

(7)

(119)

Sales of fixed assets
Investments in business combinations

41

16

-

-

(3,578)Divestment of shares in subsidiaries

8-

Cash flow from investing activities(873)(4,646)

New share issue

436

8,367

Share warrants

5

19

Issued Additional Tier 1 instruments-

276

Financing activities

(286)

(250)

Debt securities, net

28

(837)

(7,479)Subordinated liabilities, net

32

450

-

-

(26)

(441)

(350)

Redeemed Additional Tier 1 instruments

Change in non-controlling interests
Payment of principal portion of lease contracts

7

Cash flow from financing activities

(673)

557

Cash flow for the year

7,004

(1,713)

Cash and cash equivalents at the beginning of the year

17,75918,7597,004(1,713)

Cash flow for the year
Exchange rate diff. in cash and cash equivalents

(593)

713

Cash and cash equivalents at the end of the year

24,17017,759Cash and balances with central banks

21,78416,085Loans to credit institutions2

2,386

1,674

Cash and cash equivalents

24,17017,759Cash and cash equivalents include the following items

Additional liquidity portfolio
Total cash and liquidity
1

Cash flow from operating activities includes interest payments received and interest expenses paid, see note 37.

2

SEK 2.4bn of Loans to credit institutions are classified as Cash and cash equivalents as at December 31, 2023.

7,774

11,577

31,94429,336

As a bank, cash flows from operating activities primarily represent the net flows of money coming in and going out fromthe bank’s consumer lending and retail deposit activities. It’s not a reflection of the bank’s net operating result for theyear. In addition to the SEK 24.2bn in cash and cash equivalents held at year-end, Klarna also maintains an additionalliquidity portfolio of SEK 7.8bn.

K L A RN A H O L D I N G A B (P UBL)A N N UA L R E P O RT 2 0 2 3

CONTENTS

NOTES WITH ACCOUNTING PRINCIPLES

76

Notes withaccounting
principles
K L A RN A H O L D I N G A B (P UBL)A N N UA L R E P O RT 2 0 2 3

CONTENTS

Note 1

Corporate information

The Parent Company, Klarna Holding AB (publ), Corp. ID 556676-2356, maintains its registered office inStockholm at the address Sveavägen 46, 111 34 Stockholm, Sweden. The consolidated financial statements for2023 consist of the Parent Company and its subsidiaries, which together make up the Group. The Group’sbusiness is described in the Report of the Board of Directors.
In this report, Parent Company refers to Klarna Holding AB (publ) and Group refers to Klarna Holding AB (publ)
including its subsidiaries.
The consolidated financial statements and the Annual Report for Klarna Holding AB (publ) for the financial year
2023 were approved by the Board of Directors and the Chief Executive Officer (CEO) on February 27, 2024. They
will ultimately be adopted by Klarna Holding AB (publ)’s Annual General Meeting.

Note 2
1)

77

NOTES WITH ACCOUNTING PRINCIPLES

Accounting principles

Basis for the preparation of the reports

Group
These annual accounts have been prepared in accordance with International Financial Reporting Standards(IFRS) such as they have been adopted by the EU. In addition to these accounting standards, the Swedish
Financial Supervisory Authority regulations (FFFS 2008:25), the Annual Accounts Act for Credit Institutions andSecurities Companies (ÅRKL, 1995:1559) and the recommendation RFR 1 Supplementary Accounting Rules forGroups issued by the Swedish Financial Reporting Board have also been applied.
Parent Company
The Parent Company, Klarna Holding AB (publ), prepares the annual accounts in accordance with the Annual
Accounts Act (ÅRL, 1995:1554). The accounting recommendation for legal entities RFR 2 amended by the
Swedish Financial Reporting Board has also been applied. The Group’s accounting principles are also applicablefor the Parent Company unless otherwise described in this note or the notes for the parent.

2)

New and amended standards and interpretations

The Group has applied all applicable new and amended standards and interpretations from their effective date.
None of the amendments have had a significant impact on the Group.
Pillar 2 Global Anti-Base-Erosion tax reform
In December 2021, the Organisation for Economic Co-operation and Development (OECD) issued model rules fora new global minimum tax framework (referred to as "Pillar Two"). On 13 December, 2023 Swedish legislation wasenacted to adopt the rules, introducing a global minimum effective tax rate of 15% applicable for accounting
periods starting on or after 31 December, 2023. The group is in the process of assessing the full impact of thislegislation, which will apply to the Klarna group.
Klarna’s exposure to top-up tax is estimated to be limited to cases where permanent differences reduce taxable
profits below a 15% effective tax rate. This has been assessed as unlikely to give rise to a material tax cost in
2024, however, the impact of foreign exchange movements could, in certain circumstances, result in some topup taxes, most likely in Sweden.
The group has applied the exception, mandated by an amendment to IAS 12, to recognizing and disclosing
information about deferred tax assets and liabilities related to Pillar Two income taxes.
The Group has not early adopted any other standards, interpretations or amendments that have been issued
but are not yet effective. These standards, interpretations or amendments are not expected to have a material
impact to the Group in the current or future periods and on foreseeable future transactions.
3)

Basis of consolidation

The consolidated financial statements comprise of Klarna Holding AB (publ) and its subsidiaries. The companies
are consolidated as from the date when control is transferred to Klarna and consolidation comes to an end
when Klarna no longer has control. All intra-group assets, liabilities, equity, income, expenses
and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.
4)

Operating segments and income by geographical area

The preparation of reports in accordance with IFRS requires the use of a number of estimates for accounting
purposes. The areas which involve a high degree of assessment or complexity and which are of considerable
importance for the annual accounts are presented in section 25.

Klarna determines operating segments based on how our Chief Operating Decision Maker (CODM) manages
the business, makes operating decisions around the allocation of resources, and evaluates Klarna’s operating
performance.

The financial statements are prepared on the basis that it will continue to operate as a going concern.

Klarna’s CODM is the CEO, who reviews the operating results on a consolidated basis. Klarna operates as one
operating segment and has one reportable segment.
The nature, amount, timing, and uncertainty of our income and cash flows and how they are affected byeconomic factors are depicted through primary geographical markets and type of income categories (retailer
income and consumer income).
5)

Foreign currency translation

Presentation currency and functional currency
The financial statements are prepared in Swedish kronor, which is the presentation currency of the Group. The
functional currency is the currency of the primary economic environment in which an entity operates. Different
entities within the Group therefore have different functional currencies. The functional currency for Klarna
Holding AB (publ) is Swedish kronor.

K L A RN A H O L D I N G A B (P UBL)A N N UA L R E P O RT 2 0 2 3

CONTENTS

Transactions and balance sheet items
Transactions in a foreign currency are translated into the functional currency at the exchange rate on the day of
the transaction. Monetary assets and liabilities in foreign currencies are translated into the functional currency
at the exchange rate at the end of the reporting period. All profits and losses as a result of the currencytranslation of monetary items, including the currency component in forward agreements, are reported in theincome statement as exchange rate fluctuations under the heading Net result from financial transactions.
Subsidiaries and branches
Foreign subsidiaries’ and branches’ assets and liabilities are translated at the closing day rate of exchange andincome statement items at the average exchange rate. Translation differences are reported in Other
comprehensive income.
6)

78

NOTES WITH ACCOUNTING PRINCIPLESInterest and commissions

Revenues are recognized in accordance with the effective interest method or when identified performanceobligations have been fulfilled. The Group’s revenues and expenses are reported after elimination of intragrouptransactions. The product offerings from which revenues are recognized do not differ in any significant way
between geographical markets.

Commission income from consumers_________________________________________________________________________________
Klarna provides consumers with online purchases and the possibility to choose when in time to pay. Commission
income from consumers is fixed amounts which arise from servicing different types of payment options; thisconstitutes the transaction price. The respective performance obligation is satisfied at the date when theaccount statements or paper invoices are issued. The revenue from the consumer commissions is therefore
recognized at that point in time.
Commission and fees for extending credit are considered to be an integral part of the effective interest rate andare therefore recognized in interest income.
7)

The net result from financial transactions comprises the net profit or loss on the trading or disposal of financial
instruments, value changes of financial instruments that are measured at fair value through profit or loss, net
profit or loss on currency exchange activities or other recognized changes in the value of assets or liabilities, tothe extent they can be attributed to exchange rate changes and other financial income and expenses notdirectly attributable to a financial instrument.
8)

Interest income and interest expenses
Interest on financial assets and liabilities measured at amortized cost are recognized in profit or loss using theeffective interest method. When measuring a financial asset or a financial liability at amortized cost, the interest
income or expense is allocated over the relevant period. The effective interest rate is the rate that corresponds
to the rate used for discounting contractual cash flows to the reported value of the financial asset or liability.
The contractual cash flows used in the calculation include all fees that are considered to be integral to theeffective interest rate.
Interest income calculated according to the effective interest method consists mainly of interest from loans to
the public and interest from lending to credit institutions.
Fees related to debt securities issued, deposits from the public, subordinated liabilities and liabilities to credit
institutions are recognized as interest expenses.
Commission income and commission expenses
Revenues and expenses for different types of services are reported as commission income or commission
expenses. Commission income mainly stems from retailers that have an agreement with Klarna and different
types of fees related to end-customer receivables.
Commission income from retailers
Klarna provides retailers with a combined service offering (1) a payment solution while at the same time (2)providing consumers with credit products and catering for credit risk. Since these two types of services arehighly interrelated, this service package epitomizes one identified and distinct performance obligation. This
performance obligation presents a stand-ready obligation which is satisfied over the contract period since theretailer receives the benefit of that service package over that period.
The transaction price of that performance obligation consists of both fixed and variable components. The
variable parts are constrained since they are highly dependent on consumer transactions and are therefore notincluded in the initial transaction price. The transaction price is updated to mirror the dissolving uncertainty
occurring in the performance obligation due to the variable components.
The process of completion is measured by evaluating the value to the customer of the provided service
transferred to date relative to the remaining services promised under the contract. Since the amount oftransactions and usage of the payment solution for the entire contract period is initially unknown, the process ofcompletion is measured by using time elapsed.

K L A RN A H O L D I N G A B (P UBL)

Net result from financial transactions

Credit losses, net

Impairment losses from financial assets classified into the category “measured at amortized cost” (see section“Financial assets and liabilities – classification and recognition” below) are reported as Credit losses, net.
Furthermore, Credit losses, net, from off-balance sheet exposures related to financial instruments are also
reported on this line.
Credit losses, net, for the period consist of realized credit losses, recovered amounts from debt sales andprovisions for credit losses for granted credit with a deduction for the reversal of provisions for credit losses
made previously. Realized credit losses are losses whose amount is for example determined via bankruptcy, acomposition arrangement, a statement by an enforcement authority or the sale of receivables. Provision for
credit losses is calculated either as 12 months expected credit loss or lifetime expected credit loss based on the
IFRS 9 impairment requirements, see section “Impairment of financial assets, financial guarantees andcommitments” below for more details.
9)Cash and balances with central banks

Cash comprises legal tender and bank notes in local and foreign currencies. Balances with central banks consistof deposits in accounts with central banks under government authority where the following conditions are
fulfilled:(i)

The central bank is domiciled, and(ii)

The balance is readily available at any time

10)

Financial assets and liabilities – classification and recognition

Purchases and sales of financial assets and liabilities are recognized on the trade date. Financial assets are
removed from the balance sheet when the right to receive cash flows from the instrument has expired or beentransferred together with the risks and rewards associated with ownership. Financial liabilities are derecognizedwhen they are extinguished. A financial liability is extinguished when the obligation is discharged, cancelled or
expires and this is evaluated both qualitatively and quantitatively.
Financial instruments are initially recognized at fair value including transaction costs except for financial assets
and liabilities classified as fair value through profit or loss where the transaction costs are recognized in theincome statement.

A N N UA L R E P O RT 2 0 2 3

CONTENTS

Financial assets are classified into various categories based on both Klarna’s business model to manage its
financial assets and the characteristics of the cash flows of the financial assets. Financial instruments areclassified into the following categories:
Financial assets and liabilities at amortized cost
Klarna classifies and measures its financial assets at amortized cost if both of the following conditions are met:
(i)

(ii)

79

NOTES WITH ACCOUNTING PRINCIPLES

11)

Financial assets and liabilities - fair value measurement

For financial assets and liabilities measured at fair value the Group uses different methods to determine the fairvalue. All assets and liabilities for which fair value is measured or disclosed in the financial statements are
categorized within the fair value hierarchy, described as follows, based on the lowest level input that issignificant to the fair value measurement as a whole:

The financial asset is held within a business model with the objective to hold financial assets inLevel 1order to collect contractual cash flows, andLevel 1 in the fair value hierarchy consists of assets and liabilities where the inputs used in the valuation areunadjusted quoted prices from active markets for identical assets or liabilities. This category includes certain
investments in other shares and participations.

The contractual terms of the financial asset give rise on specified dates to cash flows that aresolely payments of principal and interest (SPPI) on the principal amount outstanding.

Klarna measures all financial liabilities at amortized cost, except for those that are mandatorily held at fair value
through profit and loss.
The amortized costs are determined on the basis of the effective interest that was calculated at the time ofacquisition or origination. Financial assets at amortized cost are recognized at discounted contractual cashflow
after a deduction for impairments. Where a financial asset or liability carried at amortized cost is in a qualifying
fair value hedge relationship, its carrying value is adjusted for changes in fair value attributable to the hedgedrisk.
Financial assets and liabilities at fair value through profit or loss
This category has two subcategories:(i)

Level 2 consists of assets and liabilities where the inputs that are used for valuation and are significant, arederived from directly or indirectly observable market data available over the entire period of the instrument’s
life. Such inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for
identical instruments in inactive markets and observable inputs other than quoted prices such as interest rates
and yield curves, implied volatilities, and credit spreads. This is for example the case for derivatives within otherassets and other liabilities where active markets supply the input to the valuation.
Level 3
Level 3 includes estimated values based on assumptions and assessments where one or more significant inputs
are not based on observable market information. Level 3 is used for certain items within other shares andparticipations and for certain items in debt securities in issue.

Mandatory: This category includes any financial asset that is not measured at amortized cost, thus
does not fulfill one or both of the conditions to be met for a financial asset to be measured atamortized cost.

(ii)

Level 2

Designated: This category includes any financial asset or liability that is designated on initialrecognition as one to be measured at fair value with fair value changes recognized in profit or loss.

Measurement is at fair value and realized and unrealized profits or losses as a result of changes in fair value areincluded in the income statement in the period in which they arise. The fair value of financial assets andliabilities is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. Klarna uses different methods to determine the fairvalue, see section “Financial assets and liabilities – fair value measurement” below.
Klarna measures its derivatives as well as its investments in equity instruments and certain financial liabilities atfair value through profit or loss. These do not fulfill the conditions for being measured at amortized cost. In caseKlarna’s derivatives have negative values, these financial liabilities are measured at fair value through profit or
loss.
Financial assets at fair value through other comprehensive income
Klarna does not classify any financial assets at fair value through other comprehensive income since Klarna has
no business model whose objective it is to both collect contractual cash flows and to sell financial assets. Klarna
does not use the option to designate its equity instruments as measured at fair value through othercomprehensive income.
Klarna has not reclassified its financial assets subsequent to their initial recognition during the year. Financial
liabilities are never reclassified.

K L A RN A H O L D I N G A B (P UBL)

12) Impairment of financial assets, financial guarantees and commitments
Klarna is recording allowances for expected credit losses (ECL) for all loans and other financial assets notmeasured at fair value through profit or loss. Klarna calculates allowances for:(i)

Loans to the public(ii)

Loans to credit institutions(iii)

Financial guarantees and commitments

Treasury bills chargeable at central banks, bonds and other interest-bearing securities have been evaluated for
impairment. The expected credit losses have been assessed as immaterial due to the features of the assets.
This is also applicable for the majority of the loans to credit institutions which have strong credit ratings and arehighly liquid.
The ECL allowance is based on either the 12 months’ expected credit loss (12m ECL) or on the lifetime expectedcredit loss (lifetime ECL). The ECL allowance is based on the latter if there has been a significant increase incredit risk since initial recognition.
Lifetime ECL and 12m ECL are calculated on a collective basis. When calculating ECL on a collective basis, theECL components are calculated based on segmentation which is built on shared risk characteristics. The
probability of default (PD) component is segmented by geographical region, instrument type and by days sinceorigination.
The loss given default (LGD) component is dependent on geographical region, days past due, and, in some cases,
recoveries from the sale of non-performing portfolios. These PD and LGD estimates are obtained for each of thesegment permutations, which is used to calculate the ECL on a collective basis. Since collateral is not held assecurity, it is not part of the ECL calculations.

A N N UA L R E P O RT 2 0 2 3

CONTENTS

80

NOTES WITH ACCOUNTING PRINCIPLES

Klarna groups its financial assets and off-balance sheet items within the scope of the IFRS 9 impairment
requirements into the following:Stage 1:
Klarna allocates financial assets to stage 1 at initial recognition and until there is a significant increase in credit
risk. The allowance is calculated based on 12m expected credit losses. Stage 1 also includes loans where thecredit risk has improved and that were reclassified from stage 2 and 3.
Stage 2:
When a loan has shown a significant increase in credit risk since initial recognition, Klarna allocates it to stage 2.
The allowance for these loans is calculated based on lifetime expected credit losses. Stage 2 also includes loansthat are reclassified from stage 3 because they are no longer considered credit impaired.
Stage 3:Klarna allocates loans to stage 3 that are considered “credit impaired”. Klarna determines whether a financial
asset is credit impaired based on the historical payments received from the consumer. Based on the default
definition (see definition below) a financial instrument is considered being “credit impaired” if it is 90 days pastdue or is classified as fraudulent. The allowance for these stage 3 loans is calculated based on lifetime expectedcredit losses.
Significant increase in credit risk:
Klarna assesses, at the end of each reporting period, whether the credit risk of a financial instrument has
increased significantly since initial recognition in order to determine whether 12m ECL or lifetime ECL shallapply. Klarna determines that the credit risk of a financial instrument has increased significantly where paymentof the credit product is more than 30 days past due, or where the consumer has other contracts with Klarna thatare already in stage 2 or 3.
If, at the reporting date, it is determined that there is no longer a significant increase in credit risk compared toprior periods, Klarna transfers the respective financial assets back into stage 1 and the allowance is reduced toan ECL calculated on a 12 month basis.
Definition of default:
Financial assets are defaulted when the asset has been 90 days or more past due on any payments, has entereddebt collection or is classified as fraudulent.

Measurement of ECL:
The expected credit loss (ECL) for consumer receivables is calculated as a product of the key inputs PD, LGD
and the EAD. These parameters are derived from internal statistics and other historical and forward looking
data. For quantitative information on the reported ECL amounts see note 19, Loans to the public.
Financial guarantees and commitments:
For financial guarantees and commitments the measurement of ECL follows mainly the same methodology as
for consumer receivables but further includes a credit conversion factor (CCF) in the calculation of the exposure
at default (EAD). The CCF in the IFRS 9 model is the proportion of the undrawn credit limit that is utilized leading
up to a default event. The CCF is calculated based on historically observed utilization rates.
Write-off of financial assets:
Financial assets that have no expectation of recovering either the entire outstanding amount or a proportion
thereof are written off. Hence, the gross carrying amount of the financial asset is reduced and the amount of theloss is recognized in the income statement as Credit losses, net. Financial assets are generally written off when
it is determined that the outstanding debt cannot be collected anymore as the borrower does not have assets orsources of income that could be used to repay the amounts subject to write-offs.
To determine whether the outstanding debt cannot be collected anymore, all significant counterparty
relationships are reviewed periodically. This evaluation considers current information and events related to thecounterparty, such as the counterparty experiencing significant financial difficulty or a breach of contract, forexample, default or delinquency in principal payments. Financial assets that are written off could still be subject
to enforcement activities in order to attempt to recover the receivables due. For information on the written-off
loans subject to enforcement activities, see note 19, Loans to the public.
When it is considered that there is no realistic prospect of recovery or when the loan or receivable is sold to an
external party, the financial asset and the related allowance are removed from the balance sheet.
Modifications:
In case a financial asset faces a substantial contractual modification, the previous asset is derecognized and a
new asset is recognized. If the modified financial asset fulfills the definition of “credit impaired”, therequirements for purchased or originated credit impaired assets for the recognition of the new asset are
applied. If a financial asset faces a non-substantial contractual modification the financial asset is notderecognized and it is assessed if there occurred a significant increase in credit risk since initial recognition.

Probability of Default (PD):The historical balances as well as the proportion of those balances that default over time are used as a base todetermine the PD. This approach is applied over different vintages for different countries and for days sinceorigination. Hence, this methodology provides values for 12 month and lifetime PDs for different countries anddays since origination. In cases where the maturity of the financial assets is very short, which is common for
Klarna’s products, the 12 months PD and lifetime PD have equal values.
Loss Given Default (LGD):
LGD is the magnitude of the likely loss if there is a default. The loss given default is calculated using thehistorical balances over different vintages as a base. Furthermore, the LGD component is determined based ondays past due. The recovery rate used in the LGD calculation is determined using the amount recovered fromdebt sales.
Exposure at default (EAD):
The exposure at default (EAD) represents the estimate of the exposure at a future default date, taking into
account expected changes in the exposure after the reporting date, including repayments of principal andinterest, whether scheduled by contract or otherwise. The estimated exposure is discounted using the effective
interest rate to represent the expected exposure in the event of default.

K L A RN A H O L D I N G A B (P UBL)

Simplified approach:
The simplified approach is used when calculating expected credit losses on retailer receivables. Hence, the loss
allowance for retailer receivables is always measured at an amount equal to lifetime expected credit losses. The
risk that the retailer would default is regularly analyzed and based on quantitative as well as qualitative factors.

13)

Repurchase agreements

Treasury bills and other interest-bearing securities sold under agreements to repurchase at a specified futuredate are not derecognized from the balance sheet as Klarna retains substantially all of the risks and rewards ofownership. Assets under repurchase agreements are transferred to the counterpart and the counterpart has
the right to sell or re-pledge the assets. Such securities are kept on the balance sheet and pledged as collateralwhen the securities have been transferred and cash consideration has been received. Payment received isrecognized under liabilities to credit institutions. The difference between the sale and repurchase price is
accrued over the life of the agreement using the effective interest rate.

A N N UA L R E P O RT 2 0 2 3

CONTENTS

81

NOTES WITH ACCOUNTING PRINCIPLES

Offsetting financial transactions

Financial assets and liabilities are subject to offset and the net amount reported in the balance sheet when
there is a legal right to settle on a net basis and an intention to settle net or realize the asset and settle theliability simultaneously.

Subsequently, a corresponding adjustment to the carrying amount of the right-of-use asset is made. Lease
payments included in the measurement of the lease liability are fixed payments, variable lease payments that
depend on an index or rate, amounts expected to be payable under a residual value guarantee and the exercise
price under a purchase option, if applicable.

Financial assets and liabilities from repurchase agreements are subject to netting agreements but, sincetransferred assets continue to be recognized, the asset and the associated liability have not been offset.

Klarna presents right-of-use assets that do not meet the definition of investment property in Tangible assets andlease liabilities in Other liabilities in the balance sheet.

14)

15)

Derivative instruments and hedge accounting

Derivative instruments are reported in the balance sheet on their trade date and are measured at fair value,both initially and in subsequent periods. Derivative instruments are classified as other assets or other liabilities.
Changes in the fair value of derivative instruments are reported immediately in the income statement in the item
Net result from financial transactions.

Klarna has elected not to recognize right-of-use assets and liabilities for short-term leases and leases of lowvalue assets, mainly consisting of IT equipment and short-term rental of offices. The lease payments associatedwith these leases are recognized as an expense on a straight line basis over the lease term.

18)

Intangible assets

Goodwill
The Group undertakes hedge accounting for fair value hedges to manage the interest rate risk of liabilities.
Changes in the fair value of derivatives that are designated and qualify as fair value hedging instruments arerecorded in Net result from financial transactions, together with any changes in the fair value of the hedged
liability that are attributable to the hedged risk. Any residual mismatch between the hedging instrument and thehedged item is recognized as ineffective.
When hedging interest rate risk, any interest accrued or paid on both the hedging derivative and the hedged
item is reported in interest expense. If the hedge no longer meets the criteria for hedge accounting theadjustment to the carrying amount of a hedged item for which the effective interest method is used is amortized
to the income statement over the period for which the item was hedged. If the hedged item is sold or repaid, theunamortized fair value adjustment is recognized immediately in Net results from financial transactions.

The amount by which a purchase sum, any non-controlling interest or the fair value on the day of acquisition offormer shareholdings exceeds the fair value of identifiable acquired net assets is reported as goodwill. Goodwill
on acquisitions of subsidiaries is reported as an intangible asset. Goodwill is tested annually to identify any
impairment requirement and is recorded at acquisition cost less accumulated impairment. Impairment of
goodwill is not reversed. Goodwill is allocated among cash-generating units when testing for any impairment
requirement.
Brand names and customer related intangible assets
In business combinations, a portion of the acquisition price can be allocated to brand names and customer
related intangible assets. They are reported at acquisition cost less accumulated amortization and any
accumulated impairment. Straight line amortization is carried out over the assessed useful life (3-20 years).
Capitalized development costs and licenses

16)

Borrowing

Financial liabilities with regard to borrowing are categorized as liabilities which are initially reported at fair value,
net of transaction costs incurred and then at amortized cost and with application of the effective interest
method. This category comprises Liabilities to credit institutions, Deposits from the public, Debt securities inissue and Subordinated liabilities. Where a borrowing carried at amortized cost is in a qualifying fair value hedge
relationship, its carrying value is adjusted for changes in fair value attributable to the hedged risk.

17)

Leasing

The Group’s leases mainly consist of rental of offices, cars, and IT office equipment.
A right-of-use asset and a lease liability are recognized at the lease commencement date. The right-of-use asset
is initially measured at cost, which comprises the initial amount of the lease liability adjusted for initial costs,
incentive payments, restoration obligations and lease payments before the commencement date. The right-ofuse asset is subsequently depreciated using the straight-line method from the commencement date to the endof the lease term. For most leases, Klarna has judged that the lease term does not include additional periods
after the initial period.
The lease liability is initially measured at the present value of the remaining lease payments that are not paid atthe commencement date, discounted using the Group's Incremental borrowing rate.
The lease liability is measured at amortized cost using the effective interest method. It is remeasured when
there is any change in future lease payments arising, for example, from a change in an index, assessment or
estimations on the usage of extension, termination or purchase options or the amount expected to be payable
under a residual value guarantee.

K L A RN A H O L D I N G A B (P UBL)

Costs associated with IT systems and software which have been developed in-house or acquired and which are
expected to be of considerable value for the business during at least three years are recognized as intangible
assets. Costs for maintenance are expensed as incurred. Straight line amortization is carried out over theassessed useful life (3-5 years).
Impairment
Goodwill is tested for impairment at least annually or more frequently if events or changes in circumstancesindicate that impairment may have occurred.
Other intangible assets undergo impairment testing whenever events or changes in circumstances suggest thatthe carrying amount might not be recoverable.

19)

Tangible assets

The Group depreciates tangible assets using a straight line depreciation method by applying the following useful
lives to each tangible asset class:Equipment, tools, and fixtures and fittings

5 years

Computers and other machinery

3 years

Leasehold improvements

The shorter of lease term and useful life

An assessment of an asset’s residual value and useful life is made annually. When the residual value is less thanthe carrying amount an impairment loss is recognized in the income statement.

A N N UA L R E P O RT 2 0 2 3

CONTENTS

20)

Income taxes

Income taxes consist of current tax and deferred tax. Income taxes are reported directly in the income
statement except when the underlying transaction is reported directly against equity or other comprehensive
income, in which case also the accompanying tax is reported in equity or other comprehensive income. The tax
rates and tax laws used to compute the amount are those that are enacted or substantively enacted at thereporting date in the countries where the Group operates and generates taxable income.
Deferred tax is reported according to the balance sheet method for all temporary differences between an
asset’s or a liability’s tax base and its carrying amount in the balance sheet. Deferred tax assets are reported for
non-utilized tax relief to the extent it is probable that the relief will be able to be set off against future taxable
surpluses. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year
when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at the reporting date.
Uncertain tax positions are measured on an ongoing basis and the method is determined by taking all known
facts and circumstances into account.
21) Share-based payments

Employment stock warrants and Restricted stock units
For employment stock warrants, the services rendered are measured with reference to the fair value of the
granted equity instruments. Restricted stock units (RSU) vest on a graded vesting scheme over a four year
period. For both schemes, the fair value is measured at grant date and expensed over the period in which theemployees become unconditionally entitled to these rights. The cost is presented under general administrative
expenses in the income statement. The employment vesting condition is a non-market based condition and isfactored into the assumption of how many equity instruments are expected to vest.
Non-employee stock warrants
Klarna has granted stock warrants to certain non-employee participants in return for performed services. The
fair value is measured as the fair value of the services received, and the corresponding increase in equity.
Where that fair value cannot be estimated reliably, Klarna measures the value, indirectly, by reference to the fairvalue of granted warrants.
The fair value of the equity instruments is calculated as per the date when the services are rendered. The timingof the increase in equity is therefore dependent on when the services are performed. Depending on thecharacteristics of the services received, the calculated IFRS 2 costs can be presented:

•
•
•

82

NOTES WITH ACCOUNTING PRINCIPLESIn General and administrative expenses in the income statement over the vesting period;
As Capitalizable costs (if the capitalization requirements of costs to obtain a contract asset in IFRS 15
are met) and amortized over the useful life of the asset; orAs a revenue reduction under Commission income in the income statement (if considered a discount toa customer)

23)

Group contribution

Group contribution is recognized in the Parent Company according to its financial nature. Group contribution
received from a subsidiary is reported according to the same principles as dividend received. For parent
companies this means that group contribution received is reported as revenue in the income statement. Group
contribution paid by a parent company to a subsidiary is to be reported as increased participation in the groupcompany. For subsidiaries that pay or receive group contribution, this is to be reported together with theaccompanying tax in equity among retained earnings.
24) Cash flow statement

The cash flow statement is reported using the indirect method. The cash flow statement is divided into
payments from operating activities, investing activities and financing activities. Operating activities stem mainly
from revenue-producing activities of the entity. Operating cash flows include cash received from customers andcash paid to suppliers and employees. Investing activities are the acquisition and disposal of long-term assets
and other investments that are not considered to be cash equivalents. Financing activities are activities thatalter the equity capital and borrowing structure of the entity.

25)

Significant accounting judgements, estimates and assumptions

The preparation of the Group’s consolidated financial statements requires management to makejudgements, estimates and assumptions that affect the reported amount of revenues, expenses, assets andliabilities, and the accompanying disclosures, as well as the disclosure of contingent liabilities. Uncertainty about
these assumptions and estimates could result in outcomes that require a material adjustment to the carrying
amount of assets or liabilities affected in future periods.
Judgements
In the process of applying the Group’s accounting principles, management has made the following judgements,
which have the most significant effect on the amounts recognized in the consolidated financial statements:
Assessment of a lease term
The Group determines the lease term as the non-cancellable term of the lease, together with any periods
covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by anoption to terminate the lease, if it is reasonably certain not to be exercised.
The Group has several lease contracts that include extension and termination options. The Group applies
judgement in evaluating whether it is reasonably certain whether or not to exercise the option to renew or
terminate the lease. That is, it considers all relevant factors that create an economic incentive for it to exercise
either the renewal or termination. For most leases, Klarna has judged that the lease term does not include
additional periods after the initial period.
Estimates and assumptions

Any related social security charges relating to share-based payments are recognized as an expense during thecorresponding period based on the fair value that serves as the basis for a payment of social security charges.

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting
date, that have a significant risk of causing a material adjustment to the carrying amounts of assets
and liabilities within the next financial year, are described below:

Further information relating to share-based payment transactions is presented in note 38.

Assessment of and impairment requirements for financial assets, financial guarantees and commitments

22)

Pensions

For financial assets that are measured at amortized cost or fair value through other comprehensive income aswell as for loan commitments and financial guarantees the impairment requirements of IFRS 9 are applied.

The Group’s pension plans are defined contribution plans, which means that fees are paid to an independent
legal entity according to a fixed pension plan. These fees are reported as personnel costs in the period they
apply to. After the fees have been paid, the Group has no legal or other obligations.

K L A RN A H O L D I N G A B (P UBL)A N N UA L R E P O RT 2 0 2 3

CONTENTS

IFRS 9 impairment estimates are driven by a number of factors, changes in which can result in different levels ofallowances, with the most significant being:

•
•
•
•

83

NOTES WITH ACCOUNTING PRINCIPLESThe Group’s criteria for assessing if there has been a significant change in credit risk;
The Group’s selection of statistical methods to use when the models are developed or revised;
The periods to consider when analyzing historical portfolio performance;
Applicable guidance and regulation from local regulatory authority for individual markets.

In making IFRS 9 impairment estimates, the Group considers that the loss rates of consumer receivables are notsignificantly affected by macroeconomic factors due to the unique design and short maturities of the credit
products. Furthermore, the underwriting process is built on point in time assessments of transactions where thecurrent state of the consumer is regularly assessed.

At each balance sheet date, the Group revises its estimates of the number of shares and awards that are
expected to vest. It recognizes the impact of the revision of original estimates, if any, in the income statement
and a corresponding adjustment to equity over the remaining vesting period.

26)

Incremental costs of obtaining a contract

Where applicable, the group recognizes incremental costs of obtaining a contract with a customer inaccordance with IFRS 15. These costs are capitalized as an asset and amortized over the useful life of that asset.
The asset is recognized under Other assets on the balance sheet. Amortization of the cost to obtain a contract
asset is recognized under General and administrative expenses in the income statement.
27) Reclassifications of comparatives

See section 12 above for impairment of financial assets, financial guarantees and commitments. Key
assessments and assumptions used in impairment calculations are subject to regular review.

(i)

Impairment requirements for goodwill and other intangible assets
Goodwill and other intangible assets are tested for impairment annually, in accordance with the accounting
principle described in note 21. This is tested by estimating the recoverable amount, in other words, the highestof the fair value less costs to sell and the value in use. If the recoverable amount is lower than the carrying
amount, the asset is written down. See note 21 for further information on the measurement of goodwill andsignificant assumptions used in the annual impairment test.
Legal provisions
Klarna operates in a regulatory and legal environment that, by nature, involves an element of litigation risk
inherent to its operations and from time to time may be party to litigation, arbitration and regulatory
investigations and proceedings arising during the ordinary course of business. When Klarna can reliably measure
the outflow of economic benefits in relation to a specific case and considers such outflows to be probable, aprovision is recorded. Given the subjectivity and uncertainty of determining the probability and amount, a
number of factors are assessed including; legal advice, the stage of the matter and historical evidence fromsimilar incidents. Judgment is required in concluding such assessments.

(ii)

During the current period, ended 31 December 2023, we refined revenue recognition policies
relating to specific items within Commission income and reclassified the 2022 presentationaccordingly:
a. Certain administrative fees earned were reclassified from interest income to Commission
income. The fees reclassified for the period ending 31 December 2022 amounted to SEK 518m.
b. Merchant fees earned in relation to promotional loans were reclassified from Commission
income to Interest income and recognized using the Effective Interest Rate (EIR) method. This
resulted in reclassification to Interest income in 2022 of SEK 221m that was previously
recorded as commission income and reduction of SEK (165)m Loans to the public as at 1
January 2022.
An amount of SEK 402m relating to cash received from customers pending allocation at 31
December 2022 has been reclassified from Other Liabilities to Deposits from the Public.

Where the probability of outflow is considered to be remote, or probable, but a reliable estimate cannot be
made, a contingent liability is disclosed.
Tax losses carried-forward
The group assesses on an ongoing basis as well as at the end of the year the possibility of recognizing deferred
tax assets related to tax losses carried-forward. Deferred tax assets attributable to tax losses carried-forward
are reported only if it is probable that they will be used towards taxable profits in the foreseeable future.
Significant management judgement is required to determine the amount of deferred tax assets that can berecognized, based upon the probability of taxable profits being available in the future and the quantum of
taxable profits that are forecast to arise. These judgements include management’s expectations of the growth ofprofit before tax in these entities, forecasted non-taxable revenues and expenses, and the timing of the reversalof taxable temporary differences.
Share-based payments
The fair value of the equity instruments is calculated as per the grant date using the Black-Scholes model. Thisrequires identification of various inputs to the model, including; expected volatility of own share price, risk freeinterest rate and expected term. The key assumptions used in the model are disclosed in note 38.
The fair value of the employee restricted stock unit program is based on an external valuation where input
parameters include investment rounds, secondary market trades and trading multiples for peers.

K L A RN A H O L D I N G A B (P UBL)A N N UA L R E P O RT 2 0 2 3

CONTENTS

NOTES WITH ACCOUNTING PRINCIPLES

Note 3

Risk management84

31 Dec 2023

Risk descriptions

Gross amounts

Stage 1

Stage 2

Stage 3

POCI

Simplified
approach

Total

The Group categorizes the key risks it is exposed to in the sections below. These risk categories form the basisof how Klarna identifies, assesses, manages and monitors risk.

Per region
Nordics1

16,776

1,435

240

-

370

18,821Credit risk

DACH2

29,803

2,216

569

-

195

32,783

United States

21,086

779

311

-

315

22,491

United Kingdom

11,043

414

187

1

118

11,763

Other

8,122

369

201

-

140

8,832

Total

86,830

5,213

1,508

1

1,138

94,690Definition
The risk of financial loss due to a counterparty failing to meet its contractual obligations or concentrations in
exposure.
Risk Measurement and Exposure
Credit risk

Before due and per days
past due

31 Dec 2023

31 Dec 2022

Loan receivables, gross

94,69082,625

Before due

79,186

2,212

2

-

715

82,115

Allowance for credit losses(3,498)(4,159)≤30 days

7,644

796

3

-

40

8,483

-

1,336

3

-

34

1,373

-

869

7

-

106

982

Loan receivables, net carrying amount

91,192

78,466>30-60 daysof which: Loans to credit institutions

4,502

3,818

>60-90 daysof which: Loans to the public

86,10873,983582

665

31 Dec 2023

31 Dec 2022

of which: Accrued income
Credit quality of debt securities>90 days
Total

-

-

1,493

1

243

1,737

86,830

5,213

1,508

1

1,138

94,690Stage 1

Stage 2

Stage 3

POCI

Simplified
approachTotal

31 Dec 2022

Treasury bills chargeable at central banks, etc., and bonds and other interest-bearing
securities

Gross amounts

AAA

5,643

8,738

Per region

AA+

746

1,267

Nordics1

17,127

742

162

-

182

18,213DACH226,473

1,025

881

-

301

28,680

United States

15,824

2,121

397

-

472

18,814

United Kingdom

8,471

1,693

208

1

136

10,509

Other

5,488

472

293

-

156

6,409

Total

73,383

6,053

1,941

1

1,247

82,625

Before due

68,751

2,508

152

-

920

72,331≤30 days

4,632

1,545

14

-

64

6,255

>30-60 days

-

1,193

16

-

18

1,227

>60-90 days

-

702

30

-

10

742

>90 days

-

105

1,729

1

235

2,070

73,383

6,053

1,941

1

1,247

82,625

AA

1,066

1,251

AA-

318

321

Total

7,773

11,577

Before due and per days
past due

Total
1

Sweden, Norway, Finland, and Denmark.

2

Germany, Austria, and Switzerland.

For additional information on allowances on Loans to the public, see note 19.

K L A RN A H O L D I N G A B (P UBL)A N N UA L R E P O RT 2 0 2 3

CONTENTS

85

NOTES WITH ACCOUNTING PRINCIPLES

Market Risk

Liquidity Risk

Definition
Market risk is the risk of movements in market prices impacting Klarna’s earnings or capital position.

Definition
The risk of the Group being unable to meet its financial obligations, as they fall due, or unable to fund its
operational needs without incurring unacceptable costs.

Risk Measurement and Exposure
Currency exposure1

Risk Measurement and Exposure
The Group complies with all liquidity regulatory requirements, including Liquidity Coverage Ratio (LCR) and Net
Stable Funding Ratio (NSFR), and monitoring and management of Klarna’s liquidity survival horizon.

31 Dec 2023

EUR

USD

GBP

Other

Total
exposure

Net average daily position

293

114

45

277

729

Funding sources

Effect of 10% change versus the foreign
currency

(29)

(11)

(5)

(28)

(73)

31 Dec 2023

up to 3months>3 to 6months>6 to 12months>1-5 years>5 years

Total

735

901

-

-

-

1,636

32,47012,624

38,117

13,885-97,096

Financial liabilities
31 Dec 2022

EUR

USD

GBP

Other

Total
exposure

15

185

44

208

452

Net average daily position
Effect of 10% change versus the foreign
currency
1

Liabilities to credit institutions
Deposits from the public

567

-

-

84

-

651

Other liabilities2

10,201

117

163

975

127

11,583

Accrued expenses and prepaid
income

2,722

227

580

66

-

3,595

11

-

-

-

740

751

Total

46,706

13,86938,86015,010867

115,31231 Dec 2022

up to 3months>3 to 6months>6 to 12months>1-5 years>5 years

Total

Liabilities to credit institutions

2,073

755

1

-

-

2,829

Deposits from the public

31,045

8,083

23,866

18,476-

81,470

22

428

236

990

-

1,676

Other liabilities2

8,660

124

343

1,259

321

10,707

Accrued expenses and prepaid
income

2,124

114

258

117

-

2,613

-

-

-

-

303

303

43,924

9,504

24,704

20,842624

99,598Debt securities issued1
(2)

(19)

(4)

(20)

(45)

The amounts are presented in SEKm.

Subordinated liabilities1

Economic value accounts for changes to discounted values of future cash flows. In accordance with regulatory
guidelines, we apply different stress tests to account for both parallel shifts and a rotation of the yield curve.
The tables below summarize the worst possible outcome based on these stress tests.
Interest rate risk exposure1
31 Dec 2023

SEK

EUR

USD

GBP

Other

Total
Exposure

Change in Economic Value

53

(432)

55

40

4

(280)

Financial liabilities

Debt securities issued1
31 Dec 2022

SEK

EUR

USD

GBP

Other

Total
Exposure

Change in Economic Value

154

(420)

80

35

10

(141)

Subordinated liabilities1
1

The amounts are presented in SEKm.

Total
1

Interest is included in the amounts for Debt securities issued and Subordinated liabilities.

2

Lease liabilities are included in the amounts for Other liabilities. For lease maturity information, see note 7, Leases.

Operational Risk
Definition
The risk of inadequate or failed processes, personnel, products or third parties.
Risk Measurement and Exposure
Risks are assessed by impact and likelihood that together generate a risk level. Impact is evaluated through;financial, operational, regulatory, reputational, internal and strategic aspects. The risk exposure is monitored
frequently, and reported to Executive Management and the Board at least quarterly, in addition to the risk
appetite escalation process.

K L A RN A H O L D I N G A B (P UBL)A N N UA L R E P O RT 2 0 2 3

CONTENTS86

NOTES WITH ACCOUNTING PRINCIPLES

Note 4

Operating segments and income by geographical area

ICT and Security Risk
Definition
The risk of failures or breaches in information or communication systems or physical security including systemoutages, software failures, data breaches, physical security breaches or cyber-attacks.
Risk Measurement and Exposure
Risks are assessed by impact and the likelihood that together generate the risk level. Impact is evaluatedthrough: financial, operational, regulatory, reputational, internal and strategic aspects, as well as confidentiality,
integrity and availability loss. The risk exposure is monitored frequently and reported to Executive Management
and the Board at least quarterly in addition to the risk appetite escalation process.
Business Risk
Definition
The risk of suboptimal strategy selection or ESG factors impacting the achievement of Klarna’s businessobjectives or altering the long term valuation or viability of the business.

Klarna determine operating segments based on how our Chief Operating Decision Maker (CODM) manages thebusiness, makes operating decisions around the allocation of resources, and evaluates Klarna’s operating
performance.
Klarna’s CODM is the CEO, who reviews the operating results on a consolidated basis. Klarna operates as one
operating segment and has one reportable segment.
The nature, amount, timing, and uncertainty of our income and cash flows and how they are affected byeconomic factors are depicted through primary geographical markets and type of income categories (retailer
income and consumer income).
Income recorded within these categories are earned from similar services for which the nature of associatedfees and the related income recognition models are substantially the same.
GroupJan - Jun 2021

Jan - Dec 2023

Jan - Dec 2022

Risk Measurement and Exposure

Geographical breakdown

New Business plans are developed and reviewed yearly. Monthly achievement against the yearly plan isreviewed monthly by the executive team, via detailed updates on key financial and business metrics.

- Germany

5,841

5,018

- United States

6,080

4,858

- Sweden

2,137

2,304

- United Kingdom

2,637

2,090

- Other countries

4,084

3,483

20,77917,753- Retailer income

12,1689,550- Consumer income

5,201

5,447

- Other income2

3,410

2,756

20,77917,753- Sweden

11,432

16,202- Germany

3,292

3,544

- United States

1,681

2,280

- Other countries

1,235

1,418

17,64023,444

Total net operating income less net result fromfinancial transactions1
Income category

Total net operating income less net result fromfinancial transactions1
Non-current assets

Total non-current assets3
1"Net result from financial transactions” is excluded from the income analysis since it is not applicable to a specific geography or income
category.

2“Other income” includes marketing income and Klarna card interchange income.

3

Non-current assets includes tangible assets, intangible assets, long term contract assets and bills and bonds of duration greater than 12
months.

Total net operating income is net of Commission expense, Interest expense and Net result from financial transactions.
These items impact larger markets proportionally more and thus comparing growth in Total net operating income may notaccurately reflect underlying market growth.

K L A RN A H O L D I N G A B (P UBL)A N N UA L R E P O RT 2 0 2 3

CONTENTS

NOTES WITH ACCOUNTING PRINCIPLES

Note 5Interest income

87

Note 72023

2022

Loans to credit institutions

506

33

Loans to the public (restated)

3,707

3,934

632

158

of which: cars

4,845

4,125

of which: other

Other interest income
Total

LeasesDepreciation of right-of-use assetsof which: buildings

Total right-of-use lease cost2022 Interest income from Loans to the public is restated following a reclassification of SEK 297m from Interest
income to Commission income. Refer to Section 27 in Note 2.

Interest expenses

Interest-bearing securities and chargeable treasury bills etc.

2022

(295)

(410)

(292)

(406)

(1)

(2)

(2)

(2)

(43)

(45)

(338)

(455)

(72)

(121)

Interest expense for lease liabilities

Interest income is calculated using the effective interest method.

Note 6

2023

2023

2022

(202)

(156)

Expenses relating to short-term leases
Expenses relating to low-value assets-(5)

Total short-term and low value leases

(72)

(126)

1,003

1,636

1,002

1,632

Right-of-use assets and lease liabilities
Carrying amount for right-of-use assets

(140)

(83)

of which: buildings(2,356)(669)

of which: cars

1

2

Debt securities issued

(49)

(73)

of which: other-2

Subordinated liabilities

(59)

(13)

Other interest expenses

(54)

(56)

Additions to right-of-use assets during the year

102

235

(2,860)(1,050)

Disposals during the year

(50)

(19)

Impairments during the year

(342)

(95)

Revaluations during the year

(53)

381

5

44

1,234

1,757

Liabilities to credit institutions
Deposits from the public

Total

Interest expense is calculated using the effective interest method.

Currency translation difference during the year
Lease liabilities

During the year, Klarna conducted a comprehensive review of its leased office spaces to optimize operational
efficiency. As a result of this review, the company made a strategic decision to right-size its office footprint,
leading to an early termination of certain lease agreements. The total financial impact in impairments is
illustrated in the above table. The Group presents right-of-use assets in Tangible assets and lease liabilities in
Other liabilities in the balance sheet.
2023
Maturity
Lease liabilities

up to 3months>3 to 6months>6 to 12months

>1-5
years

>5
years

Total

90

82

130

806

126

1,234

up to 3months>3 to 6months>6 to 12months

>1-5
years

>5
years

Total

136

100

183

1,017

321

1,757

2022
Maturity
Lease liabilities

K L A RN A H O L D I N G A B (P UBL)A N N UA L R E P O RT 2 0 2 3

CONTENTS

88

NOTES WITH ACCOUNTING PRINCIPLES

Note 8Commission income

Commission income split by product category

Note 112023

2022

Retailer (restated)

14,023

11,110Consumer (restated)

3,641

2,485

Other

162

119

Total

17,826

13,714

Commission income for 2022 is restated following a reclassification of certain fees, see Section 27 in Note 2,
resulting in an increase in Commission income of SEK 292m (impacting lines Consumer and Retailer within thenote).

Note 9

Employees and personnel costs

Commission expenses

2023

2022

Average number of full-time equivalents

Total

whereof
women

Total

whereofwomen

Sweden

2,327

989

2,997

1,304

Germany

1,115

377

1,305

454

United States

476

270

610

349

United Kingdom

324

150

374

168

Italy

189

45

183

50

Spain

169

82

145

78

Netherlands

80

39

88

44

Canada

46

13

44

15

Denmark

37

15

26

10

France

36

16

34

14

Australia

35

22

80

48

Poland

35

12

22

6

2023

2022

Commission to partners

(771)

(635)

Norway

31

16

38

21

Other commissions

(232)

(89)

Finland

25

15

28

16

(1,003)(724)

Ireland

21

9

5

2

Austria

11

7

9

5

Belgium

6

2

10

4

Japan

3

-

5

-

Mexico3

1

1-

New Zealand

2

-

5

1

1

-

2

-

4,972

2,080

6,011

2,589

Total

Note 10

Net result from financial transactions
2023

2022

Realized and unrealized movements in exchange rates

216

(44)

Switzerland

Gains from financial instruments

253

172

Total

Losses from financial instruments

(603)

(667)

Realized and unrealized losses on shares held in listed and unlisted companies

(16)

(511)

(150)

(1,050)Total

As of December 31, 2023, Klarna Bank AB (publ) had entered into derivatives with the gross nominal amount of
SEK 60,960m (53,026m), see note 24.

The above table represents the average number of employees for the year ending 31 December 2023. The total
number of employees as at December 31, 2023 amounted to 4,201 (5,441).

Salaries, other remuneration, social security and pension expenses

2022

Salaries and other remuneration attributable to:
(32)

(24)

Other employees(3,808)(4,380)Total salaries and other remuneration(3,840)(4,404)

Statutory and contractual social security expenses(1,159)(1,214)

(272)

(282)

(4,999)(5,618)

Board and CEOof which: pension expenses
Total salaries, other remuneration, social security and pension expenses

K L A RN A H O L D I N G A B (P UBL)

2023

A N N UA L R E P O RT 2 0 2 3

CONTENTS

89

NOTES WITH ACCOUNTING PRINCIPLES

31 Dec 2023

Remuneration

31 Dec 2022

Number at
closing day

whereofwomen

Number at
closing day

whereofwomen

Board members and Group CEO

8

25%

7

29%

Other members of senior management

10

10%

6

17%

Board members and senior management

2023
Salaries and other remuneration to the board
and senior management

Basic
Variablesalary/fee remuneration⁴

Other
benefits

Pensionexpenses

Total

-

-

-

-

-

(1.3)

(1.6)

-

-

(2.9)

Lise Kaae

-

-

-

-

-

Mikael Walther

-

-

-

-

-

Omid Kordestani

(1.2)

(1.2)

-

-

(2.4)

Sarah Smith

(1.6)

(1.3)

-

-

(2.9)

-

-

-

-

-

(16.0)

(5.9)

(0.9)

(0.8)

(23.6)

Michael Moritz, Chairman of the Board
Roger Ferguson

Matthew Miller¹
Sebastian Siemiatkowski, CEO²
Other members of senior management (9)³
Total

(82.1)(25.8)

(0.6)

(4.6)

(113.1)(102.2)(35.8)

(1.5)

(5.4)

(144.9)1

On December 29, 2023, the company appointed Matthew Miller to the Board.

2

Variable remuneration includes SEK 2.4m related to an award for 2022.

³ The number within parentheses refers to the number of positions that have received salaries and remuneration during the year, and notnecessarily to the number of individuals. During 2023 9 individuals held these roles. The increase in the number of members of senior
management follows an update to the classification of senior management roles and inclusion of 4 existing roles, rather than in increase insenior employees .

2022
Salaries and other remuneration to the board
and senior management
Michael Moritz, Chairman of the Board

The information below follows the provisions of the disclosure rules.
Remuneration program
The Group has a remuneration structure that recognizes the importance of well-balanced but differentiatedremuneration structures, based on business and local market needs, as well as the importance of being
consistent with and promoting sound and efficient risk management not encouraging excessive risk-taking andshort-term profits or counteracting the Group’s long term interests.
The aim with the remuneration structure is to both support the ability to attract and retain talents in every
position as well as support equal and fair treatment, but also to ensure that remuneration in the Group is alignedwith efficient risk management and compliant with existing regulations.

Otherbenefits

Pensionexpenses

Total

-

-

-

-

-

The Board of Directors has established a Remuneration Committee consisting of three members appointed by
the Board. The Remuneration Committee is responsible for preparing and presenting proposals to the Board onsalaries and remuneration issues. This duty includes proposals regarding the Remuneration Policy and on
remuneration to members of the Group management team and employees who head any of the control
functions. The Remuneration Committee shall also prepare proposals for the Annual General Meeting regarding
the remuneration of the members of the Board and the auditors. Furthermore, the Remuneration Committee
shall make a competent and independent evaluation of the Remuneration Policy and the Group’s remuneration
system, together with the suitable control function(s) if necessary.

(1.3)

(3.0)

-

-

(4.3)

Lise Kaae

-

-

-

-

-

Mikael Walther

-

-

-

-

-

(1.2)

(1.7)

-

-

(2.9)

Sarah Smith

(1.3)

(1.9)

-

-

(3.2)

Sebastian Siemiatkowski, CEO(11.5)

(0.2)

(0.7)

(0.8)

(13.2)

Remuneration Policy and risk analysis

Other members of senior management (5)¹

(55.9)

(4.2)

(1.9)

(4.6)

(66.6)

Total(71.2)(11.0)

(2.6)

(5.4)

(90.2)The Board has adopted a Remuneration Policy that is designed to be compatible with and promote sound andeffective risk management, avoid exaggerated risk-taking and be in line with the Group’s long-term interests. The
Remuneration Policy shall be revised when it is necessary, at least annually.

Roger Ferguson

Omid Kordestani

1

Basic
Variablesalary/fee remuneration²

In accordance with part eight of regulation (EU) No 575/2013, commonly referred to as the Capital Requirements
Regulation (CRR), and the regulations and general guidelines of the Swedish Financial Supervisory Authority(FFFS 2014:12) regarding the disclosure of information on capital adequacy and risk management (below“disclosure rules”), the Group shall at least annually in its annual report and on its website give information on its
Remuneration Policy and remuneration systems.

Remuneration Committee

Variable remuneration includes cash-based variable remuneration and IFRS 2 expensed amounts for equity based programs.

4

The rules on remuneration are found in the Swedish Banking and Financing Act (2004:297) and the Swedish
Financial Supervisory Authority’s regulations (FFFS 2011:1 and FFFS 2020:30) regarding remuneration systems incredit institutions, securities companies and fund management companies licensed to conduct discretionary
portfolio management (below “the remuneration rules”).

The number within parentheses refers to the number of positions that have received salaries and remuneration during the year, and notnecessarily to the number of individuals. During 2022, 9 individuals held these roles.
2

Variable remuneration includes cash-based variable remuneration and IFRS 2 expensed amounts for equity based programs.

K L A RN A H O L D I N G A B (P UBL)

The Remuneration Committee held five formal meetings in 2023. It handled matters within its responsibility on
an ongoing basis through correspondence between the committee members with the formal decisions notcovered by its delegation authority being reported to and documented by the Board at the closest following
Board meeting.

The Remuneration Policy, remuneration system and list of those staff members whose professional activities
have a material impact on the Group’s risk profile (Identified staff) are assessed annually. The assessment
includes an analysis of all key risks the Group is or might be exposed to, including the risks associated with its
Remuneration Policy and remuneration structure. In general, the Group’s remuneration system involves low risk
compared with large banks and other credit institutions with comprehensive trading and other businesses
covered by the remuneration rules. The risk cycle in the Group’s credit business is assessed to be short, whichmeans that any risks materialize within a few months.

A N N UA L R E P O RT 2 0 2 3

CONTENTS

90

NOTES WITH ACCOUNTING PRINCIPLES

Remuneration structure
The Group applies the following general principles on remuneration:

2022(i) remuneration shall be set on an individual basis, based on experience, competence and performance(ii) remuneration shall not be discriminating(iii) remuneration shall be competitive, but not counterproductive to the Group's long term interests andcapability to generate positive results throughout a full economic cycle.

Variable remuneration shall amount to a maximum 100% of an employee’s total fixed remuneration for Identified
staff and 200% of an employee’s total fixed remuneration for other employees, unless otherwise decided by the
Board of Directors in exceptional cases.
Variable remuneration should not only take into consideration the employee’s and his/her team’s result but
preferably also the Group’s total result as well as qualitative criteria such as the employee’s compliance withinternal rules. It should be based on results that are adjusted for current and future risks. The Group shallensure that it is entitled to unilaterally decrease or withdraw all or parts of the variable remuneration if thecriteria are not met or if the Group’s financial situation deteriorates substantially.

Group
management
team

Identified
staff

Paid as one off cash payments (relating toreferral bonuses / gratuities / salescommission)

(2.6)

(7.2)

Paid in the form of shares, share-related
instruments, financial instruments or noncash benefits
Deferred remuneration awarded

Type of variable remuneration

The remuneration structure within the Group comprises fixed remuneration and variable remuneration. As
stipulated in the remuneration rules, the Group ensures that the fixed and variable components areappropriately balanced by ensuring that the fixed remuneration represents a sufficiently large proportion of theemployee's total remuneration allowing the Group the possibility to pay no variable remuneration. This meansthat the Group can decide that the variable remuneration, including deferred payment, can be canceled in partor in whole under certain circumstances, as described below.

Value of variable remuneration

Number of beneficiaries

Total

Group
management
team

Identified
staff

Total

(9.8)

3

8

11

(7.4)

(133.4) (140.8)

9

46

55

(39.5)(30.7)(70.2)

7

34

41

New sign-on bonus paid

-

-

-

-

2

2

Severance payments paid

-

(1.7)

(1.7)

-

1

1

(173.0) (222.5)

9

46

55

Total

(49.5)

During 2022, eight employees have been remunerated more than EUR 1m (six between EUR 1m and EUR 1.5m,
one between EUR 1.5m and EUR 2m, one between EUR 2m and EUR 2.5m).
As at December 2023, total outstanding deferred remuneration1 to the Group management team of 10 persons2(6) amounts to SEK 50.5m (31.7m) and for Identified staff, 38 persons (46), this sum amounts to SEK 35.7m(139.4m), which aggregates to SEK 86.2m (171.1m).

If an Identified staff member receives variable remuneration exceeding the amount stipulated in the
remuneration rules such remuneration would be subject to deferral and retention.

1

There has been no risk adjustment reduction made to deferred remuneration awards during 2023 or 2022.

2

The number within parentheses refers to the number of positions that have received salaries and remuneration during the year, and notnecessarily to the number of individuals.

Remuneration to Group management team and Identified staff
Total remuneration awarded and paid to the Group management team of 10 persons1 (6) amounts to SEK 197.1m(119.2m) and for Identified staff, 46 persons1 (46), this sum amounts to SEK 132.8m (237.2m), which aggregates to
SEK 329.9m (356.4m). Variable remuneration accounts for SEK 97.6m (49.5m) of the Group management teamfigure related to 10 (6) of its members and SEK 44.4m (173m) of the Identified staff figure, related to 46 (46)beneficiaries.
1

The number within parentheses refers to the number of positions that have received salaries and remuneration during the year, and notnecessarily to the number of individuals.

The tables below present both variable remuneration awarded and paid:
2023

Value of variable remuneration
Group
management
team

Identified
staff

Paid as one off cash payments (relating toreferral bonuses / gratuities / salescommission)(10.5)

Paid in the form of shares, share-related
instruments, financial instruments or noncash benefits(26.7)

Type of variable remuneration

Number of beneficiaries

Total

Group
management
team

Identified
staff

Total

(0.9)

(11.4)

6

9

15(27.1)(53.8)

10

46

56

Deferred remuneration awarded(60.4)(16.4)(76.8)

10

36

46

Total

(97.6)(44.4) (142.0)

10

46

56

During 2023, seven employees have been remunerated more than EUR 1m (three between EUR 1m and EUR 1.5m,
two between EUR 2m and EUR 2.5m, two above EUR 2.5m).

K L A RN A H O L D I N G A B (P UBL)A N N UA L R E P O RT 2 0 2 3

CONTENTS

91

NOTES WITH ACCOUNTING PRINCIPLES

Note 12Fees and reimbursement of expenses for auditors
2023

Note 142022

EY

Credit losses, net

Loan losses divided by class

2022

(80)

(32)

Loans to credit institutions

Audit engagement

(21)

(18)

Increase in provisions

Audit related services

(1)

(1)

Reversal of previous provisions

81

27

(22)

(19)

Total

1

(5)

(4,640)(5,570)Total

Note 13

Depreciation, amortization and impairment of intangible andtangible assets

Loans to the public
Realized loan losses, net of recoveries
Release in provisions to cover realized loan losses

2023

2022

Amortization and depreciation

Increase in provisions
Reversal of previous provisions

Intangible assets(1,255)(947)

Tangible assets1

(432)

(537)

(1,687)(1,484)

Total

Total

Impairment

Reversal of previous provisions

Intangible assets

(332)

(48)

Tangible assets1

(373)

(107)

Total

(705)

(155)

(2,392)(1,639)Total depreciation, amortization and impairment of intangible and tangible
assetsDepreciation and impairment of leased assets is included in Tangible assets. See note 7, Leases, for additional information.

K L A RN A H O L D I N G A B (P UBL)

4,643

4,873

(15,143)(15,447)

11,121

10,464(4,019)(5,680)

(95)

(99)

81

66

(14)

(33)

(4,032)(5,718)Financial guarantees and commitments
Increase in provisions

1

2023

Total

Total credit losses, net

Unlike the balance sheet, which shows a snapshot of assets and liabilities as at 31 December, the credit losses in theincome statement reflect provisions for future losses and realized losses associated with all lending activities during
the year.

A N N UA L R E P O RT 2 0 2 3

CONTENTS

92

NOTES WITH ACCOUNTING PRINCIPLES

Note 15

Income taxes

The following table illustrates in respect of what item, deferred tax assets have not been recognized:
2023

2022

Group

Tax expense for the year

(171)

(122)

Group company

Adjustment of tax attributable to previous years

28
(143)

9
(113)

Klarna Australia Pty Ltd.

Income tax expense

Tax losses

Current tax

Total
Deferred tax
Total

808
808

Reported income tax

665

Deferred tax

Effective tax rate
Income before tax

2023(3,204)

147
147
34

2022
(10,474)

Income tax calculated in accordance with national tax rates applicable in eachcountry

713

2,255

Non-taxable revenues

25

99

Non-deductible expenses

(423)

(184)

Taxable income not booked in profit or loss

(77)

(78)

47

144

(361)

(2,204)3-

Losses carried forward recognized this year

710

20

Adjustments of tax attributable to previous years

28

(18)

Reported income tax

665

34

20.8%

0.3%

Deductible expenses not booked in profit or loss
Unrecognized taxable losses
Effect of change in tax rate

Effective tax rate
Deferred tax assets

2023

2022

Losses carried forward

25

20

Allowance for credit losses

203

201

Share-based payments

6

2

Other

48

172

Total

282

395

Deferred tax liabilities

Tax attributes not represented by a deferred tax asset in the Group - 2023

2023

2022

Intangible assets

4

854

Other

1

58

Total

5

912

Deferred tax assets attributable to carryforward of unused tax losses or other deductible temporary differences
are recognized only to the extent that it is probable that future taxable profits will be available against which theunused tax losses and unused tax credits can be utilized.

Deductible temporary differences

Gross amountTax effectGross amountTax effect

612

184

-

-

Klarna Bank AB

14,453

2,977

-

-

Klarna Bank AB, German branch

3,149

961

-

-

Klarna Bank AB, UK branch

281

70

1,973

612

-

-

-

-

491

119

Klarna Japan KK

13

3

-

-

Klarna MAS AB

43

9

-

-

Klarna New Zealand Ltd.

41

12

-

-

Klarna Securities AB

8

2

-

-

PriceRunner International AB

-

-

12

2

Klarna Germany Holding GmbH
Klarna Inc.

PriceRunner Ltd.
Sofort GmbH
Unrecognized deferred tax assets
as at December 31, 2023
Group

-

-

1

-

98

30

-

-

20,671

4,860

504

121

Tax attributes not represented by a deferred tax asset in the Group - 2022
Tax losses

Group company

Deductible temporary differences

Gross amountTax effectGross amountTax effectGlazing LLC

94

23

-

-

Inspirock Inc

16

4

-

-

Klarna Australia Pty Ltd.

629

189

-

-

Klarna Bank AB

15,895

3,274

213

44

Klarna Bank AB, German branch

3,206

990

-

-

276

52

-

-

1,848

574

-

-

Klarna Holding AB

11

2

-

-

Klarna Japan KK

9

2

-

-

Klarna MAS AB

61

13

-

-

Klarna New Zealand Ltd.

31

9

-

-

Klarna Securities AB

13

3

-

-

Piggy LLC

13

3

-

-

Stocard GmbH

231

71

-

-

Stocard UK Ltd

23

4

-

-

Toplooks LLC

109

27

-

-

22,465

5,240

213

44

Klarna Bank AB, UK branch
Klarna Germany Holding GmbH

Unrecognized deferred tax assets
as at December 31, 2022

During 2023, deferred tax assets and liabilities have been recognized resulting in a SEK 808m (147m) profit in theincome statement. Deferred tax assets have been recognized where the recognition criteria are met, of which
SEK 710m (20m) is in respect of tax losses. The gross deferred tax assets and liabilities have been set off on thebalance sheet to the extent the requirements for netting are met.
Tax losses carried forward in the Group for which tax assets are not recognized in the balance sheet amount to
SEK 20,671m (22,465m) gross. Other deductible temporary differences which have not been recognized amountto SEK 504m (213m) gross. Deferred tax assets have not been recognized in respect of these temporary
differences as they have not been assessed as likely to offset taxable profits elsewhere in the Group under the
IAS 12 recognition criteria.

K L A RN A H O L D I N G A B (P UBL)A N N UA L R E P O RT 2 0 2 3

CONTENTS

Note 16

93

NOTES WITH ACCOUNTING PRINCIPLESNet result from categories of financial instruments

Note 19

2023

2022

Financial instruments mandatory measured at fair value through profit or loss

(664)

733

Financial assets measured at amortized cost

18,599Financial liabilities measured at amortized cost
Currency exchange gains/losses
Total

Note 17

Loans to the public
31 Dec 2023

31 Dec 2022

Loans to the public

89,602

78,137

12,083

Allowance for credit losses(3,494)(4,154)(3,802)(1,638)

Total

86,10873,983529(1,323)

14,6629,855

As at 1 January 2022, Loans to the public is restated SEK (165)m. Refer to Section 27 in Note 2 in Accounting
principles.

Treasury bills chargeable at central banks, etc.
31 Dec 2023

31 Dec 2022

112

214

Municipalities and other public bodies

7,155

10,499

Total

7,267

10,713

State and sovereigns

Stage 1

Stage 2

Stage 3

POCI

Simplified
approachTotal

68,895

6,054

1,940

1

1,247

78,137

New assets originated orpurchased

1,456,000

1,060

251

-

32,957

1,490,268

Assets derecognized or
repaid (excl. write-offs)(1,412,595)(24,512)(2,142)-(32,903)(1,472,152)

Transfers to stage 1

6,377(6,081)

(296)

-

-

-

Gross carrying amountas at January 1, 20231

By currency- in SEK

2,648

5,665

Transfers to stage 2(35,886)

36,044

(158)

-

-

-

- in EUR

3,122

2,305

Transfers to stage 3(318)(6,753)

7,071

-

-

-

- in USD

1,497

2,743

Amounts written off

(87)

(604)

(5,160)-(147)(5,998)

Total

7,267

10,713

Other adjustments

(644)

6

1

-

(16)

(653)

81,742

5,214

1,507

1

1,138

89,602

Stage 1

Stage 2

Stage 3

POCI

Simplified
approach

Total

Allowance as atJanuary 1, 20231(1,520)(1,016)(1,366)-(252)(4,154)

New assets originated orpurchased(5,234)

(352)

(204)

-

(192)

(5,982)

Assets derecognized or
repaid (excl. write-offs)

6,801

2,648

1,086

-

136

10,671

Transfers to stage 1

(602)

511

91

-

-

-

Transfers to stage 2

1,470(1,549)

79

-

-

-

Transfers to stage 3

70

3,514

(3,584)---

Impact on ECL fromchange in credit risk

(2,862)(4,908)(1,198)-(192)(9,160)Changes to models andinputs used for ECL
calculations

559

59

(168)

-

-

450

Amounts written off

27

130

4,345

-

142

4,644

Other adjustments

15

11

6

-

5

37

Allowance as at
December 31, 2023

(1,276)

(952)

(913)

-

(353)

(3,494)Note 18

Gross carrying amountas at December 31, 2023

Loans to credit institutions
31 Dec 2023

Loans to credit institutions

4,502

31 Dec 2022
3,818

By currency- in SEK

277

230- in EUR

869

821- in NOK-54- in USD

2,491

1,926

- in AUD-

213- in CHF

182-- in GBP

273

29- in other currencies

410

545

4,502

3,818

Total

1

The table shows month over month movements.

Loans to the public of SEK 86.1bn (74.0bn) are loans still owed as at 31 December. This balance is only partially comparable
to credit losses on the income statement as the income statement reports all activity during the year from 1 January to 31
December, while the balance sheet is a snapshot of lending outstanding as at 31 December.

K L A RN A H O L D I N G A B (P UBL)A N N UA L R E P O RT 2 0 2 3

CONTENTS

Stage 1

Stage 2

Stage 3

POCI

Simplified
approach

Total

Gross carrying amountas at January 1, 20221

58,185

4,626

1,664

1

1,053

65,529Additions from businesscombinations

-

-

-

-

36

36

New assets originated orpurchased

1,012,754

1,250

128

-

11,5681,025,700

Assets derecognized or
repaid (excl. write-offs)(969,399)(23,073)(1,571)-(11,249)(1,005,292)

Transfers to stage 1

7,092(6,935)

(157)

-

-

-

Transfers to stage 2(37,831)

37,942

(111)

-

-

-

Transfers to stage 3(942)(7,165)

8,107

-

-

-

Amounts written off

(291)

(582)

(6,098)-(56)(7,027)

Other adjustments
Gross carrying amountas at December 31, 2022

(673)

(9)

(22)

-

(105)

(809)

68,895

6,054

1,940

1

1,247

78,137

Stage 3

POCI

Simplified
approach

Total(1,599)

(882)

(962)

-

(166)

(3,609)Additions from businesscombinations

-

-

-

-

(9)

(9)

New assets originated orpurchased(4,920)

(454)

(333)

-

(86)

(5,793)

Assets derecognized or
repaid (excl. write-offs)

6,520

2,816

892

-

102

10,330Transfers to stage 1

(730)

613

117

-

-

-

Transfers to stage 2

1,451(1,538)

87

-

-

-

Transfers to stage 3

79

3,711

(3,790)---(2,577)(5,478)(1,893)-(131)(10,079)

Changes to models andinputs used for ECL
calculations

183

(19)

(36)

-

-

128

Amounts written off

76

214

4,550

-

31

4,871

Other adjustments

(3)

1

2

-

7

7

Allowance as at
December 31, 2022

(1,520)(1,016)(1,366)-(252)(4,154)

The table shows month over month movements.

Loans with a contractual amount of SEK 2,504m (3,436m) that were written off during the year are still subject toenforcement activity.

Note 20

Bonds and other interest-bearing securities
31 Dec 2023

31 Dec 2022

Other borrowers

506

864

Total

506

864

- in SEK

506

864

K L A RN A H O L D I N G A B (P UBL)

Intangible assets

Goodwill

BrandsLicensesCapitalized
development
expenses

Other
intangible
assets

Total

6,855

1,202

80

3,817

3,165

15,119Additions

-

-

3

887

-

890

Sales/disposals

-

-

(3)

-

-

(3)

Reclassification

-

-

-

(1)

1

-

(24)

-

-

(2)

(24)

(50)

6,831

1,202

80

4,701

3,142

15,956

Amortization as at January 1, 2023

-

(65)

(64)

(1,418)(650)(2,197)

Amortization for the year

-

(73)

(6)

(854)

(322)

(1,255)

Sales/disposals

-

-

2

-

-

2

Currency translation difference
Purchase value as at December 31, 2023

Currency translation difference

-

-

-

4

19

23

Amortization as at December 31, 2023

-

(138)

(68)

(2,268)(953)(3,427)

-

(82)

-

(67)

-

(149)

(130)

-

(1)

(191)

(10)

(332)

Impairment as at January 1, 2023

Stage 2

Impact on ECL fromchange in credit risk

Note 21

Purchase value as at January 1, 2023

Stage 1
Allowance as atJanuary 1, 20221

1

94

NOTES WITH ACCOUNTING PRINCIPLES

Impairment for the year

-

-

-

2

-

2

Impairment as at December 31, 2023

(130)

(82)

(1)

(256)

(10)

(479)

Carrying amount as at December 31, 2023

6,701

982

11

2,177

2,179

12,050

Other
intangible
assets

Total

Currency translation difference

Purchase value as at January 1, 2022
Additions

Goodwill

BrandsLicensesCapitalized
development
expenses

4,586

109

66

2,168

1,262

8,191

-

-

14

928

7

949

1,926

1,085

-

686

1,724

5,421

Sales/disposals

-

-

(1)

-

-

(1)

Reclassification

(35)

-

-

-

50

15

Currency translation difference

378

8

1

35

122

544

6,855

1,202

80

3,817

3,165

15,119Amortization as at January 1, 2022

-

(12)

(58)

(810)

(324)

(1,204)

Amortization for the year

-

(52)

(7)

(591)

(297)

(947)

Additions from business combinations

Purchase value as at December 31, 2022

Sales/disposals

-

-

1

-

-

1

Currency translation difference

-

(1)

-

(17)

(29)

(47)

Amortization as at December 31, 2022

-

(65)

(64)

(1,418)(650)(2,197)

Impairment as at January 1, 2022

-

(76)

-

(17)

-

(93)

Impairment for the year

-

-

-

(48)

-

(48)

Currency translation difference

-

(6)

-

(2)

-

(8)

Impairment as at December 31, 2022

-

(82)

-

(67)

-

(149)

6,855

1,055

16

2,332

2,515

12,773Carrying amount as at December 31, 2022

A N N UA L R E P O RT 2 0 2 3

CONTENTS

95

NOTES WITH ACCOUNTING PRINCIPLES

Impairment testing of Goodwill and Intangible assets

Note 22

The Group conducted its annual goodwill impairment test as of October 1, 2023. In performing this test all
goodwill was allocated to one cash-generating unit (CGU) aligned with the Group’s one operating segment. No
impairment losses were identified as a result of the test as the fair value less cost to sell (FVLCS) of the CGU
exceeded its carrying amount. In determining the FVLCS, the group applied a level 3 valuation methodology
using a last twelve months revenue multiple as a key assumption. The Group performed a sensitivity analysis andcompared the key assumption to peer company valuations. No reasonably possible changes in the key
assumptions that would result in an impairment loss were identified in our sensitivity analysis.

Tangible assets

Purchase value as at January 1, 2023
Additions
Sales/disposals

819

-

7

7

(7)

(60)

(67)

-

(1)

(1)

606

758

Depreciation as at January 1, 2023

(73)

(326)

(399)

Depreciation for the year

(28)

(109)

(137)

Sales/disposals

3

37

40

Currency translation difference

1

3

4

Depreciation as at December 31, 2023

(97)

(395)

(492)

Impairment as at January 1, 2023

(6)

(6)

(12)

Impairment for the year

(15)

(16)

(31)

-

2

2

(21)

(20)

(41)

34

191

225

Leaseholdimprovements

Equipment

Total

Purchase value as at January 1, 2022

143

536

679

Additions

13

106

119

Additions from business combinations

-

6

6

Sales/disposals

(4)

(14)

(18)

Reclassification

(5)

5

-

Impairment as at December 31, 2023

Carrying amount as at December 31, 20231

Currency translation difference

12

21

33

Purchase value as at December 31, 2022

159

660

819

Depreciation as at January 1, 2022

(40)

(223)

(263)

Depreciation for the year

(29)

(98)

(127)

2

6

8

(6)

(11)

(17)

(73)

(326)

(399)

-

-

-

Impairment for the year

(6)

(6)

(12)

Impairment as at December 31, 2022

(6)

(6)

(12)

Carrying amount as at December 31, 20221

80

328

408

Sales/disposals
Currency translation difference
Depreciation as at December 31, 2022

Impairment as at January 1, 2022

K L A RN A H O L D I N G A B (P UBL)

Total

660

152

Sales/disposals

1

Equipment

159

Purchase value as at December 31, 2023

Currency translation difference

In December 2023, the Group made a strategic decision to cease certain operations relating to prior acquisitions
resulting in an impairment to Goodwill of SEK 130m and Intangible assets of SEK 162m.

Leaseholdimprovements

Leases are recognized as right-of-use assets and are included in Tangible assets in the Balance sheet. On December 31, 2023, the right-of-use
assets amount to SEK 1,003m (1,636m), which are disclosed in note 7, Leases.

A N N UA L R E P O RT 2 0 2 3

CONTENTS

96

NOTES WITH ACCOUNTING PRINCIPLES

Note 23

Other assets

Derivatives designated in a hedge relationship
31 Dec 2023

31 Dec 2022

Current tax assets

384

362

VAT receivables

292

222

585

789

Contract assets

1,170

1,350

Other receivables

344

466

2,775

3,189

Derivatives

Total

For more information on derivatives, see note 24.

Note 24

Derivatives and hedge accounting

Fair value hedges
The Group holds short and medium term deposits from the public which are subject to changes in fair value due
to fluctuations in the underlying interest rate benchmark, which is typically the most significant component of
the overall fair value change. These short and medium term deposits are the hedged item. The Group uses
interest rate swaps as the hedging instrument to reduce the impact of fair value changes in the hedged item due
to changes in the underlying interest rate benchmark.
For hedges of interest rate risk, ineffectiveness arises due to mismatches of critical terms and / or the use ofdifferent curves to discount the hedged item and instrument, for example, a mismatch between the reset
frequency of the swap and the benchmark frequency.
31 Dec 2023
Carrying amount

31 Dec 2023
Fair value
Positive

Negative

NominalamountInterest rate swaps

52

(66)

22,802

Total

52

(66)

22,802

Positive

Negative

NominalamountCurrency forwards

533

(202)

38,158

Total

533

(202)

38,158Derivatives designated in a hedged relationship

Fair value
Derivatives not designated in a hedged relationship

31 Dec 2022
Fair value
Positive

Negative

NominalamountInterest rate swaps

-

(85)

10,147

Total

-

(85)

10,147

Derivatives designated in a hedged relationship

Fair value
Positive

Negative

NominalamountCurrency forwards

789

(50)

42,879

Total

789

(50)

42,879Derivatives not designated in a hedged relationship

The Group enters into foreign exchange derivatives that are an economic hedge to manage currency risks andare not designated in a hedge accounting relationship. These derivatives are held at fair value with gains andlosses recognized in Net results from financial transactions.

K L A RN A H O L D I N G A B (P UBL)

Change in fair Ineffectivenessvalue used torecognized in
calculate Net result from
Negativehedge
financialineffectiveness
transactions

NominalamountPositive

Interest rate risk

22,802

52

(66)

(117)

3

Total

22,802

52

(66)

(117)

3

Fair value hedges:
Hedging instrument and ineffectiveness

31 Dec 2022
Carrying amount

Change in fair Ineffectivenessvalue used torecognized in
calculate Net result from
Negativehedge
financialineffectiveness
transactions

NominalamountPositive

Interest rate risk

10,147

-

(85)

(99)

(1)

Total

10,147

-

(85)

(99)

(1)

31 Dec 2023

31 Dec 2022

Fair value hedges:
Hedging instrument and ineffectiveness

Fair value hedges: Designated hedged item
Deposits from the public

22,934

10,182

Of which: the accumulated amount of fair value adjustment

14

(100)

Maturity 2023

Maturity 2022

Within 3
months> 3 months
and < 12months> 12 months

Interest rate risk

2,585

15,789

4,427

189

4,457

5,501

Average fixed interest rate

2.48%

3.42%

3.30%

0.50%

2.42%

2.07%

Within 3 > 3 months andmonths< 12 months> 12 months

Fair value hedges: Profileof the timing of thenominal amount of thehedge instrument

A N N UA L R E P O RT 2 0 2 3

CONTENTS

97

NOTES WITH ACCOUNTING PRINCIPLES

Note 25

Prepaid expenses and accrued income

Note 28
31 Dec 2023

31 Dec 2022

Accrued transaction-related income

496

574

Prepaid licenses

177

Other accrued income
Prepaid marketing

Debt securities issued
31 Dec 2023

31 Dec 2022

Senior unsecured bonds

451

1,115

216

Commercial papers

200

22

86

90

Convertible promissory notes

19

26

Total

Other prepaid expenses

67

117

Total

845

1,023

Note 26

Liabilities to credit institutions

Liabilities to credit institutions

-

539

651

1,676

During 2023, a total of SEK 664m of notes issued under the Medium Term Notes program matured and SEK
539m convertible promissory notes were repurchased.
For maturity analysis of financial liabilities, see note 36.

31 Dec 2023

31 Dec 2022

1,636

2,829

By currency

Note 29

Other liabilities
31 Dec 2023

31 Dec 2022

Accounts payable

414

184

Personnel related taxes

80

198

- in SEK

181

1,885

- in GBP

901

755

Current tax liabilities

177

87

- in EUR

170

180

Liabilities to retailers

8,479

6,904

- in USD

384

9

268

135

Total

1,636

2,829

1,234

1,757

Derivatives
Lease liabilities
Other liabilities

For maturity analysis of financial liabilities, see note 36.

Note 27

Total

Deposits from the public

Deposits from the publicof which: fair value adjustment for hedged risk
Total

1,321

1,809

11,972

11,074For more information on derivatives, see note 24. For maturity analysis of financial liabilities, see note 36.
31 Dec 2023

31 Dec 2022

97,096

81,47014(100)

97,096

81,470By currency

Note 30

Accrued expenses and prepaid income
31 Dec 2023

31 Dec 2022

Accrued personal and consultant related costs

642

696

Accrued marketing costs

489

437

Accrued outsourced and IT costs

542

352

- in SEK

12,08915,011Other accrued expenses and prepaid income

532

564

- in EUR

84,354

65,835

Accrued commission costs

298

175

Accrued interest costs

972

306

Accrued scoring and distribution costs

143

123

3,618

2,653

- in other currencies
Total

For maturity analysis of financial liabilities, see note 36.

653

624

97,096

81,470Total

For maturity analysis of financial liabilities, see note 36.

K L A RN A H O L D I N G A B (P UBL)A N N UA L R E P O RT 2 0 2 3

CONTENTS

98

NOTES WITH ACCOUNTING PRINCIPLES

Note 31

Provisions

Note 32
Pensions andother postemployment
obligations

Pending legal
issues and tax
litigations

Other
provisions

Total

Subordinated liabilities
31 Dec 2023

31 Dec 2022

Subordinated note, nominal value

750

300

Transaction expenses

(10)

(1)

Provisions as at January 1, 2023

9

7

2

18

Accrued interest

11

4

New provisions

6

-

-

6

Total

751

303

Amounts used

(2)

-

(1)

(3)

Provisions as at December 31, 2023

13

7

1

21

Provisions for financial guarantees and commitments

Stage 1

Stage 2

Stage 3

Total

Provisions as at January 1, 2023

54

39

1

94

New provisions

47

14

1

62

(37)

(40)

(3)

(80)

Transfers to stage 1

14

(14)

-

-

Transfers to stage 2

(1)

1

-

-

Transfers to stage 3

-

-

-

-

Impact on year end ECL from change in credit risk

25

5

1

31

Provisions as at December 31, 2023

102

5

-

107

Reversed provisions

On July 5, 2018, Klarna Bank AB (publ) issued SEK 300m of subordinated notes due 2028. The notes have a
floating coupon rate corresponding to STIBOR 3M plus 3.5% per annum. The interest is paid on a quarterly basis.
The notes were called on the first call date of July 5, 2023.
On May 16, 2023, Klarna Holding AB (publ) issued SEK 500m of subordinated notes due 2033. The notes have a
floating coupon rate corresponding to STIBOR 3M plus 7.5% per annum. The interest is paid on a quarterly basis.
The notes were allocated to a limited number of large Nordic investors and has a first call date of May 16, 2028.
On August 16 2023, Klarna Holding AB (publ) issued SEK 250m of subordinated notes due 2033. The notes havea floating coupon rate corresponding to STIBOR 3M plus 7.5% per annum. The interest is paid on a quarterly
basis. The notes were issued as a private placement and has a first call date of August 16, 2028.
For maturity analysis of financial liabilities, see note 36.

Pensions andother postemployment
obligations

Pending legal
issues and tax
litigations

Other
provisions

Provisions as at January 1, 2022

3

1

1

5

New provisions

8

10

1

19

Amounts used

(2)

(4)

-

(6)

Pledged assets

9

7

2

18

Assets pledged for own liabilities

Stage 1

Stage 2

Stage 3

Total

Provisions as at January 1, 2022

44

6

11

61

Pledged treasury bills chargeable at central banks, etc., and pledged bonds andother interest-bearing securities

New provisions

60

11

6

77

Other pledged assets

Reversed provisions

(29)

(23)

(13)

(65)

Transfers to stage 1

13

(9)

(4)

-

Transfers to stage 2

(22)

22

-

-

Contingent liabilities and commitments

Transfers to stage 3

-

-

-

-

Contingent liabilities

(12)

32

1

21

54

39

1

94

Provisions as at December 31, 2022

Total

Note 33

Pledged assets and contingent liabilities

Pledged loans to the public and credit institutions
Provisions for financial guarantees and commitments

Impact on year end ECL from change in credit risk
Provisions as at December 31, 2022

Total

31 Dec 2023

31 Dec 2022

2,775

2,717

-

1,402

32

34

2,807

4,153

-

44

Commitments

15,424

16,438

Total

15,424

16,482

Guarantees

Parts of the receivables are continuously pledged as collateral for liabilities to credit institutions which provides
security for the Group's credit facility. The credit liability amounted to SEK 0m (0m) as at December 31, 2023.
Treasury bills chargeable at central banks, etc., and pledged bonds and other interest-bearing securities containsecurities pledged as collateral in repurchase agreements. Associated liabilities amounted to SEK 0m (1,405m)
as at December 31, 2023.
Commitments contain an undrawn part of consumer credit line amounting to SEK 0m (5,006m) and acommitment to refund consumers in the event of returns to a defaulted retailer amounting to SEK 14,747m(11,333m) as at December 31, 2023. Commitment to fund loans as at December 31, 2023 amounted to SEK 677m
(99m)

K L A RN A H O L D I N G A B (P UBL)A N N UA L R E P O RT 2 0 2 3

CONTENTS

Note 34

99

NOTES WITH ACCOUNTING PRINCIPLES

Fair value of financial assets and liabilities

31 Dec 2023
Fair value

The Group’s basis for establishing the fair value of financial assets and liabilities are presented below.

31 Dec 2022

Carrying
amount Difference

Fair value

Carrying
amount Difference

Liabilities

For Cash and balances with central banks the carrying amount is a reasonable approximation of the fair value.
Treasury bills chargeable at central banks, etc., Bonds and other interest-bearing securities, and repurchaseagreements within Liabilities to credit institutions are valued in terms of the active market prices.

Liabilities to credit institutions

1,636

1,636

-

2,829

2,829

-

Deposits from the public

97,36597,096269

81,10981,470

(361)

648

651

(3)

1,644

1,676

(32)

11,315

11,315-

10,572

10,572

-

268

268

-

135

135

-

3,595

3,595

-

2,613

2,613

-

769

751

18

300

303

(3)

115,596

115,312284

99,202

99,598(396)

Debt securities issued
Other liabilities

Carrying amount for Loans to credit institutions and Loans to the public are assumed to be approximations offair value. Fair value on short-term (<1 year) loans is equivalent to their booked value since the effect of
discounting is insignificant.

Other liabilities (derivatives)

The fair value for other shares and participations is based on quoted market prices where available or valuation
techniques using unobservable data (see Note 35 Classification of financial assets and liabilities for further
detail on basis).

Total

Accrued expenses and prepaid
incomeSubordinated liabilities

Note 35

For derivatives the fair value is based upon input parameters which are observable from independent andreliable market data sources.

Classification of financial assets and liabilities intomeasurement categories
Fair value throughprofit or loss

Amortized
cost

Non-financial
assetsTotal

Cash and balances with central banks-

22,028-22,028For other assets and liabilities (excluding derivatives) and Prepaid and accrued expenses and income the fairvalue is the carrying amount of these financial instruments as they are short term in nature.

31 Dec 2023

The carrying value for liabilities to credit institutions generally approximates the fair value.

AssetsTreasury bills chargeable at central banks, etc.

-

7,267

-

7,267

The calculation of fair value of Deposits from the public is based on Level 2 input using observable market data.
Deposits from the public are grouped into maturity buckets and thereafter the net present value is calculated
based on the remaining maturity and the corresponding interest rate.

Loans to credit institutions

-

4,502

-

4,502

Loans to the public-

86,108-

86,108

Bonds and other interest-bearing securities

-

506

-

506

Fair value of issued debt securities and subordinated liabilities are determined using the quoted market price atthe balance sheet date where available (in the case of level 1) or using observable inputs (in the case of level 2).

Other shares and participations

The below fair values are calculated for disclosure purposes only.

345

-

-

345

Intangible assets--

12,05012,050

Tangible assets

-

-

1,228

1,228

Deferred tax assets

-

-

282

282

585

388

1,802

2,775

-

582

263

845

930

121,381

15,625

137,936

Fair value throughprofit or loss

Amortized
cost

Non-financial
liabilities

Total

Liabilities to credit institutions

-

1,636

-

1,636

Deposits from the public-

97,096-

97,096

Debt securities issued

-

651

-

651

Other assets
31 Dec 2023
Fair value

31 Dec 2022

Carrying
amount Difference

Fair value

Prepaid expenses and accrued income

Carrying
amount Difference

Total

AssetsCash and balances with central
banks

22,02822,028-16,08516,085-

Treasury bills chargeable at central
banks, etc.

7,021

7,267

(246)

10,237

10,713(476)

Loans to credit institutions

4,502

4,502

-

3,818

3,818

-

Loans to the public

86,108

86,108-73,98373,983-

Bonds and other interest-bearing
securities

492

506

(14)

827

864

(37)

Other shares and participations

345

345

-

338

338

-

Other liabilities

Other assets

388

388

-

465

465

-

Other assets (derivatives)

585

585

-

789

789

-

Prepaid expenses and accrued
income

582

582

-

665

665

-

122,051

122,311(260)

107,207

107,720

(513)

Total

K L A RN A H O L D I N G A B (P UBL)

31 Dec 2023
Liabilities

-

-

5

5

268

11,315389

11,972

Accrued expenses and prepaid income

-

3,595

23

3,618

Provisions

-

-

128

128

Deferred tax liabilities

Subordinated liabilities
Total

-

751

-

751

268

115,044545

115,857

A N N UA L R E P O RT 2 0 2 3

CONTENTS

100

NOTES WITH ACCOUNTING PRINCIPLES

The following table shows the financial assets and liabilities measured at fair value, divided into the threevaluation levels. For description of the fair value levels, see note 2, Accounting principles, section 12. Notransfers between levels have been made during 2023.

Fair value throughprofit or loss

Amortized
cost

Non-financial
assetsTotal

Cash and balances with central banks-

16,085-16,085

Treasury bills chargeable at central banks, etc.

-

10,713-

10,713Loans to credit institutions

-

3,818

-

3,818

Loans to the public-

73,983-73,983

Bonds and other interest-bearing securities

-

864

-

864

338

-

-

338

Intangible assets--

12,773

12,773Financial liabilities

Tangible assets

-

-

2,044

2,044

Debt securities issued

Deferred tax assets

-

-

395

395

Other liabilities (derivatives)

789

465

1,935

3,189

Total

31 Dec 2022
AssetsOther shares and participations

Other assets
Prepaid expenses and accrued income
Total

-

665

358

1,023

1,127

106,593

17,505125,225

31 Dec 2023

Level 1

Level 2

Level 3

Total

Other shares and participations

81

-

264

345

Other assets (derivatives)

-

585

-

585

Total

81

585

264

930

-

-

-

-

-

268

-

268

-

268

-

268

Level 1

Level 2

Level 3

Total

67

-

271

338

Financial assets

31 Dec 2022
Financial assets

31 Dec 2022

Fair value throughprofit or loss

Amortized
cost

Non-financial
liabilities

Other shares and participations
Total

Liabilities
Liabilities to credit institutions

-

2,829

-

2,829

Deposits from the public-

81,470-81,470Debt securities issued

539

1,137

-

1,676

Deferred tax liabilities

-

-

912

912

135

10,572367

11,074

Accrued expenses and prepaid income

-

2,613

40

2,653

Provisions

-

-

112

112

Subordinated liabilities

-

303

-

303

674

98,924

1,431

101,029

Other liabilities

Total

K L A RN A H O L D I N G A B (P UBL)

Other assets (derivatives)

-

789

-

789

Total

67

789

271

1,127

Financial liabilities
Debt securities issued

-

-

539

539

Other liabilities (derivatives)

-

135

-

135

Total

-

135

539

674

A N N UA L R E P O RT 2 0 2 3

CONTENTS

101

NOTES WITH ACCOUNTING PRINCIPLES

Note 36

Movements in Level 3

Maturity analysis for financial liabilities

The following tables show a reconciliation of the opening and closing balances of Level 3 financial assets andliabilities which are recorded at fair value.
Financial assets

Financial liabilities

Other shares andparticipations

Debt securities
issued2

Balance as at January 1, 2023

271

539

Gain/loss in income statement1

1

(211)

Contractual undiscounted cashflows

31 Dec 2022

Expected to be recoveredor settled:

Expected to be recovered or
settled:Within 12
monthsAfter 12months

Total

Within 12
monthsAfter 12months

Total

Liabilities to credit institutions

1,636

-

1,636

2,844

-

2,844

Deposits from the public

84,561

14,166

98,727

63,62918,80482,433

574

85

659

718

994

1,712

1,186

11,672

9,133

1,717

10,850of which: unrealized gain/loss

1-of which: realized gain/loss

-

(211)

Other liabilities

10,486

-

(331)

(8)

3

Accrued expenses and prepaid
income

3,529

66

3,595

2,495

118

2,613

11

740

751

16

374

390

100,797

16,243

117,040

78,83522,007

100,842

Repurchase
Impact of foreign exchange movements
Balance as at December 31, 2023

264-

Debt securities issued

Subordinated liabilities
Total

Financial assets

Financial liabilities

Other shares andparticipations

Debt securities
issued2

Balance as at January 1, 2022

262

326

Gain/loss in income statement1

(24)

20

(24)

20

-

168

of which: unrealized gain/loss
Issuances1

31 Dec 2023

Impact of foreign exchange movements

33

25

Balance as at December 31, 2022

271

539

Note 37

Interest received and paid

Interest payments received
Interest expenses paid

2023

2022

4,134

4,004

(2,144)(839)

Fair value gains and losses recognized in the income statement are included in Net result from financial transactions.

2

The value of debt securities issued has been established using valuation models.

The Group uses a range of unobservable inputs and valuation techniques such as the current interest rate,equity markets, expected future cash flows and options models to determine the fair value of level 3 financial
instruments.
The impact of a 10% increase in the valuation of Other shares and participations would increase assets by SEK
27m (27m). The impact of a 10% decrease would decrease assets by SEK 27m (27m).
The impact of a 10% increase in valuation inputs of Debt securities issued would increase liabilities by SEK 0m(10m). The impact of a 10% decrease would decrease liabilities by SEK 0m (10m).
During the period SEK 539m of debt securities issued were repurchased resulting in a gain of SEK 211m which
was recognized in the income statement. The debt securities issued were valued in prior periods using level 3
valuation models.

K L A RN A H O L D I N G A B (P UBL)A N N UA L R E P O RT 2 0 2 3

CONTENTS

Note 38102

NOTES WITH ACCOUNTING PRINCIPLES

Share-based payments

Details regarding the Group’s RSU program and other contingent equity instruments are outlined in the tablebelow:

Employee Restricted Stock Unit Program
Klarna’s Restricted Stock Unit Program (the “RSU Program”) was implemented in 2020. It is open to all
employees and entails a gratuitous granting of Restricted Stock Units (“RSUs”) in relation to an ownershipinterest in Klarna Bank AB (publ). Each participant is granted a set number of RSUs at the grant date, which vest
over a four-year graded vesting schedule, with 25% of the shares vesting annually. Should the participant end
their employment within the group, unvested RSUs will be forfeited.

Restricted stock units

The number of shares distributed to employees under the RSU Program is approved by the Board of Directors ofKlarna Holding AB (publ). The share-based compensation expense is based on the grant-date fair value of theawards and recognized over the vesting period, in line with the graded vesting schedule.

Group

Number of
RSUs

Weighted averagefair value at grant
SEK

Number of shares

Weighted averagefair value at grant
SEK

January 1, 2023

8,544,987

63

29,824

8,646

Granted during the year

7,081,803

45

-

-

Released during the year

(2,411,162)

67(2,367)

14,789Forfeited during the year

(2,450,832)

53

-

-

December 31, 2023

10,764,796

52

27,457

6,524

On vesting, the company is, in accordance with certain countries’ tax law, required to withhold an amount tosettle the employee’s tax associated with a share-based payment and transfer that amount in cash to the tax
authority on the employee’s behalf. Such amounts are withheld from employees in accordance with applicablelaws, either through deduction of salary or withholding a number of vested shares.

Restricted stock units

Employee Stock Warrants
In certain jurisdictions the Group offers share-based payments to certain employees in the form of stock
warrants. The warrants are subject to graded vesting over a term of typically four to five years. The awards areaccounted for as equity-settled share-based payments, with the fair value determined at the grant date andexpensed over the vesting period, based on the Group’s estimate of the number of awards that will eventually
vest. One warrant entitles the recipient to purchase one ordinary share in Klarna Holding AB (publ) at the agreed
strike price.
Certain warrants have been acquired by employees in exchange for a cash payment of the fair market value at
grant date. Since pre-emption rights related to these awards transfer over a specified period they are accounted
for as equity settled share-based payments, however no associated expense is recognized.

Other equity awards

Other equity awards

Group

Number of
RSUs

Weighted averagefair value at grant
SEK

Number of shares

Weighted averagefair value at grant
SEK

January 1, 2022

2,212,311

134

50,144

11,135Granted during the year

8,857,384

54

2,955

14,798

Released during the year

(854,828)

116(23,275)

14,789Forfeited during the year

(1,669,880)

86

-

-

8,544,987

63

29,824

8,646

December 31, 2022

Additional detail on employee and non-employee stock warrant programs is outlined in the tables below:
Stock warrants

Non-Employee Stock Warrants
Klarna has granted stock warrants to certain non-employee participants. The vesting periods associated withthese grants range from one year to five years. The warrants are accounted for as equity settled share-based
payments and recorded as an expense over the relevant service or vesting periods. The fair market value ofservices provided has been determined with reference to the fair market value of the instruments as measured
at the date when the services are provided.
Employee Restricted Shares
A restricted share award scheme in which some employees acquired restricted shares in a group entity thatretains an ownership interest in Klarna Bank AB (publ) became fully vested during the year . The restricted shareawards were accounted for as an equity settled share-based payment. The restricted shares were acquired by
employees in exchange for a cash payment at fair market value, measured at the grant date and therefore no
associated expense was recognized. At the balance sheet date the employee retained shares in a group entity
holding an ownership interest in Klarna Bank AB (publ) are reflected in minority interest.
Other Equity Awards
During 2023, 0 (2,955) equity instruments were issued in relation to business acquisitions. The instruments
granted to specific individuals of the acquired companies entitle the recipient to one ordinary share in Klarna
Holding AB (publ). There is a four year vesting period associated with these instruments, and they are accounted
for as equity-settled share-based payment compensation and recognized as a post business combination
expense. During the year, 2,367 (23,275) equity instruments were released related to employees leaving Klarna.
The future personnel costs associated with the released equity instruments were expensed in the income
statement at the last day of employment. The instruments have been measured based on the fair market valueof the underlying ordinary shares at the date of grant.

K L A RN A H O L D I N G A B (P UBL)

Number of warrants

Weighted average
exercise price SEK

January 1, 2023

1,933,083

5,206

Granted during the year

1,102,024

6,131

Exercised during the year1(65,346)

807

Group

Forfeited during the year

(417,518)

79

December 31, 2023

2,552,243

5,706

Stock warrants
Group
January 1, 2022
Granted during the year
Forfeited during the year
December 31, 2022
1

Number of warrants

Weighted average
exercise price SEK

536,519

2,385

1,432,287

6,218(35,723)

3,461

1,933,083

5,206

The weighted average share price at the date of exercise of these warrants was SEK 2,295.

A N N UA L R E P O RT 2 0 2 3

CONTENTS

103

NOTES WITH ACCOUNTING PRINCIPLES

Note 40

The range of exercise prices for warrants outstanding at the end of the year is between 1 and 14,789 SEK (1 to
14,789 SEK). The weighted average remaining contractual life for warrants is 3.5 years (4.1). The number of
exercisable warrants amounts to 51,500 (11,500) as at 31 December 2023.
Klarna uses the Black Scholes options pricing model when calculating the fair value of warrant programs. The
below table outlines the inputs used within the model:
Stock warrants
Group

2023

2022

Expected volatility (%)

35-37

35

Risk-free interest rate (%)

2.6-3.3

2.2 - 2.5

Expected term (years)

2.8-5.3

3.4 - 3.7

2,295

2,305

Weighted average share price (SEK)

Expected volatility has been assessed with reference to the historic share price volatility of companies within
Klarna’s peer group.
The weighted average fair value of warrants granted during the year was 171 SEK (116 SEK).
The total expense recognized in the income statement in relation to share-based payments is 462m (651m).

Note 39

Information on related parties

The following are defined as related parties: all companies within the Klarna Holding AB (publ) Group,
shareholders in Klarna Holding AB (publ) with significant influence, board members of Klarna Holding AB (publ)
and Klarna Bank AB (publ), key management personnel, as well as close family members of and companies
significantly influenced by such board members or key management personnel.
During the year, there have been normal business transactions between companies in the Group and agreed
remuneration has been paid to the CEO, Board of Directors and other senior management personnel.
For information about transactions with the Board of Directors, CEO and senior management, see note 11.

Capital adequacy and leverage ratio

Capital adequacy regulations
Capital adequacy refers to the ability of an institution’s Own Funds to cover the risk it is exposed to. Within the
EU the capital adequacy requirements are contained in the Capital Requirements Directive (CRD) and Capital
Requirements Regulation (CRR), both implemented in 2014. These regulations are based on the global capital
adequacy standards Basel II and III, and define minimum requirements for total own funds in relation to riskweighted exposure amounts (Pillar I), rules for the Internal Capital Adequacy Process and Internal Liquidity
Adequacy Assessment Process “ICLAAP” as well as the Supervisory Review and Evaluation Process “SREP”(Pillar II), and rules for disclosures on risk, capital adequacy etc. (Pillar III).
The information about capital adequacy in this document is based on the Swedish Financial Supervisory
Authority regulations (FFFS 2008:25 and FFFS 2014:12). Other disclosures required under Pillar III as well as the
Capital adequacy reports are published on Klarna’s homepage www.klarna.com
Common Equity Tier 1 capital
Klarna Holding AB (publ) reported a CET1 capital amount of SEK 11,632m as of December 31, 2023 (SEK 14,865m).
During 2023, Common Equity Tier 1 for the consolidated situation of Klarna Holding AB (publ) decreased by SEK
3,233m as a result mainly from operating losses incurred during the year (SEK 2,332m) which arose due toinvestments made in relation to peak shopping season and increased lending due to higher volumes during theperiod. Additional factors were a decrease of unrealized foreign exchange gains (SEK 180m), a reduction in the
IFRS9 transitional relief (SEK 830m), a decrease of Other reserves (SEK 384m), partially offset by an increase inshare premium (SEK 537m).
Additional Tier 1 capital
In March 2022 Klarna Bank AB (publ) issued SEK 276m Additional Tier 1 capital instruments. The instruments
have a floating coupon rate corresponding to STIBOR 3M plus 7% per annum. The securities were offered to alimited number of large Nordic investors and the first call date is March 25, 2027.
Klarna Holding AB (publ) issued, in November 2018, EUR 25m in Additional Tier 1 capital instruments which wereredeemed on the first call date on November 15, 2023.
Subordinated liabilities
On July 5, 2018, Klarna Bank AB (publ) issued SEK 300m subordinated notes due 2028 which were redeemed on
the first call date on 5 July, 2023.
On May 16, 2023, Klarna Holding AB (publ) issued SEK 500m subordinated notes due 2033. The subordinatednotes are eligible for inclusion as Tier 2 capital in accordance with current regulations. The notes have a floating
coupon rate corresponding to STIBOR 3M plus 7.5% per annum. The notes were allocated to a limited number oflarge Nordic investors and the first call date is May 16, 2028.
On August 16, 2023, Klarna Holding AB (publ) issued SEK 250m subordinated notes due 2033. The subordinatednotes are eligible for inclusion as Tier 2 capital in accordance with current regulations. The notes have a floating
coupon rate corresponding to STIBOR 3M plus 7.5% per annum. The notes were allocated to a limited number oflarge Nordic investors and the first call date is August 16, 2028.
Consolidated situation and methods for calculating minimum requirements
In accordance with capital adequacy regulations, the consolidated situation is made up of Klarna Holding AB(publ) (Klarna Bank AB (publ)'s parent company) and its subsidiaries. All subsidiaries are fully consolidated in theGroup. Klarna Bank AB (publ) is a registered bank under the supervision of the Swedish Financial Supervisory
Authority (Finansinspektionen). Klarna Bank AB (publ) uses the standardized method for calculating theminimum capital requirements for credit, as well as market risk, and the alternative standardized approach for

K L A RN A H O L D I N G A B (P UBL)A N N UA L R E P O RT 2 0 2 3

CONTENTS

104

NOTES WITH ACCOUNTING PRINCIPLES

operational risk regarding Klarna Bank AB (publ) and its consolidated situation. The approval for calculating
minimum capital requirement for operational risk using the alternative standardized approach was granted by
the Finansinspektionen in December 2019.
Pillar II Requirements and Guidance
Pillar II requirements cover risks that are not or are insufficiently covered by Pillar I and are determined by the
Swedish Financial Supervisory Authority (SFSA) as the result of its periodic Supervisory Risk Evaluation Process(SREP). From September 29, 2023, Klarna Group’s Pillar II requirements were 0.94% of the risk exposure amount.
Pillar II Guidance is the level of capital that the SFSA assesses to be a suitable level for each bank to hold tocover, for example, risks or aspects of risks and manage future stressed situations. From September 29, 2023,
Klarna’s Pillar II Guidance amount is set to 3.5% of the risk exposure amount.
The Internal Capital Adequacy Assessment Process and Internal Liquidity Adequacy Assessment Process(Pillar II)
The objective of the Internal Capital Adequacy Assessment Process and Internal Liquidity Adequacy
Assessment Process (ICLAAP) is to ensure that Klarna clearly and correctly identifies, assesses and manages allrisk to which it is exposed. The process considers the financial resources required to cover such risk, and toensure that Klarna has access to sufficient capital and liquidity to support its business strategy over the coming
planning horizon with regards to different market conditions. The main governing document for the ICLAAP is
the ICLAAP policy. In this document, Klarna’s board defines the responsibilities, processes and rules of the
ICLAAP. The ICLAAP report is updated at least yearly.
The internally assessed capital requirement is based on the minimum capital requirement under Pillar I, thecapital requirement for risks managed under Pillar II and the combined buffer requirements. The internallyassessed capital required as per December 2023 amounts to SEK 11,513m (SEK 9,677m) for Klarna Bank AB (publ)and SEK 9,074m (SEK 8,230m) for the consolidated situation. Klarna thereby has sufficient capital to cover forrequired capital under Pillar I and Pillar II, including combined buffer requirements.

Capital adequacy information

Consolidated situation
31 Dec 2023
31 Dec 2022

Klarna Bank AB (publ)
31 Dec 2023
31 Dec 2022

Own funds, total risk exposure amount and total leverage ratio
exposure
Common Equity Tier 1 capital

11,632

14,865

14,544

12,613Tier 1 capital

11,80915,292

14,82012,889Own funds

12,56015,54814,82013,191

Total risk exposure amount

71,794

68,597

90,21080,078

Total leverage ratio exposure

131,831

119,462

145,722

127,312

Common Equity Tier 1 capital ratio

16.2%

21.7%

16.1%

15.8%

Tier 1 capital ratio

16.4%

22.3%

16.4%

16.1%

Total capital ratio

17.5%

22.7%

16.4%

16.5%

Leverage ratio

9.0%

12.8%

10.2%

10.1%

Combined buffer requirement incl, the requirements of
575/2013 Art, 92(1)(a)

8.0%

7.5%

8.0%

7.5%

of which: capital conservation buffer requirement

2.5%

2.5%

2.5%

2.5%

of which: countercyclical buffer requirement

1.0%

0.5%

1.0%

0.5%

11.2%

17.2%

11.0%

11.3%

Capital adequacy analysis

CET1 available after meeting the total SREP own funds
requirements (%)
Exposure amounts for credit risk according to thestandardized approach

115,018

108,144

127,341

115,597of which: central governments or central banks

23,192

16,982

22,863

16,645of which: regional governments or local authorities

2,683

5,063

2,683

5,063

of which: public sector entities

1,163

-

1,163

-

of which: multilateral development banks

1,777

5,436

1,777

5,436

Capital Buffer Requirements
As at December 31, 2023, Klarna was subject to a Capital conservation buffer of 2.5% and to a Countercyclicalcapital buffer of 0.98% of the risk exposure amount for the consolidated situation, and 1.04% of the risk
exposure amount for Klarna Bank AB.

of which: international organisations

1,102

-

1,102

-

of which: institutions

5,910

4,695

3,158

1,868

of which: corporates

9,440

7,785

22,687

17,935of which: retail

63,93859,69051,78751,227of which: exposures in default

567

572

565

551

Capital adequacy disclosure
Capital adequacy disclosures in accordance with the requirements in Commission Implementing Regulation (EU)No 2021/637 and the Swedish Financial Supervisory Authority (Finansinspektionen) requirements FFFS 2014:12
can be found in Klarna’s Capital adequacy reports.

of which: covered bonds

506

864

506

864

of which: equity

345

338

15,81011,280of which: other items

4,395

6,719

3,240

4,728

Total exposure amount

115,018

108,144

127,341

115,597

73,816IFRS 9 transitional adjustments
From January 1, 2018, Klarna applied the transitional rules in accordance with article 473a of the European
Union regulation no 575/2013 in order to phase in the effect on the capital when applying IFRS 9. The capital
adequacy calculations are adjusted with one dynamic and two static amounts over a period spanning 5 years.
As of January 1, 2023, the capital adequacy calculations were modified to include the dynamic component only,
as the static component is zero from January 1, 2023 onwards.
Excess subsidiary capital deduction
In accordance with Article 85 and 87 of CRR Klarna Bank AB (publ)’s Tier 1 and Tier 2 capital can only be
included in the capital base of Klarna Holding Group with the share required to cover the minimum capitalrequirements of Klarna Bank AB (publ). As of December 31, 2023, an amount of SEK 177m Additional Tier 1 capital
instruments issued by Klarna Bank AB (publ) were included in the Own funds of Klarna Holding AB (publ)
consolidated.

K L A RN A H O L D I N G A B (P UBL)

Credit risk including counterparty credit risk

Risk exposure amounts according to the standardized
approach
64,47962,11982,197of which: institutions

1,182

939

632

374

of which: corporates

9,151

7,703

22,396

17,854of which: retail

47,95344,76838,84038,421

620

598

731

577

Credit risk including counterparty credit riskof which: exposures in defaultof which: covered bonds

51

86

51

86

of which: equity

742

744

16,207

11,686of which: other items

4,780

7,281

3,340

4,818

Securitization positions

1,445

1,131

1,445

1,131

Market risk

1,217

1,478

1,637

1,023

1,217

1,478

1,637

1,023
3,981

of which: foreign exchange risk

4,535

3,742

4,813

Credit valuation adjustments

118

127

118

127

Total risk exposure amount

71,794

68,597

90,21080,078Operational risk

A N N UA L R E P O RT 2 0 2 3

CONTENTS

105

NOTES WITH ACCOUNTING PRINCIPLES

Consolidated situation

Klarna Bank AB (publ)

31 Dec 2023

31 Dec 2022

31 Dec 2023

31 Dec 2022

5,158

4,969

6,576

5,905

Total minimum capital requirements
Credit risk including counterparty credit riskof which: institutions

95

75

51

30

of which: corporates

732

616

1,791

1,428

3,836

3,582

3,107

3,074

50

48

59

46

of which: retailof which: exposures in defaultof which: covered bonds

4

7

4

7

of which: equity

59

59

1,297

935

of which: other items

382

582

267

385

Securitization positions

116

90

116

90

Market risk

97

118

131

82

97

118

131

82

363

299

385

318

of which: foreign exchange risk
Operational risk
Credit valuation adjustments
Total capital requirement

9

11

9

10

5,743

5,487

7,217

6,405

Own funds disclosure

Note 41

Business combinations

There have been no business combinations during the period.
Acquisitions in 2022
PriceRunner Group AB
On April 1, 2022, Klarna Bank AB (publ) acquired 100% of the shares in PriceRunner Group AB (PriceRunner).
PriceRunner is a price comparison platform for e-commerce, offering to help consumers find better products
and better prices by comparing prices for a particular product with many merchants. The core offering includes
product price comparison (and price history), user reviews, testing/recommendations, payment and delivery
options.
The total consideration was SEK 4,617m and was paid in cash and shares in Klarna Holding AB (publ). The
acquisition was accounted for under the acquisition method. Of the total purchase consideration, SEK 1,923m
was recorded to goodwill, SEK 3,446m to acquired intangible assets, SEK 711m to deferred tax liabilities and SEK(41)m to other net assets. The goodwill primarily refers to PriceRunner’s market position, growth throughadditional merchants and Klarna synergies.

Common Equity Tier 1 capital: instruments and reserves
Capital instruments and the related share premium accounts
Retained earnings
Accumulated other comprehensive income (and otherreserves)
Common Equity Tier 1 capital before regulatory adjustments

42,08941,55335,31730,048(18,559)(8,666)(17,717)(8,473)

590

1,155

1,276

935

24,12034,042

18,876

22,510

(1)

(2)

(1)

(1)

Common Equity Tier 1 capital: regulatory adjustments
Additional value adjustments
Intangible assets (net of related tax liability)(10,288)(9,947)(1,414)(1,877)

Losses for the current financial year

(2,332)(10,293)(3,028)(8,876)IFRS 9 transitional adjustments to CET1 Capital

496

1,343

449

1,115

Deferred tax assets rely on future profitability

(25)

(20)

-

-

Securitization positions alternatively subject to a 1250% risk
weight

(338)

(258)

(338)

(258)

(12,488)(19,177)(4,332)(9,897)

11,632

14,865

14,544

12,613

Capital instruments and the related share premium accounts

-

257

276

276

of which: classified as equity under applicable accounting
standards

-

257

276

276

Total regulatory adjustments to Common Equity Tier 1 (CET1)
capitalCommon Equity Tier 1 (CET1) capital

From the date of acquisition until December 31, 2022, PriceRunner Group AB and its wholly-owned subsidiaries
contributed by SEK 437m, net, to the Group’s total operating revenues. The total effect on the Group’s net result
was SEK 72m. If the acquisition date for the combined entity had been as of the beginning of the reporting
period, the Group’s total operating revenues would have been SEK 128m higher during 2022. The Group’s net
result would have been SEK 22m higher during 2022.

Note 42

Significant events after the end of the reporting period

On 1st February 2024, Klarna Holding AB issued SEK 1.5bn of Additional Tier 1 Capital Notes with a floating rate
coupon of STIBOR 3M + 9.5%.

Additional Tier 1 (AT1) capital instruments

Qualifying Tier 1 capital included in consolidated AT1 capitalissued by subsidiaries and held by third parties

177

170

-

-

Total Additional Tier 1 (AT1) capital instruments

177

427

276

276

11,80915,292

14,82012,889

751

-

-

302

Tier 1 capital
Tier 2 (T2) capital instruments
Capital instruments and the related share premium accounts
Qualifying own funds instruments included in consolidated T2
issued by subsidiaries and held by third party
Total Tier 2 (T2) capital instruments
Own funds

K L A RN A H O L D I N G A B (P UBL)

-

256

-

-

751

256

-

302

12,56015,54814,82013,191A N N UA L R E P O RT 2 0 2 3

CONTENTS

PARENT COMPANY FINANCIALS

Parent company
financials

K L A RN A H O L D I N G A B (P UBL)106

A N N UA L R E P O RT 2 0 2 3

CONTENTS

107

PARENT COMPANY FINANCIALS

Income Statement, Parent Company

Balance Sheet, Parent Company

Amounts in SEKm

Note

2023

2022

Amounts in SEKm

Administrative expenses

4,5

(108)

(42)

Assets

(108)

(42)

Financial non-current assets

Operating result

Income from financial items
Other interest income and similar items

329

Financial expenses(48)(1,246)

Total income from financial items

281(1,133)

Income tax

173

6

Net result for the year8

36,13030,7859

7,225

11,04243,35541,82724

22

Cash and bank balances-

34

Total current assets

24

56

43,37941,883Current assets(1,175)

9

(9)

182

(1,184)31 Dec 2022

Receivables
Total financial non-current assets

113

31 Dec 2023

Shares and participations in group companies

Receivables
Result after financial items

Note

9

Total assets

Statement of Comprehensive Income, Parent Company

EquityAmounts in SEKm

2023

2022

Share premium reserve

Net result for the year

182

(1,184)

Additional Tier 1 instruments

Total comprehensive income for the year

182

(1,184)Retained earnings

Share capital3

3

42,092

41,569

-

256

266

1,203

182

(1,184)42,543

41,847

Liabilities1

751-

Other liabilities

54

31

Net result for the year
Total equity

Liabilities
Current liabilities

Accrued expenses
Total current liabilities

Total equity and liabilities

1

K L A RN A H O L D I N G A B (P UBL)

10

31

5

836

36

43,37941,883See Group’s note 32 for additional information.

A N N UA L R E P O RT 2 0 2 3

CONTENTS

108

PARENT COMPANY FINANCIALSStatement of Changes in Equity, Parent Company

Amounts in SEKm

RestrictedequityAmounts in SEKm
Balance as at January 1, 2023

Sharecapital3

Non-restricted equity
Share
Additional
premium
Tier 1reserve instruments
41,569256

Net result

Total equity

1,203(1,184)

41,847

3

-

-

-

3

Transfer of previous year's net
result---(1,184)

1,184-

Net result for the year

-

-

-

-

182

182

Total comprehensive income forthe year

-

-

-

-

182

182

New share issue

-

515

-

-

-

515

Share warrants

-

5

-

-

-

5

Share-based payments

-

-

-

292

-

292

Restricted stock units

-

-

-

4

-

4

Additional Tier 1 instruments1

-

-

-

(19)

-

(19)

Redeemed Additional Tier 1
instruments

-

-

(256)

(30)

-

(286)

Balance as at December 31, 2023

3

42,092

-

266

182

42,543

Amounts in SEKm

2023

2022

(108)

(42)

263

71

4

7

Change in other assets and liabilities

2,164(8,081)

Cash flow from operating activities

2,323(8,045)(3,262)(313)(3,262)

(313)

436

8,367

Operating result

Retainedearnings-

Adjustments for items in operating activities

Non-restricted equity
Share
Additional
premium
Tier 1reserve instruments

Retainedearnings

1

Financial items, net
Share-based payments
Changes in the assets and liabilities of operating activities

1

Investing activities
Investments in subsidiaries
Cash flow from investing activities

8

Financing activities
New share issue

Sharecapital

Note

Operating activities

Reclassification

Restrictedequity1Cash Flow Statement, Parent Company

5

19

(286)

-

Subordinated liabilities, net

750-

Cash flow from financing activities

905

8,386

Cash flow for the year

(34)

28

34

6

Share warrants
Redeemed Additional Tier 1 Instruments

Net result

Total equity

Balance as at January 1, 2022

3

32,280

256

940

113

33,592

Transfer of previous year's net
result

-

-

-

113

(113)

-

Net result for the year

-

-

-

-

(1,184)(1,184)

Total comprehensive income forthe year

-

-

-

-

(1,184)(1,184)

New share issue

-

9,289

-

-

-

9,289

Cash and bank balances-

34

Transaction costs

-

(19)

-

-

-

(19)

Cash and cash equivalents-

34

Share warrants

-

19

-

-

-

19

Share-based payments

-

-

-

161

-

161

Restricted stock units

-

-

-

7

-

7

Additional Tier 1 instruments1

-

-

-

(18)

-

(18)

Balance as at December 31, 2022

3

41,569256

1,203(1,184)

41,847

Cash and cash equivalents at the beginning of the year
Cash flow for the year
Cash and cash equivalents at the end of the year

(34)

28

-

34

Cash and cash equivalents include the following items

Amounts in Additional Tier 1 instruments column consist of issued instruments, while amounts in Retained earnings column consist of interest
and cost of issuance of these issued instruments.

Share capital: 30,334,909 shares (30,053,266), quota value 0.1 (0.1).

K L A RN A H O L D I N G A B (P UBL)A N N UA L R E P O RT 2 0 2 3

CONTENTS

NOTES WITH ACCOUNTING PRINCIPLES

109

Notes withaccounting
principles
K L A RN A H O L D I N G A B (P UBL)A N N UA L R E P O RT 2 0 2 3

CONTENTS

110

NOTES WITH ACCOUNTING PRINCIPLES

Notes, Parent Company

Note 4

Employees and personnel costs

The Group notes 1-3 apply to the Parent Company as well, with the exception that the Parent Company has
chosen not to adopt IFRS 9 "Financial instruments" which is in accordance with the Swedish accounting
recommendation, RFR 2, amended by the Swedish Financial Reporting Board.

Salaries, other remunerations and social security expenses

2023

2022

Board and CEO

(8)

(10)

Total salaries and remuneration

(8)

(10)

Klarna Holding AB (publ) has no employees. However, the remuneration to the board of directors other than CEO
is accounted for in Klarna Holding AB (publ).
31 Dec 2023
Board members and senior management
Board members and CEO

31 Dec 2022

Number at
closing day

whereofwomen

Number at
closing day

whereof
women

8

25%

7

29%

10

10%

6

17%

Other members of senior management

2023
Salaries and other remuneration to the board andsenior management
Michael Moritz, Chairman of the Board
Roger Furgeson
Lise Kaae

Basic
Variablesalary/fee remuneration3

Other
benefits

Pensionexpenses

Total

-

-

-

-

-

(1.3)

(1.6)

-

-

(2.9)

-

-

-

-

-

-

-

-

-

-

Omid Kordestani

(1.2)

(1.2)

-

-

(2.4)

Sarah Smith

(1.6)

(1.3)

-

-

(2.9)

-

-

-

-

-

Mikael Walther

Matthew Miller¹
Sebastian Siemiatkowski, CEO2
Total

-

-

-

-

-

(4.1)

(4.1)

-

-

(8.2)

Other
benefits

Pensionexpenses

Total

1

On December 29, 2023 the company appointed Matthew Miller to the Board.

2

Remuneration to the CEO is accounted for and presented in the annual report for Klarna Bank AB (publ).

3

Variable remuneration includes cash-based variable remuneration and IFRS 2 expensed amounts for equity based programs.

2022
Salaries and other remuneration to the board andsenior management

-

-

-

-

-

(1.3)

(3.0)

-

-

(4.3)

Lise Kaae

-

-

-

-

-

Mikael Walther

-

-

-

-

-

Omid Kordestani

(1.2)

(1.7)

-

-

(2.9)

Sarah Smith

(1.3)

(1.9)

-

-

(3.2)

-

-

-

-

-

(3.8)

(6.6)

-

-

(10.4)

Michael Moritz, Chairman of the Board
Roger Furgeson

Sebastian Siemiatkowski, CEO¹
Total

K L A RN A H O L D I N G A B (P UBL)

Basic
Variablesalary/fee remuneration2

1

Remuneration to the CEO is accounted for and presented in the annual report for Klarna Bank AB (publ).

2

Variable remuneration includes cash-based variable remuneration and IFRS 2 expensed amounts for equity based programs.

A N N UA L R E P O RT 2 0 2 3

CONTENTS

111

NOTES WITH ACCOUNTING PRINCIPLES

Note 5

Expenses by expense type

Note 8
2023

2022

0

0

Other costs

(108)

(42)

Total

(108)

(42)

Audit fees to Ernst & Young AB

Note 6

Income tax expense

Shares and participations in group companies

Participations in group companies

31 Dec 2023

31 Dec 2022

36,13030,785

Group companies

No. of shares

Share

Book value

Book value

Klarna Bank AB (publ), Sweden, Corp. ID 556737-0431

223,524,286

97%

34,697

29,692Klarna Midco AB, Sweden, Corp. ID 559146-5132

540,148

95%

856

774

24,375

97%

575

317

2023

2022

Larkan Holding AB, Sweden, Corp. ID 559262-3119

Tax expense for the year-

(9)

Larkan III AB (publ), Sweden, Corp. ID 559405-6060

50,000100%

11Adjustment of tax attributable to previous years

9-

Larkan IV AB (publ), Sweden, Corp. ID 559405-6177

750,000

100%

1

1

Total current tax

9(9)Larkan V AB, Sweden, Corp. ID 559405-5138

250,000

100%

0

-

Reported tax expense

9(9)Larkan VI AB, Sweden, Corp. ID 559419-2618

250,000

100%

0

-

Larkan VII AB, Sweden, Corp. ID 559433-3030

100,000

100%

0

-

Larkan VIII AB, Sweden, Corp. ID 559433-3022

25,000100%

0-Larkan IX AB, Sweden, Corp. ID 559443-0448

25,000

100%

0

-

0

-

Current tax

The effective tax on income deviates from the nominal tax rate due to the following items:
Effective tax rate

2023

2022

Larkan X AB, Sweden, Corp. ID 559456-1556

25,000100%

Income before tax

173(1,175)

Larkan XI AB, Sweden, Corp. ID 559456-1564

25,000100%

Income tax calculated in accordance with national tax rate

(36)

242

Non-deductible expenses

(10)

(258)

Deductible expenses not booked in profit or loss

44-

Losses carried forward used this financial year2

7Adjustments of tax attributable to previous years

9-Reported tax expense

9

(9)

4.9%

(0.8)%

Total

30,785

During 2023, seven new subsidiaries to Klarna Holding AB (publ) were established. The Klarna Group operates
according to a centralized business model where Klarna Bank AB (publ), being the owner of the majority of theGroup’s assets, risks as well as the strategic and key value driving functions, is the principal (central
entrepreneur) of the Group.

Note 9Effective tax rate

036,130Receivables
31 Dec 2023

Tax losses carried forward for the parent, Klarna Holding AB, for which tax assets are not recognized in thebalance sheet is SEK 0m (11m) gross, with a calculated tax effect of SEK 0 (2m).

Note 7

Proposed treatment of unappropriated earnings

The Board and the CEO propose to the Annual General Meeting that the non-restricted equity of
SEK 42,539,621,384 on Klarna Holding AB (publ)´s balance sheet at the disposal of the Annual General Meeting to be
carried forward.
Additional Tier 1 instruments
Retained earnings
Net result for the year
Total

K L A RN A H O L D I N G A B (P UBL)

31 Dec 2022

Non-current
Receivables from group companies

7,225

11,042

Total

7,225

11,042

Receivables from group companies-

18

Current tax assets

12

4

Other receivables

12

-

Total

24

22

7,249

11,064Current- SEK
42,357,491,149 SEK

Total receivables

182,130,235 SEK
42,539,621,384 SEK

A N N UA L R E P O RT 2 0 2 3

CONTENTS

Note 10112

NOTES WITH ACCOUNTING PRINCIPLES

Accrued expenses

Definitions and Abbreviations
31 Dec 2023

31 Dec 2022

Accrued expenses for consultants

31

5

Total

31

5

Note 11

Contingent liabilities

The subsidiary Klarna Bank AB (publ) continually pledges parts of its receivables as collateral for liabilities tocredit institutions which provides security for the Group’s credit facilities. The credit liability amounts to SEK 0m(0m) as at December 31, 2023. Klarna Holding AB (publ) acts as a guarantor for Klarna Bank AB (publ)’s
outstanding liability regarding this credit facility.

Note 12

Information on related parties

The following are defined as related parties: all companies within the Klarna Group, shareholders with significant
influence, board members of Klarna Holding AB (publ) and Klarna Bank AB (publ), key management personnel ofKlarna Bank AB (publ), as well as close family members of and companies significantly influenced by such board
members or key management personnel.
The following transactions have taken place with related parties:
Klarna Holding AB (publ) has a non-current receivable of SEK 7,208m (11,033m) and current receivable of SEK 0m(18m) from Klarna Bank AB (publ).
Additionally, Klarna Holding AB (publ) has a non-current receivable of SEK 17m (9m) from Klarna Midco AB.
For information about transactions with the board of directors, CEO and senior management, see note 4.

Adjusted Operating Result*
Adjusted operating result is an alternative performancemeasure (APM).The adjusted operating result is defined as
IFRS operating result, excluding (a) Restructuring costs; (b)Share-based payments and related payroll taxes and; (c)Depreciation and amortization. Klarna believes this is a
useful financial measure to investors for evaluating its
operating result and supports period-to-period
comparisons as the items excluded are not a function of
the Group's underlying operating performance.
Capital requirement
Total assets and off-balance sheet items, risk-weighted
according to the capital adequacy rules for credit andmarket risk. The operational risks are measured andadded as risk exposure amount.
Common Equity Tier 1 capital
Common Equity Tier 1 (CET1) capital is the highest quality
regulatory capital as it absorbs losses as soon as they
happen. It includes equity excluding proposed dividend,
deferred taxes and intangible assets and certain otherregulatory adjustments defined in Regulation (EU) No
575/2013 (CRR) and EU 241/2014.
CET1 ratio
A core measure of a bank’s financial strength. This iscalculated by dividing CET1 by risk exposure amounts(REAs). The higher the ratio the more reserves a bank has.
Consumer
An individual or company using our services.
Debt/equity ratio*
Average liabilities adjusted for untaxed reserves inrelation to average equity adjusted for untaxed reserves.
The calculation of average liabilities and average equity isbased on opening and closing balances for the reporting
period.
Equity/assets ratio*
Equity adjusted for untaxed reserves as a percentage of
total assets at the end of the reporting period.
Gross Merchandise Volume
Value of products sold through Klarna platform.
Gross Profit*
Klarna believes gross profit is the best indicator of thecore profitability of the Group's business activities before
the deduction of indirect costs. Gross profit is defined as
Total net operating income in accordance with IFRS,
including costs related to processing and servicing (within
statutory metric, General administrative expenses) andconsumer credit losses (within statutory metric, Credit
losses, net). Costs of which are not directly related torevenue-generating activities within Interest expenses,
Commission expenses and Net result from financialtransactions are excluded.
Own funds (Total capital)
The sum of Tier 1 capital and Tier 2 capital.

K L A RN A H O L D I N G A B (P UBL)

Return on assets*
Net result for the last 12 months as a percentage of
average total assets. The calculation of average total
assets is based on opening and closing balances for thelast 12 months.
Return on equity*
Operating result for the last 12 months as a percentage of
average equity adjusted for untaxed reserves. The
calculation of average equity is based on opening andclosing balances for the last 12 months.
Restricted Stock Units
Klarna’s Restricted Stock Unit Program for employees,
implemented in 2020.
Revenue*
Revenue is an APM that illustrates the total income Klarna
generates from transactions, prior to deduction of
expenses. Klarna believes Revenue is the best indicator of
how much value we are sustainably generating from ourbusiness and that this approach is in-line with our peers.
Revenue is defined as IFRS Total net operating income
excluding Commission expense, Interest expense, Net
result from financial transactions and interest on liquidity
assets not related directly to the core business. Intereston liquidity assets that are not directly related to the corebusiness stems from Loans to credit institutions andInterest income (see note 5).
Risk Exposure Amount (REAs)
Risk Exposure Amount refers to the total exposure of abank, financial institution, or any other regulated entity topotential losses. It is the sum of credit risk, operationalrisk, market risk and the risk of a credit valuation
adjustment.
Tier 1 capital
The sum of Common Equity Tier 1 capital and Additional
Tier 1 capital.
Tier 2 capital
Subordinated liabilities, which are eligible for inclusion in
the total capital.
Total capital ratio
Total capital as a percentage of risk exposure amounts.
Alternative Performance Measures (APM)*
Alternative Performance Measures (APM) are financial
measures of historical or future financial position,
performance or cash flow that are not defined inapplicable regulations (IFRS) or in the EU Capital
Requirements Regulation and Directive CRR/CRD IV. APMs
are used by Klarna when relevant to assess and describe
Klarna’s financial situation and provide additional relevant
information and tools to enable analysis of Klarna’s
performance. APMs on return on equity and return on
assets provide relevant information on the performance inrelation to different investment measurements. All thesemeasures may not be directly comparable with similar key
measures presented by other companies.

A N N UA L R E P O RT 2 0 2 3

CONTENTS

113

NOTES WITH ACCOUNTING PRINCIPLES

Board of Directors’ affirmation
The Board of Directors and CEO certify that the annual report has been prepared in accordance with generally
accepted accounting principles in Sweden and that the consolidated financial statements have been preparedin accordance with the International Financial Reporting Standards (IFRS/IAS) referred to in the European
parliament and the councils’ regulation (EC) 1606/2002, from July 19, 2002, on the application of International
Accounting Standards. They give a true and fair view of the Parent Company’s and the Group’s financial position
and result. It is further assured that the report of the Board of Directors gives a true and fair overview of thedevelopment of the Parent Company’s and Group’s business activities, financial position and results ofoperations as well as describes the material risks and uncertainties that the Parent Company and its
subsidiaries are facing.
Stockholm, February 27, 2024______________________
Michael Moritz
Chairman of the Board______________________
Mikael Walther
Board member______________________
Lise Kaae
Board member______________________
Sarah Smith
Board member______________________
Roger Ferguson
Board member_____________________
Omid Kordestani
Board member______________________
Matthew Miller
Board member______________________
Sebastian Siemiatkowski
CEO and Board member

Our audit report was submitted on:
on 27 february 2024
Ernst & Young AB______________________
Jesper Nilsson
Authorized Public Accountant

K L A RN A H O L D I N G A B (P UBL)A N N UA L R E P O RT 2 0 2 3

CONTENTS

APPENDIX

114

Appendix
K L A RN A H O L D I N G A B (P UBL)A N N UA L R E P O RT 2 0 2 3

CONTENTS

115

APPENDIXESG Datasheet
Environment
Greenhouse gas emissions
Direct (Scope 1) GHG emissions (tCO₂e)
Indirect (Scope 2) GHG emissions (tCO₂e)
Other indirect (Scope 3) GHG emissions (tCO₂e)
GHG emissions intensity (tCO₂e per SEK 1M revenue)
Change in GHG emissions (%)
Electricity consumption			Total electricity consumption (MWh)Share of renewable energy of total electricity
consumption (%)
Internal carbon tax
Funds resulting from internal carbon tax (USD)
Internal carbon tax funds invested in Climate
Transformation Fund projects (USD)
Number of projects we invested in through Climate
Transformation Fund
			

2023

2022

2021

Social2022

2021

Employees ( # (%) )67
52
109,824
4.7
-25%

281
66
146,928
7.6
-3.7%

279
6
152,710
9.6
49%

2,949

9,110

6,344

100%

100%

80%

2.0M

2.3M

1.7M

5M+

2.7M

1.0M

30

16

11

Women
Total
Men
Women
1 (0.0%)11 (0.3%)
10 (0.4%)
1 (0.1%)221 (9.4%)
824 (32.2%) 1,347 (32.1%)
523 (31.9%)
1,116 (68.0%) 1 ,727 (67.4%) 2,843 (67.7%) 2,126 (90.6%)
2,348
4,201
2,561
1,640

by employment type
Permanent
Temporary
Total employees

1,632 (99.5%) 2,550 (99.6%) 4,182 (99.5%) 2,331 (99.3%) 3,068 (99.2%) 5,399 (99.2%) 2,460 (98.0%) 3,230 (98.7%) 5,690 (98.4%)
93 (1.6%)
44 (1.3%)
49 (2.0%)42 (0.8%)25 (0.8%)
17 (0.7%)
19 (0.5%)
11 (0.4%)
8 (0.5%)
5,783
3,274
2,509
5,441
3,093
2,348
4,201
2,561
1,640

by region
Asia
EuropeNorth America
Oceania
Total employees

3 (0.1%)3 (0.1%)0 (0.0%)4 (0.1%)4 (0.1%)0 (0.0%)2 (0.1 %)
2 (0.1%)0 (0.0%)1,411 (86.0%) 2,356 (92.0%) 3,767 (89.7%) 1,986 (84.6%) 2,804 (90.7%) 4,790 (88.0%) 2,090 (83.3%) 2,934 (89.6%) 5,024 (86.9%)
651 (11.3%)
287 (8.8%)364 (14.5%)
586 (10.8%)262 (8.5%)
324 (13.8%)413 (9.8%)
193 (7.5%)
220 (13.4%)
105 (1.8%)
50 (1.5%)
55 (2.2%)
61 (1.1%)
23 (0.7%)
38 (1.6%)
19 (0.5%)
10 (0.4%)
9 (0.5%)
5,783
3,274
2,509
5,441
3,093
2,348
4,201
2,561
1,640

by age
<30
31-50
>50
Total employees

726 (28.3%) 1,280 (30.5%)554 (33.8%)
1,073 (65.4%) 1,788 (69.8%) 2,861 (68.1%)
60 (1.4%)
47 (1.8%)
13 (0.8%)
4,201
2,561
1,640

1,139 (48.5%)
1,188 (50.6%)
21 (0.9%)
2,348

1,132 (36.6%)
1,913 (61.8%)
48 (1.6%)
3,093

Parental leave
Employees who tookparental leave 2

1

The Group Management Team is formed of the Chief Executive Officer, Chief Productand Design Officer, Chief Operating Officer, Chief Financial Officer, Chief Marketing
Officer, Chief Technology Officer, Chief Commercial Officer, Chief Risk Officer, Chief
Compliance Officer, Chief Information Security Officer and the Chief Credit Risk
Officer2This statistic is higher than other figures in this report since it includes all employees
who at some point during 2023 worked at Klarna.

Total
Men
Women
Total
Men
9 (0.2%)7 (0.2%)2 (0.1%)7 (0.1%)6 (0.2%)647 (11.2%)
412 (12.6%)235 (9.4%)
597 (11.0%)376 (12.2%)
2,711 (87.6%) 4,837 (88.9%) 2,272 (90.6%) 2,855 (87.2%) 5,127 (88.6%)
5,783
3,274
2,509
5,441
3,093

by management level
Group Management Team 1
Manager
Non-Manager
Total employees

by genderGroup Management TeamManagers
Non-Managers
New hires
Total employees

K L A RN A H O L D I N G A B (P UBL)

2023

2,271 (41.7%) 1,375 (54.8%) 1,350 (41.2%) 2,725 (47.1%)
3,101 (57.0%) 1,118 (44.6%) 1,866 (57.0%) 2,984 (51.6%)
74 (1.3%)
58 (1.8%)
16 (0.6%)
69 (1.3%)
5,783
3,274
2,509
5,441

9.1%
38.8%
39.3%
34.5%
39.0%

90.9%
61.2%
60.7%
65.4%
61.0%

-

14.3%
37.0%
44.0%
42.6%
43.2%

87.5%
63.0%
56.0%
57.4%
56.8%

-

22.2%
36.3%
44.3%
47.4%
43.4%

77.8%
63.7%
55.7%
52.6%
56.6%

-

420 (16.30%)

392 (11.10%)

812 (13.29%)

405 (17.25%)

360 (11.64%)

765 (14.06%)

-

-

-

E S G R E P O RT 2 0 2 3

CONTENTS

116

APPENDIX

Social (continued)

2023

2022

2021

Governance
Board of Directors in 2023 ( # (%) )Compensation and benefits
Employees participating in RSU program
Total salaries, other remuneration, social security and pension expenses (SEK)3,956 (94.17%) 4,678 (85.98%)
5,617M
4,999M

3,773 (67.40%)
3,968M

Employee engagement survey 3
Employees who took the annual employee engagement survey
Overall satisfaction score from employee engagement survey

68%
71%

86%
64%

81%
75%

Training
Number of mandatory trainings on Looop
Completion rate of compliance training 4
Completion rate of AML/CTF training 4, 5Completion rate of data privacy training 4
Completion rate security awareness training 4

31
86%
86%
92%
88%

36
91%
91%
91%
92%

34
90%
90%
96%
96%

12.95M

34.1M

19.1M

115M

214M

229M

Political advocacy
Spend on public affairs activities (SEK)
Global tax commitment
Cash income taxes paid (SEK)3

As this is a significant deviation from our previous engagement survey methodology, the results garnered fromthe new tool are not directly comparable to the past data.

4

The completion rate also includes employees on leave (e.g., parental leave, long-term sick leave).

5

The ML/TF employee training is part of the mandatory Compliance online training.

K L A RN A H O L D I N G A B (P UBL)

by gender
Board of Directors
Audit, Compliance & Risk Committee (ACRC)
Remuneration Committee

Women
2 (25.0%)
2 (66.7%)
1 (33.3%)Men
6 (75.0%)
1 (33.3%)
2 (66.7%)

Total
8 (100%)3 (100%)3 (100%)by type
Board of Directors
Audit, Compliance & Risk Committee (ACRC)
Remuneration Committee

Executive
1 (12.5%)
0 (0.0%)0 (0.0%)Non-Executive
7 (87.5%)
3 (100.0%)
3 (100.0%)

Total
8 (100%)3 (100%)3 (100%)E S G R E P O RT 2 0 2 3

CONTENTS

117

APPENDIX

EU Taxonomy
Compliance Report
Reporting section
As a licensed credit institution with more than 500
employees, Klarna Bank AB falls within the scopeof the Non-Financial Reporting Directive (NFRD)(Directive 2014/95/EU 1). All companies that fallwithin the scope of the NFRD must report in theirconsolidated annual report in accordance with the
EU Taxonomy Regulation (hereafter “Taxonomy”)(Regulation (EU) 2020/852 2). Klarna Holding AB(hereafter “Klarna”), defined under article 2 of the
Directive 2013/34/EU 3 as a credit institution, falls
under the scope of the Swedish implementationof the NFRD through the Accounts Act for Credit
institutions and securities companies ÅRKL 4.
Per the EU Taxonomy Regulation, Klarna must
provide quantitative and qualitative information on:■ the proportion in its total assets of exposures
to Taxonomy-eligible and Taxonomy-aligned
economic activities of the two climate objectives,
namely climate change mitigation and climatechange adaptation.

■ the proportion in its total assets of the exposures
to Taxonomy-eligible economic activities of thefour environmental objectives, namely water andmarine resources, circular economy, pollution,and biodiversity.
■ the proportion in its total assets of the exposures
to Taxonomy-eligible economic activities related
to nuclear and gas energy covered under the two
climate objectives.

Quantitative information
The following section presents the quantitative
information that Klarna is required to report on
for the financial year 2023. From January 1, 2024,
Klarna must report on the Green Asset Ratio (GAR)
and associated stock and flow KPIs following the
mandatory templates in Annex VI of the Disclosure
Delegated Act. In addition, Klarna must report on theeligibility of its exposures for the activities coveredin the Environmental Delegated Act, as well as forthe nuclear and gas-related activities, following thetemplate provided in Annex XII of the Disclosure
Delegated Act.
This results in the following list of mandatory
templates:● the “summary of KPIs” template,● the “Covered Assets (on-balance sheet)”
template that encompasses all on-balance sheet
exposures,● the “GAR – Sector information”,

When estimates and proxies are used, disclosures
under Article 8 of the Taxonomy Regulation may
not be classified as “mandatory” and should beclassified as “voluntary.” To assess the eligibility andalignment of exposures, Klarna is often dependent
on the information provided by its customers andmerchants. In many cases, this information is not
yet available. Therefore, Klarna has used alternative
methods and estimates, which are described below
under “Assumptions and methodology.” If eligibility
and alignment had been identified, the exposureswould have been included as voluntary disclosures.

● the “GAR KPIs Stock”,● the “GAR KPIs Flow”,● the templates related to the eligibility of nuclear
and gas-related economic activities.

All templates have been filled in using the available
data and a best-effort approach and can be foundin the Supporting Material below. Methodologies anddata limitations are detailed in the sections further
below.
Additional templates in Tables 5, 6, and 7 of Annex
IV of the Disclosure Delegated Act are not reported
on by Klarna for Financial Year (FY) 2023 as they are
not yet in the scope of the mandatory reporting.
To comply with the Taxonomy requirements andensure consistency between the financials in
the annual report and the Taxonomy KPIs, thecalculations are based on the same data used for
Klarna’s financial reporting under Regulation (EU)2021/451 5 (FINREP).
At the end of the financial year 2023, Klarna’s
activities eligible under the EU Taxonomy accounted
for 0% of its total covered assets both for the climate
objectives and the four environmental objectives.
The low eligibility score results from various factors
such as data constraints, materiality evaluations,and the limited relevance of the current scope of
the EU Taxonomy for Klarna’s business, particularly
regarding Klarna’s predominant exposures, namely
households. Further elaboration on this can be foundin the subsequent sections of the report.
As alignment is assessed only for the eligible
exposures for the climate objectives, it alsoamounted to 0%.

Qualitative information
To ensure transparency and understandingof the reported metrics, Klarna must provide
accompanying qualitative information. The
requirements for the qualitative informationand its content are set out in Annex XI of theDisclosures Delegated Act and are listed in thesection “Regulatory reporting metrics.”
1

https://eur-lex.europa.eu/eli/dir/2014/95

2

https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32020R0852

3

https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32013L0034

4

https://www.fi.se/en/sustainability/sustainability-regulations/sustainability-reporting/5

Official Journal of the European Union

K L A RN A H O L D I N G A B (P UBL)

Scope of assets and activities coveredby the metrics
The table below provides information on what iscovered by each metric. The definitions correspondto those in the Disclosures Delegated Act and its
Annexes, as referenced in the footnotes.

E S G R E P O RT 2 0 2 3

CONTENTS

118

APPENDIX

Table 1: Description of the required exposure categories of Annex VI

Table 1: Continued

Category		Description of the catagory

Assetsexcluded from thenumeratorofforGAR
calculation (covered in the denominator)
Category		Description
thecatagory

Total covered assets

Total loans and advances, debt securities, equities and repossessed collaterals and allother on-balance sheet assets on 31 December 2023 for Klarna Holding AB 6 excluding
exposures to central governments, central banks, and supranational issuers.

Non-NFRD
companies

Companies that do not fall within the scope of the Non-Financial Reporting Directive(NFRD) such as SMEs, non-EU country counterparties, and other non-financial
companies that fall out of the scope of the NFRD. As granular data is (not yet) available
within Klarna’s systems to assess whether an EU counterparty falls within the scopeof the NFRD or not, it has been assumed for the present reporting period that all EU
non-SMEs fall under the scope of the NFRD. This assumption supports a conservative
approach with regards to the materiality consideration for the eligibility of covered
non-financial companies.

Derivatives

According to the EBA guidance 9, only derivatives not held for trading are covered
under this section, and derivatives held for trading should be included in the
trading book (when the institute has a trading book).

On-demandinter-bank loans

Balances receivable on demand with credit institutions.

Cash andcash-related assets

Cash and cash equivalent.

Other assets

Other assets cover tangible assets, intangible assets, prepaid expenses andaccrued income.

GAR – Covered assets in both numerator and denominator
Credit institutions

Other financial
corporations

Non-financial
undertakings

Households

Local governments
financing

Undertaking, the business of which is to take deposits or other repayable funds fromthe public and to grant credits for its own account 7. Under the Taxonomy regulation
for credit institutions, supranational issuers and central banks are excluded from thenumerator (and therefore from the “credit institutions” category) and are accounted
for separately.
All financial corporations and quasi-corporations, other than credit institutions,such as investment firms, investment funds, insurance companies, pension funds,
collective investment undertakings, and clearing houses, as well as remaining financial
intermediaries, financial auxiliaries, captive financial institutions and money lenders 18.
Corporations and quasi-corporations not engaged in financial intermediation but
principally in the production of market goods and non-financial services. Under theTaxonomy regulation for credit institutions, the non-financial corporations must be
split between European and non-European companies and between NFRD and nonNFRD companies.
Individuals or groups of individuals as consumers and producers of goods and nonfinancial services exclusively for their own final consumption, and as producers ofmarket goods and non-financial and financial services provided that their activities
are not those of quasi-corporations. Non-profit institutions which serve households(‘NPISH’) and which are principally engaged in the production of non-market goods andservices intended for particular groups of households shall be included.

Centralgovernments,
central banks, andsupranational users

Exposures to central governments, central banks, and supranational users. These
exposures are not included in the total covered assets.

Trading book

All positions in financial instruments and commodities held either with trading
intent or in order to hedge other elements of the trading book as defined in
Directive 2006/49/EC 10.

Total assets

Total loans and advances, debt securities, equities, and repossessed collaterals and allother on-balance sheet assets on 31 December 2023 for Klarna Holding AB.

Loans granted by institutions to the local government.

6

Klarna Bank AB (KBAB) is the entity holding the banking license. Thus, KBAB is the one authorized to conduct operations incompliance with the Swedish Banking and Financing Business Act (lending, accepting deposits and Forex operations).
Then KBAB is owned by Klarna Holding AB.

7, 8Commission Implementing Regulation (EU) 2021/ of 17 December 2020

K L A RN A H O L D I N G A B (P UBL)

Assets not covered for GAR calculation

9

https://www.eba.europa.eu/sites/default/files/document_library/Publications/Draft%20Technical%20
Standards/2022/1026173/Annex%20II%20-%20Instructions%20for%20ESG%20prudential%20disclosures%20
templates.pdf

10Official Journal of the European UnionE S G R E P O RT 2 0 2 3

CONTENTS

119

APPENDIX

Assumptions and methodology
The purpose of this section is to provide acomprehensive explanation of the assumptions
and methodology applied in Klarna’s EU Taxonomy
disclosure for the financial year 2023.

Afterwards, Klarna calculated its own eligibility tofinancial undertakings based on the exposure it
has towards the undertaking and their reported
eligible amount.

The GAR categorizes the exposures tocounterparties into four groups: financial
undertakings, non-financial undertakings,
households, and local governments. In order toassess the eligibility of these exposures, a four-stepprocess was followed for each category:

Financial institutions are divided between NFRD
and non-NFRD entities and are categorised under
two sub-sections for the GAR calculations: credit
institutions and other financial corporations.
For credit institutions, the breakdown per
counterparty was available in Klarna’s reporting
system and therefore the methodology describedabove was applied. For the other financial
corporations, granular data and information on
counterparties were not available. Therefore,
Klarna has taken a conservative approach andassumed the eligibility to be zero due to a lack ofdata.

1. Identify Klarna’s exposures amount to thecounterparty.
2. Determine eligibility of the exposures where data
is available.
3. Calculate Klarna’s eligibility based on theamount of exposure to, and the eligibility of, thecounterparty.
4. Structure the data in the GAR templates (seeSupporting Material).
To assess the eligibility of the exposures, Klarna
applied different methods within these four steps
based on the categories to which it has exposure:■ Financial Undertakings: The eligibility of thiscategory has been assessed based on publicly
available counterparty information. To calculate
the eligibility of the exposures towards financial
undertakings within the EU, Klarna first identified
who its financial counterparties are. Then, it
consulted the eligibility amounts reported in the
counterparties’ annual reports for FY 2022, asfigures for FY 2023 were not yet publicly available.
To mitigate this timeline misalignment, the draft
FAQ published by the European Commission on
December 21st, 2023 11 “encourages” reporting
entities to reach out to their counterparties togather non-publicly available information. For
the financial year 2023, given the short notice of
this information and the low impact of financial
institutions (due to Klarna’s model focusing on
household exposures), Klarna has not reached
out to its counterparties to gather additional
information. However, Klarna will explore thefeasibility of liaising bilaterally with its financial
counterparties for future reporting periods.

K L A RN A H O L D I N G A B (P UBL)

■ Non-financial undertakings: To identify eligible
assets for non-financial undertakings, Klarna
analysed its portfolio using the NACE industry
codes as stated in the Climate Delegated Act 12
and Environmental Delegated Act 13, which
provides guidance on the activities within thescope of the Taxonomy’s eligibility. The exposure
to customers registered with the corresponding
NACE code is fully included as eligible if thedescription of the activity closely matches theofficial NACE code description.

Since Klarna offers a global payment and shopping
service oriented toward retail customers, themajority of its covered assets come from what
the Taxonomy refers to as “households”. The
second largest share of the total covered assets
is “other assets”, of which it is not required toconsider the eligibility of these exposures. The
exposures to “financial undertakings”, “non-financial
undertakings”, and “local governments” only madeup a small share of the total covered assets. To
ensure the information and data are accurate, Klarna
monitors their financial exposures to both financial
and non-financial corporations on a daily basis basedon their level of financial materiality.
Once eligibility for the various exposures wasassessed, Klarna worked on defining the proportionof exposures aligned with the EU Taxonomy. To do so,
Klarna has also used different methodologies basedon the categories to which it has eligible exposures:■ Non-financial undertakings: As non-financial
undertakings represented an eligibility of 0 %, theexposures have not been assessed for alignment.
■ Households: As households did not present
eligibility, the exposures have not been assessed
for alignment■ Local governments: As local governments did notpresent eligibility; the exposures have not beenassessed for alignment.
The methodology described above for eligibility
and alignment is likely to be updated as additional
regulatory guidance on the EU Taxonomy is released,
as market practice changes, and as customers
disclose their eligibility and alignment numbers. The
disclosed numbers may fluctuate as a result, andthe data may differ significantly from the numberspresented.

■ Financial undertakings: As described above, only
the exposures to credit institutions presented
eligibility and were therefore considered foralignment. As for all credit institutions, the use ofproceeds is unknown, the alignment of the eligible
exposure was calculated by using the publicly
available KPIs on Capex and Turnover for eacheligible exposure as prescribed in Annex V of theDisclosure Delegated Act 14.

■ Households: All retail exposures or loans to
private customers can be categorized as assets
related to households. So far, only three types of
exposures have been included in the Taxonomy
as eligible for households. These include
exposures for the renovation of buildings andmotor vehicles, as well as loans collateralized byresidential immovable property. Klarna does notgrant motor vehicle loans, loans collateralized
by residential immovable property, or for therenovation of buildings.
■ Local governments: This category is assessed
based on the exposure Klarna has to the local
governments and their eligibility reporting.

11

Draft Commission Notice on the interpretation and implementation of certain legal provisions of the Disclosures Delegated Act
under Article 8 of the EU taxonomy Regulation on the reporting of taxonomy-eligible and Taxonomy-aligned economic activities
and assets (europa.eu)

12European Commission

13

https://finance.ec.europa.eu/system/files/2023-06/taxonomy-regulation-delegated-act-2022-environmental_en_0.pdf

14

taxonomy-regulation-delegated-act-2022-environmental-annex-5_en_1.pdf (europa.eu)

E S G R E P O RT 2 0 2 3

CONTENTS

120

APPENDIX

Data limitations
In every category of exposure counterparties, Klarna
faced some data constraints which affected thedetermination of the eligibility and alignment of the
exposures. These are the following:
1. Financial undertakings: When assessing theeligibility of the exposures towards financial
undertakings, data limitations are mainly found
due to outdated and/or unavailable public data.
The eligibility of the counterparties is basedon publicly available data from reporting in theprevious year and therefore does not accurately
represent information for the current year. In
addition, the reporting on the alignment for
financial corporations became mandatory as ofJanuary 1, 2024. Therefore, publicly available dataon that metric is only available for FY 2022 for thefinancial counterparties that had decided to reporton it voluntarily. This means that the alignment
reporting of Klarna for financial counterparties may
be significantly impacted from FY 2024 when suchdata will be available from counterparties and allow
Klarna to assess its own alignment.

K L A RN A H O L D I N G A B (P UBL)

Summary of methodology and data limitations
2. Non-financial undertakings: Data limitations aremainly found in the use of NACE codes. Sincecompanies may engage in a wider range ofactivities than indicated by the high-level NACE
code available in Klarna’s systems, this may notaccurately reflect all their business activities. As aresult, the NACE proxy applied to each customer
may underestimate or overestimate the activitiesof that customer’s eligibility. Furthermore, due toa lack of available data on the level of granularity
required on counterparties and a non-material
exposure, non-financial corporations are notfurther considered for eligibility and thereforealignment.

The table below summarizes the methodology and data limitations considered when assessing the eligibility
and alignment of various exposure categories.

Table 2: Summary of methodology and data limitations
Category

Methodology

Data limitations

Financialundertakings

The category is assessed based on
the exposure Klarna had towards
the financial undertakings and theireligibility and alignment reporting overthe financial year 2022 if available(published voluntarily).

For most counterparties, data is
not available due to the reporting
requirements timeline. For somecounterparties, data is available for FY
2022 based on voluntary disclosure andpresents significant uncertainty due toestimations.

3. Households: For households, Klarna currently
does not have any exposures covered in thescope of the GAR for credit institutions.
4. Local governments: Currently, no data is available
to the level required to assess the eligibility of the
exposures towards local governments.

Due to the factors detailed above, andthe exposure being relatively low, thiscategory is not considered for eligibility.
Non-financial
undertakings

The category is assessed using NACE
codes to determine the eligible
activities of non-financial undertakings.
If applicable, the alignment would beassessed by using the counterparties’
reported alignment for the financial
year 2022.

Due to a limited granularity in termsof mapping between Klarna’s internal
categories and companies’ NACE
codes and relatively low exposure, thiscategory is not considered for eligibilityor alignment.

Households

The category is assessed based on
the exposure Klarna had towards its
merchants and their eligibility andalignment reporting over the financial
year 2022.

The exposure to households currently
included in the GAR covers only three
categories for which Klarna has either
no exposure towards or no granular
information available. As it represented
a relatively low amount, this category
was not considered for eligibility oralignment.

Local governments

The category is assessed based on
the exposure Klarna had towards its
merchants and their eligibility reporting
over the financial year 2022.

As granular data to properly assess
this category was not available, anddue to the relatively low amount it
represented, this category is notconsidered for eligibility or alignment.

E S G R E P O RT 2 0 2 3

CONTENTS

121

APPENDIX

Taxonomy alignment in the businessstrategy, product design processes,
and engagement with clients andcounterparties
In the context of Klarna’s EU Taxonomy disclosurefor the previous financial year (2022), it was
expected that a more significant proportion ofloans made by the company to “households”
would meet the eligibility criteria as the remaining
four objectives became mandatory for reporting.
The Circular Economy objective holds the mostsignificant potential impact on Klarna. Indeed, somecounterparties to which Klarna has exposure fallunder activities covered under the Circular Economy
environmental objective. Such activities could
include the economic activities “5.2 Sale of spareparts”, “5.4 Sale of second-hand goods,” and “5.6Marketplace for the trade of second-hand goods forreuse”. However, the Green Asset Ratio for credit
institutions has so far limited eligible household
exposures to three categories: loans collateralized byresidential immovable property, building renovationloans, and motor vehicle loans. Those categories failto capture the potentially eligible exposures of Klarna
under the Circular Economy environmental objective,
as Klarna’s households’ exposures are mostly related
to retail and consumer goods. Therefore, its eligibility
was not impacted significantly by the introduction of
the Environmental Objectives.
Klarna acknowledges its substantial role in promoting
sustainability by providing its customers with morecomprehensive information to make informed
purchasing decisions. In line with this, the company isengaged in various sustainability initiatives, including
the Conscious brands ratings initiative, the CO2Emissions feature, donations touch points, and thepromotion of second-hand shopping and reselling
opportunities for consumers. These initiatives aredescribed in detail in the ESG section of Klarna’s
consolidated report.

K L A RN A H O L D I N G A B (P UBL)

Klarna keeps exploring the synergies between its
sustainability efforts and the Taxonomy. For instance,
while collecting data for the Conscious brands ratings
initiative through platforms like Good on You andClarity AI, Klarna will also assess if the data required
for the Taxonomy can be gathered simultaneously.
Additionally, Klarna’s circular shopping initiatives havethe potential to impact its Taxonomy eligibility andalignment in the future, especially concerning thecircular economy objective.
The company also recognizes its impact on its
retail partners and has established processes anddialogue tools to encourage sustainable e-commerceand sustainability goals. These dialogues can also
be leveraged to discuss the Taxonomy with retailpartners.
Given the increasing efforts to adopt and comply
with the Taxonomy, Klarna will continue to evaluate
the best ways to integrate it into its business andprocesses.

Materiality
In the context of ESG reporting, Klarna endeavours
to provide information regarding its environmental
and social impact to stakeholders, investors andcustomers. In this regard, ESG materiality helps toassess whether some information is relevant andessential to the company’s ESG reporting. This helps
to determine which sustainability topics Klarnashould prioritize and, in turn, be included in the ESG
section of the consolidated report.
Regarding the EU Taxonomy, Klarna provides loans
to merchants and retailers that are considered
as exposures to non-financial undertakings in
the Taxonomy. Klarna also presents exposures tofinancial undertakings covered in the EU Taxonomy
regulation. However, for the disclosure for thefinancial year 2023, Klarna’s eligible exposure tofinancial and non-financial undertakings was deemed
substantially low. Hence, considering materialityand data limitations, Klarna chose to exclude these
exposures from its eligibility and alignment analysis.

E S G R E P O RT 2 0 2 3

CONTENTS

122

APPENDIX

Supporting material
1. Summary of KPIs

Main KPI

Additional KPIs

Total environmentally
sustainable assets

KPI*

KPI**

% coverage(over total assets)***% of assets excluded from thenumerator of the GAR (Article 7(2) and(3) and Section 1.1.2. of Annex V)% of assets excluded from thedenominator of the GAR (Article 7(1) andSection 1.2.4 of Annex V)

0

0

0

68%

14%

18%

Total environmentally
sustainable assets

KPI

KPI

% coverage(over total assets)% of assets excluded from thenumerator of the GAR (Article 7(2) and(3) and Section 1.1.2. of Annex V)% of assets excluded from thedenominator of the GAR (Article 7(1) andSection 1.2.4 of Annex V)

N/A

N/A

N/A

N/A

N/A

N/A

Green asset ratio (GAR) stock

GAR (flow)*

based on the Turnover KPI of the counterparty.					

**based on the CapEx KPI of the counterparty, except for lending activities where for general lending Turnover KPI is used.

***% of assets covered by the KPI over banks´ total assets.					K L A RN A H O L D I N G A B (P UBL)E S G R E P O RT 2 0 2 3

CONTENTS

123

APPENDIX

2. GAR – Covered assets KPI

0

0

0

0

0

0

Loans and advances

1,929,297,827

0

0

0

0

0

0

0

0

0

Debt securities, including UoP

3,186,428,775

0

0

0

0

0

0

0

0

0

4,442,955,178

0

0

0

0

0

0

0

0

0

Non-financial undertakings

1,686,469,763

0

0

0

0

0

0

0

0

0

Loans and advances

1,532,879,888

0

0

0

0

0

0

0

0

0

Of which enabling0

Of which transitional0

Of which Use of Proceeds

0

Of which environmentally sustainable(Taxonomy-aligned)

05,115,726,602

Credit institutions

Of which towards taxonomy relevant
sectors (Taxonomy-eligible)

00

TOTAL (CCM + CCA + WTR+ CE + PPC + BIO)

Of which enabling00

Of which Use of Proceeds

00

Of which environmentally sustainable(Taxonomy-aligned)00

Of which towards taxonomy relevant
sectors (Taxonomy-eligible)

00

Biodiversity andEcosystems (BIO)

Of which enabling00

Of which Use of Proceeds

00

Of which environmentally sustainable(Taxonomy-aligned)

009,558,681,780

Of which towards taxonomy relevant
sectors (Taxonomy-eligible)

096,523,879,156

Financial undertakings

Pollution(PPC)

Of which enabling0

Of which Use of Proceeds

0

Of which environmentally sustainable(Taxonomy-aligned)

0

Circular economy(CE)

Of which towards taxonomy relevant
sectors (Taxonomy-eligible)

Of which enabling0

Of which enabling

Of which Use of Proceeds

0

Of which Use of Proceeds

Of which environmentally sustainable(Taxonomy-aligned)

096,523,879,156

Loans and advances, debt securities and equity instruments
not HfT eligible for GAR calculation

Of which environmentally sustainable(Taxonomy-aligned)

Of which towards taxonomy relevant
sectors (Taxonomy-eligible)0

GAR - Covered assets in both numerator and denominator

Water and marine resources(WTR)

Of which towards taxonomy relevant
sectors (Taxonomy-eligible)

Of which enabling0

Of which towards taxonomy relevant
sectors (Taxonomy-eligible)

Of which transitional

Climate Change Adaptation(CCA)

Of which Use of Proceeds

Climate Change Mitigation(CCM)
Of which environmentally sustainable(Taxonomy-aligned)

Total [gross] carrying
amount (SEK)

Equity instruments
Other financial corporationsof which investment firms
Loans and advances
Debt securities, including UoP
Equity instrumentsof which management companies
Loans and advances
Debt securities, including UoP
Equity instrumentsof which insurance undertakings
Loans and advances
Debt securities, including UoP
Equity instruments

Debt securities, including UoP
Equity instruments
Households

153,589,875

0

0

0

0

0

0

0

0

0

83,923,229,579

0

0

0

0

0

0

0

0

0

1,355,498,034

0

0

0

0

0

0

0

0

0

1,355,498,034

0

0

0

0

0

0

0

0

0

19,697,137,470

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

of which loans collateralised by residential immovable propertyof which building renovation loansof which motor vehicle loans
Local governments financing
Housing financing
Other local government financing
Collateral obtained by taking possession: residential andcommercial immovable properties
Assets excluded from the numerator for GAR calculation(covered in the denominator)
Financial and Non-financial undertakings
SMEs and NFCs (other than SMEs) not subject to NFRD
disclosure obligations

273,790,424

Loans and advances

273,790,424

of which loans collateralised by commercial immovable propertyof which building renovation loans
Debt securities
Equity instruments
Non-EU country counterparties not subject to NFRD
disclosure obligations

24,768,913

Loans and advances
Debt securities
Equity instruments
Derivatives

584,314,383

On demand interbank loans

2,697,899,879

Cash and cash-related assets

10,636

Other categories of assets (e.g. Goodwill, commodities etc.)

16,116,353,236

Total GAR assets

116,221,016,626

Assets not covered for GAR calculation

25,204,987,208

Central governments and Supranational issuers

3,231,665,494

Central banks exposure

21,973,321,713

Trading bookTotal assets

141,426,003,834

Off-balance sheet exposures –Undertakings subject to NFRD disclosure obligations
Financial guarantees
Assets under management
Of which debt securities
Of which equity instruments

1.

This template shall include information for loans and advances, debt securities and equity instruments in the banking book, towards
financial corporates, non-financial corporates (NFC), including SMEs, households (including residential real estate, house renovationloans and motor vehicle loans only) and local governments/municipalities (house financing). 			

2. The following accounting categories of financial assets should be considered: Financial assets at amortised cost, financial assets at fairvalue through other comprehensive income, investments in subsidiaries, joint ventures and associates, financial assets designated at fairvalue through profit or loss and non-trading financial assets mandatorily at fair value through profit or loss, and real estate collaterals
obtained by credit institutions by taking possession in exchange in of cancellation of debts.			
3. Banks with non-EU subsidiary should provide this information separately for exposures towards non-EU counterparties. For non-EU
exposures, while there are additional challenges in terms of absence of common disclosure requirements and methodology, as the
EU taxonomy and the NFRD apply only at EU level, given the relevance of these exposures for those credit institutions with non-EU
subsidiaries, these institutions should disclose a separate GAR for non-EU exposures, on a best effort basis, in the form of estimates andranges, using proxies, and explaining the assumptions, caveats and limitations
4. For motor vehicle loans, institutions shall only include those exposures generated after the date of application of the disclosure.		

K L A RN A H O L D I N G A B (P UBL)E S G R E P O RT 2 0 2 3

CONTENTS

124

APPENDIX

3. GAR – Sector Information
Climate Change Mitigation (CCM)

Breakdown by
sector - NACE 4
digits level(code and label)

Water and marine resources (WTR)

Circular economy (CE)

Pollution (PPC)

Biodiversity and Ecosystems (BIO)TOTAL (CCM + CCA + WTR+ CE + PPC + BIO)

Non-Financial
corporates (Subject
to NFRD)

SMEs and other
NFC not subject
to NFRD

Non-Financial
corporates (Subject
to NFRD)

SMEs and other
NFC not subject
to NFRD

Non-Financial
corporates (Subject
to NFRD)

SMEs and other
NFC not subject
to NFRD

Non-Financial
corporates (Subject
to NFRD)

SMEs and other
NFC not subject
to NFRD

Non-Financial
corporates (Subject
to NFRD)

SMEs and other
NFC not subject
to NFRD

Non-Financial
corporates (Subject
to NFRD)

SMEs and other
NFC not subject
to NFRD

Non-Financial
corporates (Subject
to NFRD)

SMEs and other
NFC not subject
to NFRD[Gross]carrying amount[Gross]carrying amount[Gross]carrying amount[Gross]carrying amount[Gross]carrying amount[Gross]carrying amount[Gross]carrying amount[Gross]carrying amount[Gross]carrying amount[Gross]carrying amount[Gross]carrying amount[Gross]carrying amount[Gross]carrying amount[Gross]carrying amount

Mn EUROf whichenvironmentally
sustainable (CCM)

Mn EUROf whichenvironmentally
sustainable (CCM)

Mn EUROf whichenvironmentally
sustainable (CCA)

Mn EUROf whichenvironmentally
sustainable (CCA)

Mn EUROf whichenvironmentally
sustainable (WTR)

Mn EUROf whichenvironmentally
sustainable (WTR)

Mn EUROf whichenvironmentally
sustainable (CE)Mn EUROf whichenvironmentally
sustainable (CE)Mn EUROf whichenvironmentally
sustainable (PPC)

Mn EUROf whichenvironmentally
sustainable (PPC

Mn EUROf whichenvironmentally
sustainable (BIO)

Mn EUROf whichenvironmentally
sustainable (BIO)

Mn EUROf whichenvironmentally
sustainable (CCM
+ CCA +
WTR + CE
+ PPC +BIO)

Mn EUROf whichenvironmentally
sustainable (CCM
+ CCA +
WTR + CE
+ PPC +
BIO)

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

1.

Climate Change Adaptation (CCA)

Credit institutions shall disclose in this template information on exposures in the banking book towards those sectors covered by the
Taxonomy (NACE sectors 4 levels of detail), using the relevant NACE Codes on the basis of the principal activity of the counterparty. 		
			

2. The counterparty NACE sector allocation shall be based exclusively on the nature of the immediate counterparty. The classification of
the exposures incurred jointly by more than one obligor shall be done on the basis of the characteristics of the obligor that was the more
relevant, or determinant, for the institution to grant the exposure. The distribution of jointly incurred exposures by NACE codes shall be
driven by the characteristics of the more relevant or determinant obligor. Institutions shall disclose information by NACE codes with the levelof disaggregation required in the template.

K L A RN A H O L D I N G A B (P UBL)E S G R E P O RT 2 0 2 3

Of which Use of Proceeds

Of which transitional

Of which enabling
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyeligible)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyaligned)
Of which Use of Proceeds

Of which enabling

Other financial corporations

Local governments financing

Other local government financing

Total GAR assets

K L A RN A H O L D I N G A B (P UBL)

Loans and advances, debt securities and equity instruments not HfTeligible for GAR calculation
0
0
0
0
0
0
0
0
0

Financial undertakings
0
0
0
0
0
0
0
0
0

Credit institutions
0
0
0
0
0
0
0
0
0

Equity instruments

Loans and advances
0
0
0
0
0
0
0
0
0

Debt securities, including UoP
0
0
0
0
0
0
0
0
0

0
0
0
0
0
0
0
0
0

Non-financial undertakings
0
0
0
0
0
0
0
0
0

Loans and advances
0
0
0
0
0
0
0
0
0

of which loans collateralised by residential immovable propertyof which building renovation loansof which motor vehicle loans

Housing financing

Collateral obtained by taking possession: residential and commercial
immovable properties

Equity instruments
0
0
0
0
0
0
0
0
0

Households
0
0
0
0
0
0
0
0
0

0
0
0
0
0
0
0
0
0

0
0
0
0
0
0
0
0
0

0
0
0
0
0
0
0
0
0

APPENDIX

Proportion of total assets covered

Of which enabling

Of which transitional

Of which Use of Proceeds

Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyaligned)

Biodiversity andEcosystems (BIO)

Proportion of total covered assets
funding taxonomy relevant sectors(Taxonomy-eligible)

Of which enabling

Of which Use of Proceeds

Pollution(PPC)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyaligned)

Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyeligible)

Of which enabling

Of which Use of Proceeds

Circular economy(CE)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyaligned)

Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyeligible)

Of which enabling

Of which Use of Proceeds

Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyaligned)

Water and marine resources(WTR)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyeligible)

Of which enabling

Climate Change Adaptation(CCA)

Of which Use of Proceeds

Climate Change Mitigation(CCM)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyaligned)% (compared to total covered assets in the denominator)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyeligible)

Proportion of total covered assets
funding taxonomy relevant sectors(Taxonomy-aligned)

GAR - Covered assets in both numerator and denominator
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyeligible)

CONTENTS

125

4. GAR KPIs Stock4.1. GAR KPI – Stock Turnover
TOTAL (CCM + CCA + WTR+ CE + PPC + BIO)

of which investment firms

Loans and advances

Debt securities, including UoP

Equity instrumentsof which management companies

Loans and advances

Debt securities, including UoP

Equity instrumentsof which insurance undertakings

Loans and advances

Debt securities, including UoP

Equity instruments

Debt securities, including UoP

E S G R E P O RT 2 0 2 3

CONTENTS

126

APPENDIX

4.2. GAR KPI – Stock Capex

Proportion of total assets covered

Of which enabling

Of which transitional

Of which Use of Proceeds

Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyaligned)

Proportion of total covered assets
funding taxonomy relevant sectors(Taxonomy-eligible)

TOTAL (CCM + CCA + WTR+ CE + PPC + BIO)

Of which enabling

Of which Use of Proceeds

Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyaligned)

Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyeligible)

Biodiversity andEcosystems (BIO)

Of which enabling

Of which Use of Proceeds

0

Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyaligned)

Of which enabling0

Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyeligible)

Of which Use of Proceeds

0Pollution(PPC)

Of which enabling

Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyaligned)0

Of which Use of Proceeds

Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyeligible)

0

Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyaligned)

Of which enabling0

Circular economy(CE)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyeligible)

Of which transitional0

Of which enabling

Of which Use of Proceeds

0

Of which Use of Proceeds

Proportion of total covered assets
funding taxonomy relevant sectors(Taxonomy-aligned)0

Water and marine resources(WTR)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyaligned)

Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyeligible)

Climate Change Adaptation(CCA)

Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyeligible)

Climate Change Mitigation(CCM)% (compared to total covered assets in the denominator)

GAR - Covered assets in both numerator and denominator
Loans and advances, debt securities and equity instruments not HfTeligible for GAR calculation
Financial undertakings

0

0

0

0

0

0

0

0

0

Credit institutions

0

0

0

0

0

0

0

0

0

Loans and advances

0

0

0

0

0

0

0

0

0

Debt securities, including UoP

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

Equity instruments
Other financial corporationsof which investment firms
Loans and advances
Debt securities, including UoP
Equity instrumentsof which management companies
Loans and advances
Debt securities, including UoP
Equity instrumentsof which insurance undertakings
Loans and advances
Debt securities, including UoP
Equity instruments
Non-financial undertakings

0

0

0

0

0

0

0

0

0

Loans and advances

0

0

0

0

0

0

0

0

0

Debt securities, including UoP
Equity instruments

0

0

0

0

0

0

0

0

0

Households

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

0

of which loans collateralised by residential immovable propertyof which building renovation loansof which motor vehicle loans
Local governments financing
Housing financing
Other local government financing
Collateral obtained by taking possession: residential and commercial
immovable properties
Total GAR assets

1.

Institution shall dislcose in this template the GAR KPIs on stock of loans calculated based on the data disclosed in template 1, on covered
assets, and by applying the formulas proposed in this template

2. Information on the GAR (green asset ratio of ‘eligible’ activities) shall be accompanied with information on the proportion of total assets
covered by the GAR

K L A RN A H O L D I N G A B (P UBL)

3. Credit institutions can, in addition to the information included in this template, show the proportion of assets funding taxonomy
relevant sectors that are environmetnally sustainable (Taxonomy-aligned). This information would enrich the information on the KPI on
environmentatlly sustainable assets compared to total covered assets
4. Credit institutions shall duplicate this template for revenue based and CapEx based disclosuresE S G R E P O RT 2 0 2 3

CONTENTS

127

APPENDIX

5. GAR KPIs Flow
5.1. GAR KPI – Flow Turnover

Proportion of total assets covered

Of which enabling

Of which transitional

Of which Use of Proceeds

Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyaligned)

Proportion of total covered assets
funding taxonomy relevant sectors(Taxonomy-eligible)

TOTAL (CCM + CCA + WTR+ CE + PPC + BIO)

Of which enabling

Of which Use of Proceeds

Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyaligned)

Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyeligible)

Biodiversity andEcosystems (BIO)

Of which enabling

Of which Use of Proceeds

0

Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyaligned)

Of which enabling0

Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyeligible)

Of which Use of Proceeds

0Pollution(PPC)

Of which enabling

Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyaligned)0

Of which Use of Proceeds

Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyeligible)

0

Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyaligned)

Of which enabling0

Circular economy(CE)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyeligible)

Of which transitional0

Of which enabling

Of which Use of Proceeds

0

Of which Use of Proceeds

Proportion of total covered assets
funding taxonomy relevant sectors(Taxonomy-aligned)0

Water and marine resources(WTR)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyaligned)

Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyeligible)

Climate Change Adaptation(CCA)

Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyeligible)

Climate Change Mitigation(CCM)% (compared to flow of total eligible assets)

GAR - Covered assets in both numerator and denominator
Loans and advances, debt securities and equity instruments not HfTeligible for GAR calculation
Financial undertakings

0

0

0

0

0

0

0

0

0

Credit institutions

0

0

0

0

0

0

0

0

0

Loans and advances

0

0

0

0

0

0

0

0

0

Debt securities, including UoP

0

0

0

0

0

0

0

0

0

Equity instruments

0

0

0

0

0

0

0

0

0

Other financial corporations

0
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

of which investment firms
Loans and advances

0

0

0

0

0

0

0

0

0

Debt securities, including UoP

0

0

0

0

0

0

0

0

0

Equity instruments

0

0

0

0

0

0

0

0

0

of which management companies

0

0

0

0

0

0

0

0

0

Loans and advances

0

0

0

0

0

0

0

0

0

Debt securities, including UoP

0

0

0

0

0

0

0

0

0

Equity instruments

0

0

0

0

0

0

0

0

0

of which insurance undertakings

0

0

0

0

0

0

0

0

0

Loans and advances

0

0

0

0

0

0

0

0

0

Debt securities, including UoP

0

0

0

0

0

0

0

0

0

Equity instruments

0

0

0

0

0

0

0

0

0

Non-financial undertakings

0

0

0

0

0

0

0

0

0

Loans and advances

0

0

0

0

0

0

0

0

0

Debt securities, including UoP

0

0

0

0

0

0

0

0

0

Equity instruments

0

0

0

0

0

0

0

0

0

Households

0

0

0

0

0

0

0

0

0

of which loans collateralised by residential immovable property

0

0

0

0

0

0

0

0

0

of which building renovation loans

0

0

0

0

0

0

0

0

0

of which motor vehicle loans

0

0

0

0

0

0

0

0

0

Local governments financing

0

0

0

0

0

0

0

0

0

Housing financing

0

0

0

0

0

0

0

0

0

Other local government financing

0

0

0

0

0

0

0

0

0

Collateral obtained by taking possession: residential and commercial
immovable properties

0

0

0

0

0

0

0

0

0

Total GAR assets

0

0

0

0

0

0

0

0

0

K L A RN A H O L D I N G A B (P UBL)E S G R E P O RT 2 0 2 3

CONTENTS

128

APPENDIX

5.2. GAR KPI – Flow Capex

Proportion of total assets covered

Of which enabling

Of which transitional

Of which Use of Proceeds

Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyaligned)

Proportion of total covered assets
funding taxonomy relevant sectors(Taxonomy-eligible)

TOTAL (CCM + CCA + WTR+ CE + PPC + BIO)

Of which enabling

Of which Use of Proceeds

Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyaligned)

Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyeligible)

Biodiversity andEcosystems (BIO)

Of which enabling

Of which Use of Proceeds

0

Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyaligned)

Of which enabling0

Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyeligible)

Of which Use of Proceeds

0Pollution(PPC)

Of which enabling

Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyaligned)0

Of which Use of Proceeds

Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyeligible)

0

Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyaligned)

Of which enabling0

Circular economy(CE)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyeligible)

Of which transitional0

Of which enabling

Of which Use of Proceeds

0

Of which Use of Proceeds

Proportion of total covered assets
funding taxonomy relevant sectors(Taxonomy-aligned)0

Water and marine resources(WTR)
Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyaligned)

Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyeligible)

Climate Change Adaptation(CCA)

Proportion of total covered assets funding
taxonomy relevant sectors (Taxonomyeligible)

Climate Change Mitigation(CCM)% (compared to flow of total eligible assets)

GAR - Covered assets in both numerator and denominator
Loans and advances, debt securities and equity instruments not HfTeligible for GAR calculation
Financial undertakings

0

0

0

0

0

0

0

0

0

Credit institutions

0

0

0

0

0

0

0

0

0

Loans and advances

0

0

0

0

0

0

0

0

0

Debt securities, including UoP

0

0

0

0

0

0

0

0

0

Equity instruments

0

0

0

0

0

0

0

0

0

Other financial corporations

0
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

of which investment firms
Loans and advances

0

0

0

0

0

0

0

0

0

Debt securities, including UoP

0

0

0

0

0

0

0

0

0

Equity instruments

0

0

0

0

0

0

0

0

0

of which management companies

0

0

0

0

0

0

0

0

0

Loans and advances

0

0

0

0

0

0

0

0

0

Debt securities, including UoP

0

0

0

0

0

0

0

0

0

Equity instruments

0

0

0

0

0

0

0

0

0

of which insurance undertakings

0

0

0

0

0

0

0

0

0

Loans and advances

0

0

0

0

0

0

0

0

0

Debt securities, including UoP

0

0

0

0

0

0

0

0

0

Equity instruments

0

0

0

0

0

0

0

0

0

Non-financial undertakings

0

0

0

0

0

0

0

0

0

Loans and advances

0

0

0

0

0

0

0

0

0

Debt securities, including UoP

0

0

0

0

0

0

0

0

0

Equity instruments

0

0

0

0

0

0

0

0

0

Households

0

0

0

0

0

0

0

0

0

of which loans collateralised by residential immovable property

0

0

0

0

0

0

0

0

0

of which building renovation loans

0

0

0

0

0

0

0

0

0

of which motor vehicle loans

0

0

0

0

0

0

0

0

0

Local governments financing

0

0

0

0

0

0

0

0

0

Housing financing

0

0

0

0

0

0

0

0

0

Other local government financing

0

0

0

0

0

0

0

0

0

Collateral obtained by taking possession: residential and commercial
immovable properties

0

0

0

0

0

0

0

0

0

Total GAR assets

0

0

0

0

0

0

0

0

0

1.

Institution shall dislcose in this template the GAR KPIs on flow of loans calculated (new loans on a net basis) based on the data disclosed intemplate 1, on covered assets, and by applying the formulas proposed in this template

2. Credit institutions shall duplicate this template for revenue based and CapEx based disclosures

K L A RN A H O L D I N G A B (P UBL)E S G R E P O RT 2 0 2 3

CONTENTS

129

APPENDIX

6. Eligibility of exposures to the nuclear and gas-related activities
Nuclear energy related activities
The undertaking carries out, funds or has exposures to research, development,
demonstration and deployment of innovative electricity generation facilities that produce
energy from nuclear processes with minimal waste from the fuel cycle.

No

The undertaking carries out, funds or has exposures to construction and safe operation of
new nuclear installations to produce electricity or process heat, including for the purposes of
district heating or industrial processes such as hydrogen production, as well as their safety
upgrades, using best available technologies.

No

The undertaking carries out, funds or has exposures to safe operation of existing nuclear
installations that produce electricity or process heat, including for the purposes of district
heating or industrial processes such as hydrogen production from nuclear energy, as well as
their safety upgrades.

No

Fossil gas related activities
The undertaking carries out, funds or has exposures to construction or operation ofelectricity generation facilities that produce electricity using fossil gaseous fuels.

No

The undertaking carries out, funds or has exposures to construction, refurbishment, andoperation of combined heat/cool and power generation facilities using fossil gaseous fuels.

No

The undertaking carries out, funds or has exposures to construction, refurbishment andoperation of heat generation facilities that produce heat/cool using fossil gaseous fuels.

No

K L A RN A H O L D I N G A B (P UBL)E S G R E P O RT 2 0 2 3

CONTENTS

130

APPENDIX

Task Force on Climate-related Financial
Disclosures (TCFD)
Governance
TCFD Disclosure recommendation

Klarna 2023 Disclosure

We have clear routines to communicate and oversee climate-related risks:

A. Describe the Board’s oversightof climate-related risks andopportunities

In delivering our global business strategy, we pay particular attention toEnvironmental, Social, and Governance (ESG) factors. This includes climate-relatedrisks, which constitute a focal monitoring area in our long-term financial andbusiness success. For this, in Klarna we use climate-related risk management tools,
such as correlation analysis or climate scenario analysis, to offer a long-term viewof climate-related risks. This robust risk management approach is encapsulated
within Klarna’s Risk Management framework, ensuring these risks are systematicallyquantified, monitored, and mitigated.

Monthly: Follow-up meetings with our senior management team, in which relevant
team updates regarding our sustainability and ESG performance, including climate
initiatives, risk control practices are shared.
Quarterly: The Group Management Team receives the independent Risk Control
evaluation of the ESG Risk analysis, which includes climate-related risks andopportunities.
Annually: The Group Management Team receives assesses and approves the work
plans of the Sustainability Group and ESG risk teams during the annual businessplanning. This process includes an in-depth review of the risk taxonomy and the risk
appetite statement in regards to climate-related risks and opportunities.

Our Board of Directors (“Board”) and its committees, as well as the GroupManagement Team, have clearly defined roles in our risk management processes,
which also cover ESG risks:
Quarterly: Our Board receives comprehensive reports on ESG risks, including
those climate-related, which offer a perspective on our management policies andpractices. This quarterly reporting goes beyond merely presenting risks and also
communicates our achievements, strategic plans, and progress towards our net-zerocommitment.
Annually: The Board takes an active role in the sign-off and review of the annual
ESG report. This document not only outlines Klarna’s climate plans but encapsulates
our past achievements and future targets. Through this, the Board maintains
an overview of Klarna’s ESG approach, progress, and can provide constructive
feedback for further enhancement of our operations.
Our commitment to effective oversight of ESG factors, backed by regular Board
oversight, contributes to our goal of sustainable growth and long-term businesssuccess. Our approach’s primary objectives encompass climate initiatives thatenable consumers to shop in alignment with their values and promote circularity,
which align with Klarna’s climate commitment.
B. Describe management’s role inassessing and managing climaterelated risks and opportunities

Our Chief Marketing Officer (CMO) oversees Klarna’s sustainability programs, inclose collaboration with the Sustainability Group. This is complemented by the Chief
Financial Officer’s (CFO) who keeps regular communication with the Risk Control
domain, which holds strategic and ESG risks monitoring responsibilities. Alongsidethese core teams, several other functions within our organization contribute toeffectively manage our climate-related risks and opportunities.

Strategy
TCFD Disclosure recommendation

Klarna 2023 Disclosure

A. Describe the climate-relatedrisks and opportunities theorganization has identified overthe short, medium, and long term

1. Transition Risks (Medium Term):a. Policy and Legal:
Emerging climate-centric regulations, notably around emissions reportingand carbon pricing create transition risks in the form of potential operational,
compliance and non-compliance costs.
Adhering to new and evolved regulatory frameworks could result in a significant
increase of operational, administrative and third-party advisory costs. Noncompliance may result in legal and financial repercussions including regulatory costs
or litigation, as well as reputational costs.
While Klarna’s carbon footprint is relatively small compared to overall businessvolumes, an expansion and increase of carbon pricing across the economy could
have a direct impact on Klarna’s operational costs.
Overall, policy and legal transition risks are assessed as low and are actively
monitored through Klarna’s ESG reporting and climate action activities.
b. Market:
Klarna connects consumers and merchants to deliver a safe and superior
commercial experience. Klarna specializes in payments, factoring, and consumer
credits with low order values and short duration. Klarna’s business volumes are
therefore directly linked to consumer spending.

K L A RN A H O L D I N G A B (P UBL)E S G R E P O RT 2 0 2 3

CONTENTS

131

APPENDIX

Increasing awareness of the climate impacts of goods and services might havean impact on consumer purchasing behavior, e.g. by lowering consumer spending
overall or by shifting consumption towards goods and services perceived to be moresustainable.

3. Opportunities:
a. Climate Leadership:
Klarna’s ambitious and innovative climate goals and strategy position the company
as a leader amongst peers, strengthening the brand in the eyes of customers,
merchant partners and other stakeholders and providing a credible foundation for
its sustainability products on its platforms.

These potential shifts in the market create transition risks to Klarna e.g. bydecreasing overall transaction volumes on Klarna’s platform or by shifting
consumption away from product categories that have high commercial significancefor Klarna but are not perceived to be sustainable. However, they also present
an opportunity for Klarna to strengthen its position in the market by cateringto consumers’ changing preferences, e.g. providing credible information aboutsustainability aspects of goods and services to consumers or offering used andrefurbished goods on the platforms. Klarna actively pursues this opportunity with its
evolving portfolio of sustainability information offerings on its platforms.
Overall, climate transition risks from market transformation are considered low andare actively mitigated through the continued strengthening of the sustainability
proposition in Klarna’s products.
c. Reputational:b. Climate Stewardship:
Klarna has an opportunity to establish itself as a go-to destination forenvironmentally conscious shoppers. Building on its existing offerings that highlight
climate and sustainability related performance of products and merchant partners,
Klarna is well-positioned to capitalize on this growing market-segment.
B. Describe the impact of climaterelated risks and opportunities
on the organization’s businesses,
strategy, and financial planning

The risk of reputational transition impacts primarily emerge from Klarna’s potential
association with brands and merchants that face scrutiny for the climate impactof their business models and the perception that Klarna contributes to this impact
indirectly.
Overall, these risks are considered low and Klarna actively manages these factors by
pursuing a highly ambitious climate strategy for its own impact as well as by creatingtransparency over the emissions related climate impact of purchases via the Klarna
app with the CO2e tracker function, which provides consumers with information
about the carbon footprint of their purchases and provides them with advice on
using their items more sustainably.

a. Acute:

Klarna’s business-critical operations are largely reliant on cloud-based IT systems
and therefore less exposed to the direct impacts of extreme weather events,
allowing for operational resilience.
The operations of our more than 550,000 merchant partners across 25 countries
are directly reliant on globally distributed production and logistics infrastructure,creating significant exposure to disruptions from extreme weather events like floods,
hurricanes or wildfires. These disruptions could affect their business and financial
stability, which in turn, may impact transaction volumes on Klarna’s platform.
However due to the high diversification of Klarna’s business across geographies,
sectors and merchants, the aggregate risk from acute weather events for Klarna has
been assessed as low.
b. Chronic:
Over time, chronic physical risks from climate-related events may present
challenges for the material sourcing and operations of some Klarna’s retail partners,
particularly in regions exposed to extreme weather events. However, based on
Klarna’s business diversification, these risks are currently considered to be low for
Klarna’s own business.

K L A RN A H O L D I N G A B (P UBL)

Klarna’s climate strategy focuses on reducing its value chain emissions to Net Zero
GHG emissions by 2040 and on our journey there price the remaining emissions withan internal carbon tax. The raised funds from this carbon tax are then used to financehigh impact climate solutions via the Milkywire Climate Transformation Fund. This is inline with recommended best practice, e.g. the World Wildlife Fund (WWF) and Boston
Consulting Group (BCG) blueprint for corporate action on climate and nature. It guides
how companies measure and display their emissions, set targets to reduce them,price what is remaining, and contribute financially to effective climate projects. Thisapproach mitigates the regulatory and reputational risks identified above while also
capitalizing on the opportunities identified around climate leadership.
Klarna’s sustainability product roadmap aims to empower consumers to makemore environmentally conscious purchasing decisions, e.g. by informing them
about the carbon footprint of their purchases as well as highlighting brands andproducts with particular sustainability characteristics in its user touchpoints. Thisapproach mitigates the market risks identified above while also capitalizing on theopportunities identified around climate stewardship.

2. Physical Risks (Long Term):
The acute physical risks from extreme weather events can be differentiatedbetween the direct exposure of Klarna’s operations and the exposure of ourmerchant partners.

The identified climate-related risks and opportunities inform Klarna’s ambitious andinnovative climate strategy as well as its sustainability product roadmap.

C. Describe the resilience of theorganization’s strategy, taking
into consideration different
climate-related scenarios,
including a 2-degree or lower
scenario

Klarna is committed to gaining a comprehensive understanding of how climate change
scenarios can help us assess the impact of business risks and opportunities. We’ve
recently completed our climate scenario analysis with the goal of enhancing ourunderstanding of Klarna’s strategic resilience across various future climate scenarios
and identifying different potential solutions. These scenarios were developed incollaboration with recognized organizations such as the Network for Greening the
Financial System (NGFS) and take into account a range of temperature changes andadditional climate variables at both the national and international levels.
The focus of this report is on the 2030 time horizon. While Klarna is an agile
company with capital planning and strategies that align with banking regulations,
we recognize that certain climate impacts may take longer to manifest. Therefore,
in this first version of the climate scenario analysis, a 2030 time horizon isconsidered appropriate.
By considering these scenarios and employing an internal methodology that adheres tobest practices in climate scenario analysis, we assess the climate impact from three main
perspectives: Macroeconomic GDP impact (transitional and physical impact), changes
in consumer consumption behavior, and regulatory compliance. The conclusions of thisanalysis enable us to develop a long-term resilience program for Klarna, providing theorganization with a strategic roadmap that presents new opportunities to leverage our
ESG profile via key projects with internal and external stakeholders.

E S G R E P O RT 2 0 2 3

CONTENTS

132

APPENDIX

Risk management
TCFD Disclosure recommendation

Klarna 2023 Disclosure

A. Describe the organization’s
processes for identifying andassessing climate-related risks

At Klarna, our comprehensive approach to identifying, assessing, and managing
climate-related risks is centered around an integrated strategy. This strategy
connects within the overall risk management framework, which leverages theinsights of our stakeholders, and maximizes the expertise across our organization.

C. Describe how processes for
identifying, assessing, andmanaging climate-relatedrisks are integrated into theorganization’s overall risk
management

Our process is built upon, among other, the double materiality assessment
performed by the Sustainability Group in November 2021. This assessment provides
a holistic understanding of Klarna’s most material ESG themes according to our key
stakeholders (internal and external). These ESG themes, and areas of priority, arethen considered as part of our ESG Risk Assessment which enables us to identify
strategic areas and drive risk mitigation from a standpoint aligned with both our
stakeholders’ views and Klarna’s different teams. As part of the risk assessment wethen assess the potential likelihood and impact of those specific ESG risks.

This approach to risk management is integrated into our ways of working andcommunication channels throughout the ESG governance and risk control teams
within Klarna. This integration promotes close collaboration between the first andsecond lines of defense, especially during strategic initiatives like our climate
scenario analysis and ESG annual reporting. By aligning actions and maintaining
ongoing communication through multiple scopes, we ensure a holistic risk
management.

This is an annual exercise that we regularly update to adapt to Klarna’s evolving
business landscape, including new products and markets of operation.
Following the annual exercises, and to enrich our understanding of our risklandscape, we actively engage with teams across the organization through deep
dives and workshops. By drawing upon their expertise, we can uncover and manage
further key residual ESG risks that Klarna may be exposed to.
Examples of these joint efforts that drive further mitigation actions or even open
new lines of climate-related engagement, are such as our climate scenario analysis.
This comprehensive approach allows us to consider the broader implications ofclimate change risks beyond their direct impact.
B. Describe the organization’s
processes for managing climaterelated risks

At Klarna, the cornerstone of our risk management lies in a three-tiered defense
model, ensuring all aspects of our organization work in tandem to identify, assess,and mitigate potential risks, including those associated with climate change.
Our first line of defense, the Business Line, is actively engaged in daily operations,ensuring the implementation of necessary control measures to maintain an
acceptable level of risk exposure. Meanwhile, the Control Functions, our secondline of defense, provides the necessary frameworks and processes that support
independent oversight of ESG and climate-related risks. Working closely with theBusiness Line, Control Functions enhance Klarna’s internal assessments, particularly
for ESG initiatives, thus strengthening our proactive risk management.
The collaboration from these first two lines is fortified by the third line of defense;
the Risk Assurance. Providing an overarching lens, they validate and offer feedbackon the maturity and effectiveness of existing controls, ensuring comprehensive risk
management across all areas of our business.
Our integrated model breaks down traditional silos between the lines of defense toencourage collaboration, which is especially evident in strategic initiatives related
to climate change. Examples of such initiatives are climate correlation analysis andassessing the potential impacts of climate events on our stakeholders (i.e. merchants).
Our dynamic risk management approach continually adapts to evolving risks andregulatory developments. A testament to this is our proactive preparation to theforthcoming Corporate Sustainability Reporting Directive (CSRD), where we aredeveloping an action plan to align our governance and risk management procedures
effectively.

K L A RN A H O L D I N G A B (P UBL)

At Klarna, we recognize the need to integrate our approach to climate-related risks
into both our strategic risk framework and the broader Klarna risk management
framework. This framework operates on the three-tiered defense model previously
mentioned. This model enables us to effectively manage ESG risks, including climaterelated risks, which also could act as drivers for other risk areas within Klarna (i.eoperational or credit risk). Consequently, our risk assessments do not only evaluate
the direct nature of climate-related risks, but also their transmission channels
throughout our risk taxonomy.

Metrics and targets
TCFD Disclosure recommendation

Klarna 2023 Disclosure

A. Disclose the metrics used by theorganization to assess climaterelated risks and opportunities
in line with its strategy and risk
management process

At Klarna, we monitor a range of metrics to assess climate-related risks andopportunities.
Some of our key metrics include (non-exhaustive):
1. Revenue intensity: It calculates our emissions relative to our revenue, providing abenchmark for environmental efficiency within our business operations.
2. Number of items covered by the CO2e emissions tracker: In alignment with ourefforts to encourage more sustainable shopping, we provide consumers withinformation to understand the estimated CO2e on a product level in certain
product categories (e.g. fashion products).
3. Partnerships donation impact: Number of customers who donate and total
donations towards planet health causes.
4. Green electricity usage: This metric helps us assess our progress towards
renewable energy utilization and the reduction in our reliance on traditional,
carbon-intensive energy sources.
5. Purchase volume - more sustainable brands and circularity services: We track theabsolute and relative purchase volume of more sustainable products and brands
that are highlighted on our platform.
To align with the upcoming regulations such as the Corporate Sustainability
Reporting Directive (CSRD) we are undergoing a review of our ESG metrics. The
aim is to ensure we are capturing and reporting the most pertinent data points,
considering Klarna’s breadth and diversity in providing multiple products acrossdiverse markets.

E S G R E P O RT 2 0 2 3

CONTENTS

133

APPENDIX

B. Redovisa Scope 1, Scope 2 och,om tillämpligt, Scope 3 utsläpp
av växthusgaser (GHG) och
relaterade risker

Klarna calculates its annual GHG emissions in line with the GHG Protocol’s relevant
standards.
Klarna’s 2023 GHG emissions are 1:
Scope 1: 67 tCO₂e
Scope 2: 52 tCO₂e
Scope 3: 109,824 tCO₂e

C. Describe the targets used by
the organization to manage
climate-related risks andopportunities and performanceagainst targets

Klarna has opted to follow the World Wildlife Fund (WWF) and Boston Consulting
Group (BCG) blueprint for corporate action on climate and nature, which serves
as a guide for companies to measure and display their emissions, set targets to
reduce them, price what is remaining, and contribute financially to effective climate
projects.
Our commitment has three broad components:
1. we will annually price all of our scope 1, 2, and 3 emissions with an internalcarbon tax and use the resulting funds to finance high impact climate solutions.
2. by 2030, we will reduce our revenue-based carbon intensity by 50% acrossscope 1, 2 and 3 against a 2019 baseline.
3. by 2040, we aim to reach net zero scope 1, 2 and 3 emissions.

1

The wording of these commitments has been changed since the previous year to provide additional clarity on their substance.

K L A RN A H O L D I N G A B (P UBL)E S G R E P O RT 2 0 2 3

Auditor’s report – Translated from Swedish signed version

Other Information than the annual accounts and consolidated accounts

To the general meeting of the shareholders of Klarna Holding AB, corporate identity number 556676-2356

This document also contains other information than the annual accounts andconsolidated accounts and is found on pages 1-8 and 9-113. The Board of
Directors and the Managing Director are responsible for this other information.

Report on the annual accounts and consolidated accounts
Opinions

Basis for Opinions

We have audited the annual accounts and consolidated accounts of Klarna
Holding AB for the year 2023 except for the sustainability statement on pages
12-60 and the corporate governance statement on pages 61-68. The annual
accounts and consolidated accounts of the company are included on pages 9113 in this document.

We conducted our audit in accordance with International Standards on Auditing(ISA) and generally accepted auditing standards in Sweden. Our responsibilities
under those standards are further described in the Auditor’s Responsibilities
section. We are independent of the parent company and the group inaccordance with professional ethics for accountants in Sweden and haveotherwise fulfilled our ethical responsibilities in accordance with theserequirements.

In our opinion, the annual accounts have been prepared in accordance with theAnnual Accounts Act and present fairly, in all material respects, the financial
position of the parent company as of 31 December 2023 and its financial
performance and cash flow for the year then ended in accordance with theAnnual Accounts Act. The consolidated accounts have been prepared inaccordance with the Annual Accounts Act and present fairly, in all material
respects, the financial position of the group as of 31 December 2023 and theirfinancial performance and cash flow for the year then ended in accordance with
International Financial Reporting Standards (IFRS), as adopted by the EU, and
the Annual Accounts Act. Our opinions do not cover the sustainability statementon pages 12-60 and the corporate governance statement on pages 61-68. The
statutory administration report is consistent with the other parts of the annual
accounts and consolidated accounts.

We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our opinions.

We have fulfilled the responsibilities described in the Auditor’s responsibilities
for the audit of the financial statements section of our report, including in
relation to this matter. Accordingly, our audit included the performance ofprocedures designed to respond to our assessment of the risks of material
misstatement of the financial statements. The results of our audit procedures,
including the procedures performed to address the matters below, provide thebasis for our audit opinion on the accompanying financial statements.

Allowance for expected credit losses for loans to the public

As described in Note 20 of the consolidated financial statements the grossloans to the public were SEK 89 602 million for the consolidated accounts,
and the corresponding allowance for expected credit losses was SEK 3 494
million per the 31st of December 2023.
As explained in note 2 and note 14, the allowance for credit losses iscalculated either as 12 months expected credit loss or lifetime expectedcredit loss. The expected credit loss (“ECL”) allowance is based on the latter
if there has been a significant increase in credit risk since initial recognition.
When calculating ECL on a collective basis, the ECL components arecalculated based on segmentation which is built on shared risk
characteristics. The probability of default (PD) component is segmented bygeographical region, instrument type and by days since origination.
The loss given default (LGD) component is dependent on geographical region,
retailer type, days past due, and, in some cases, recoveries from the sale ofnon-performing portfolios.

•

Evaluate the overall presentation, structure and content of the annual
accounts and consolidated accounts, including the disclosures, andwhether the annual accounts and consolidated accounts represent theunderlying transactions and events in a manner that achieves fairpresentation.

•

Obtain sufficient and appropriate audit evidence regarding the financial
information of the entities or business activities within the group to
express an opinion on the consolidated accounts. We are responsible forthe direction, supervision and performance of the group audit. We remainsolely responsible for our opinions.

Our opinion on the annual accounts and consolidated accounts does not cover
this other information and we do not express any form of assurance conclusion
regarding this other information.
In connection with our audit of the annual accounts and consolidated accounts,
our responsibility is to read the information identified above and consider
whether the information is materially inconsistent with the annual accounts andconsolidated accounts. In this procedure we also take into account ourknowledge otherwise obtained in the audit and assess whether the information
otherwise appears to be materially misstated.
If we, based on the work performed concerning this information, conclude that
there is a material misstatement of this other information, we are required toreport that fact. We have nothing to report in this regard.

The Board of Directors and the Managing Director are responsible for the
preparation of the annual accounts and consolidated accounts and that theygive a fair presentation in accordance with the Annual Accounts Act and,concerning the consolidated accounts, in accordance with IFRS as adopted by
the EU. The Board of Directors and the Managing Director are also responsible
for such internal control as they determine is necessary to enable thepreparation of annual accounts and consolidated accounts that are free frommaterial misstatement, whether due to fraud or error.

Key Audit Matters

Description

Conclude on the appropriateness of the Board of Directors’ [and theManaging Director’s] use of the going concern basis of accounting in
preparing the annual accounts and consolidated accounts. We also draw aconclusion, based on the audit evidence obtained, as to whether any
material uncertainty exists related to events or conditions that may castsignificant doubt on the company’s and the group’s ability to continue as agoing concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosuresin the annual accounts and consolidated accounts or, if such disclosures
are inadequate, to modify our opinion about the annual accounts andconsolidated accounts. Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report. However, future events orconditions may cause a company and a group to cease to continue as agoing concern.

Responsibilities of the Board of Directors and the Managing Director

We therefore recommend that the general meeting of shareholders adopts theincome statement and balance sheet for the parent company and the group.

Key audit matter of the audit is the matter that, in our professional judgment,
was of most significance in our audit of the annual accounts and consolidated
accounts of the current period. This matter was addressed in the context of ouraudit of, and in forming our opinion thereon, the annual accounts andconsolidated accounts as a whole, but we do not provide a separate opinion on
this matter. For the matter below, our description of how our audit addressed
the matter is provided in that context.

•

How our audit addressed this key audit matter
We have performed a walkthrough of the process for estimating the allowancefor expected credit losses as well as performed testing of IT general controls of
the systems that are relevant for the process.
We have examined management’s analysis of expected credit losses, reviewed
underlying model documentation and evaluated the outcome of management’s
model validation procedures.

In preparing the annual accounts and consolidated accounts, The Board of
Directors and the Managing Director are responsible for the assessment of thecompany’s and the group’s ability to continue as a going concern. They disclose,
as applicable, matters related to going concern and using the going concern
basis of accounting. The going concern basis of accounting is however not
applied if the Board of Directors and the Managing Director intend to liquidate
the company, to cease operations, or has no realistic alternative but to do so.
Auditor’s responsibility
Our objectives are to obtain reasonable assurance about whether the annual
accounts and consolidated accounts as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s reportthat includes our opinions. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs andgenerally accepted auditing standards in Sweden will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error andare considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these annual accounts and consolidated accounts.

We must inform the Board of Directors of, among other matters, the planned
scope and timing of the audit. We must also inform of significant audit findings
during our audit, including any significant deficiencies in internal control that
we identified.
We must also provide the Board of Directors with a statement that we havecomplied with relevant ethical requirements regarding independence, and tocommunicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable,
actions taken to eliminate threats or related safeguards applied.
From the matters communicated with the Board of Directors, we determine
those matters that were of most significance in the audit of the annual accounts
and consolidated accounts, including the most important assessed risks formaterial misstatement, and is therefore the key audit matter. We describe thismatter in the auditor’s report unless law or regulation precludes disclosure
about the matter.

As part of an audit in accordance with ISAs, we exercise professional judgment
and maintain professional skepticism throughout the audit. We also:•

Identify and assess the risks of material misstatement of the annual
accounts and consolidated accounts, whether due to fraud or error, design
and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our
opinions. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or theoverride of internal control.

•

Obtain an understanding of the company’s internal control relevant to our
audit in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on theeffectiveness of the company’s internal control.

We have tested, on a sample basis, the underlying data used in the supporting
calculations including review of PD and LGD components and segmentation.
We have examined and assessed the assumptions and parameters used in themodels and compared actual losses to expected, including a lookback analysis.
We have further assessed the reasonableness of any manual adjustments to the
ECL.
Additionally, we have reviewed the disclosures related to the allowance for
expected credit losses for loans to the public.

Given the complexity of the calculation and that it requires management tomake key judgements and assumptions, the allowance for expected credit
losses for loans to the public is a key audit matter.

•

Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by
the Board of Directors [and the Managing Director].

Report on other legal and regulatory requirements
Opinions
In addition to our audit of the annual accounts and consolidated accounts, wehave also audited the administration of the Board of Directors and theManaging Director of Klarna Holding AB for the year 2023 and the proposed
appropriations of the company’s profit or loss.
2 (3)We recommend to the general meeting of shareholders that the profit beappropriated in accordance with the proposal in the statutory administration
report and that the members of the Board of Directors and the Managing
Director be discharged from liability for the financial year.
Basis for Opinions
We conducted the audit in accordance with generally accepted auditing
standards in Sweden. Our responsibilities under those standards are further
described in the Auditor’s Responsibilities section. We are independent of theparent company and the group in accordance with professional ethics foraccountants in Sweden and have otherwise fulfilled our ethical responsibilities
in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our opinions.
Responsibilities of the Board of Directors and the Managing Director
The Board of Directors is responsible for the proposal for appropriations of thecompany’s profit or loss. At the proposal of a dividend, this includes anassessment of whether the dividend is justifiable considering the requirements
which the company's and the group’s type of operations, size and risks place on
the size of the parent company's and the group’s equity, consolidation
requirements, liquidity and position in general.

The auditor’s examination of the corporate governance statement
The Board of Directors is responsible for that the corporate governancestatement on pages 61-68 has been prepared in accordance with the Annual
Accounts Act.
Our examination of the corporate governance statement is conducted inaccordance with FAR´s standard RevR 16 The auditor´s examination of thecorporate governance statement. This means that our examination of thecorporate governance statement is different and substantially less in scope thanan audit conducted in accordance with International Standards on Auditing andgenerally accepted auditing standards in Sweden. We believe that theexamination has provided us with sufficient basis for our opinions.
A corporate governance statement has been prepared. Disclosures inaccordance with chapter 6 section 6 the second paragraph points 2-6 of theAnnual Accounts Act and chapter 7 section 31 the second paragraph the samelaw are consistent with the other parts of the annual accounts and consolidated
accounts and are in accordance with the Annual Accounts Act.
Auditor’s report on the statutory sustainability statement
It is the Board of Directors who is responsible for the statutory sustainability
statement on pages 12-60 and that it has been prepared in accordance with theAnnual Accounts Act.

The Board of Directors is responsible for the company’s organization and theadministration of the company’s affairs. This includes among other things
continuous assessment of the company’s and the group’s financial situation andensuring that the company's organization is designed so that the accounting,management of assets and the company’s financial affairs otherwise arecontrolled in a reassuring manner. The Managing Director shall manage theongoing administration according to the Board of Directors’ guidelines andinstructions and among other matters take measures that are necessary to fulfill
the company’s accounting in accordance with law and handle the managementof assets in a reassuring manner.

Our examination has been conducted in accordance with FAR’s auditing
standard RevR 12 The auditor’s opinion regarding the statutory sustainability
statement. This means that our examination of the corporate governancestatement is different and substantially less in scope than an audit conducted inaccordance with International Standards on Auditing and generally accepted
auditing standards in Sweden. We believe that the examination has provided us
with sufficient basis for our opinions.

Auditor’s responsibility

Ernst & Young AB, Hamngatan 26, 111 47 Stockholm, was appointed auditor ofKlarna Bank AB (publ) by the general meeting of the shareholders on June
26, 2023 and has been the company’s auditor since May 25, 2016.

Our objective concerning the audit of the administration, and thereby our
opinion about discharge from liability, is to obtain audit evidence to assess witha reasonable degree of assurance whether any member of the Board of
Directors or the Managing Director in any material respect:•

has undertaken any action or been guilty of any omission which can giverise to liability to the company, or•in any other way has acted in contravention of the Companies Act, theAnnual Accounts Act or the Articles of Association.

Our objective concerning the audit of the proposed appropriations of thecompany’s profit or loss, and thereby our opinion about this, is to assess withreasonable degree of assurance whether the proposal is in accordance with theCompanies Act.

A statutory sustainability statement has been prepared.

Stockholm February 27, 2024
Ernst & Young AB

Jesper Nilsson
Authorized Public Accountant

Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with generally accepted auditing standards in
Sweden will always detect actions or omissions that can give rise to liability to
the company, or that the proposed appropriations of the company’s profit orloss are not in accordance with the Companies Act.
As part of an audit in accordance with generally accepted auditing standards in
Sweden, we exercise professional judgment and maintain professional
skepticism throughout the audit. The examination of the administration and the
proposed appropriations of the company’s profit or loss is based primarily on
the audit of the accounts. Additional audit

procedures performed are based on our professional judgment with starting
point in risk and materiality. This means that we focus the examination on suchactions, areas and relationships that are material for the operations and where
deviations and violations would have particular importance for the company’ssituation. We examine and test decisions undertaken, support for decisions,actions taken and other circumstances that are relevant to our opinion
concerning discharge from liability. As a basis for our opinion on the Board of
Directors’ proposed appropriations of the company’s profit or loss we examined
whether the proposal is in accordance with the Companies Act.

3 (3)