UNDERSTANDING
GREEN BONDS

Marketing communication - For professional investors - December 2023

WHAT MAKES A GREEN BOND CREDIBLE?
Before we answer this question, let’s recap what green bonds are, and what the funds raised
are used for. Green bonds finance and refinance projects, assets, and activities that contributeto the ecological transition such as renewable energy, energy efficiency or reducing the useof natural resources. They are an essential vehicle for the bond markets to help fund theinevitable change to a more sustainable economy.

POLLUTION CONTROL& ECO-EFFICIENCYLIVING NATURALRESOURCES

ENERGYGREEN BONDS
CLIMATE CHANGE
ADAPTATION

TRANSPORTBUILDINGS

The sustainable
investor for achanging world

U N D E R STA N D I N G G R E E N B O N D S - 2 -We believe these elements make a green bond credible:•‘Green-ness’ – This concerns the extent of the environmental benefits which the proceeds
generate such as the amount of renewable energy produced or amount of energy savings. We use
the EU Taxonomy to define the green-ness of an activity unless our ESG analysts decide to apply
stricter criteria or use alternative criteria in the event verifiable data does not exist.

•‘Integrity’ – This concerns the processes and management systems governing the allocation of
the proceeds by the issuer including how the issuer mitigates potential risks and measuring andreporting the benefits of the proceeds.

•‘Ambition’ – This concerns the extent of the bond’s contribution to the issuer’s sustainability
ambitions such as their renewable power capacity target.

‘Green-ness’ concerns the extent of the environmental benefits that the proceeds generate such as
the amount of renewable energy generated, or emissions saved. We use the EU taxonomy to definethe ‘green-ness’ of an activity unless our ESG analysts decide to apply the stricter criteria that wealready use or use alternative criteria in the event no verifiable data exists.
Integrity concerns the processes and management systems governing the allocation of the proceeds,mitigating potential risks, and measuring and reporting.
Ambition concerns the extent of the bond’s contribution to the issuer’s sustainability ambitions suchas their renewable power target.
Our methodology in a nutshell:

Our Green Bond
Methodology Process
1 - Issuer’s ESG
Score and ambition

4 - Reporting on results

2 - Eligible
Projects

3 - Implementationof green bond project

Key considerations for each component are:1. How does the issuer rate in environmental, social and governance (ESG) terms and what istheir ambition?
2. Which activities will the issuer use the bond’s proceeds for, and how green are these activities
against the EU Taxonomy?
3. How is the issuer using the proceeds? How is the Issuer managing negative risks or avoidingdoing significant harm?
4. Is the issuer reporting clearly and transparently on the allocation of the proceeds and thebenefits achieved?

U N D E R STA N D I N G G R E E N B O N D S - 3 -SCORING
We assess component one, two and three ex-ante (i.e., before issuance of the bond). We assesscomponent four ex-post (i.e., 12 to 24 months after the bond has been issued).
We score each green bond out of 100 points. The score corresponds to a rating of Positive, Neutralor Negative.
Green bonds from developed market issuers must score at least 50 to be rated Neutral and at least
70 to be rated Positive. They are rated Negative if they score below 50.
Green bonds from emerging market issuers must score at least 30 to be rated Neutral and at least
50 to be rated Positive. They are rated Negative if they score below 30.
Across the lifecycle of the bond, we monitor for controversies or high reputational risks related to
the green bond. Our sources include our portfolio managers and rating agencies. When we believe
the controversy or reputational risk is substantial, we will adjust our score and change the rating
to Negative.
To enhance our methodology periodically, we may use research and ideas from investment banks,
non-governmental organisations, academics, industry associations, consultancies, and rating
agencies.

DETAILS OF EX-ANTE ASSESSMENT•

Issuer’s ESG score and ambition – We review the issuer’s ESG characteristics. Specifically, where
the issuer’s ESG score is in the bottom 10% of its peer group, we automatically rate the green bond
Negative since we believe the issuer is unlikely to carry out the projects and activities financed
successfully and credibly. We also assess how the bond fits with the issuer’s transition ambition.

•Eligible projects – Where projects target climate mitigation, we use the EU Taxonomy wheneverapplicable to determine the extent to which the project align with the technical screening criteria
for a substantial contribution to climate mitigation. We use various levels of alignment (e.g., fullyaligned, partially aligned, worse than significant harm) in our scoring of a project’s ‘green-ness’.

•Implementation of projects – We assess whether the issuer respects the ‘Do No Significant Harm’principles such as how they implement certified environmental management and health andsafety management systems. We also use the issuer’s historical controversies in related activities
as an indication of how likely the green bond projects will avoid doing significant harm. In addition
to the ‘Do No Significant Harm’ principles, we look at whether the issuer will prioritise newfinancing over refinancing, and in the event of refinancing, the look-back period allowed.

DETAILS OF EX-POST ASSESSMENT•

Reporting on results – We determine whether the issuer has reported on their green bond 12
to 24 months after issuance. If there is no report at the time of our assessment, we will engage
with the issuer to understand the situation. Where the issuer confirms there is no reporting andthere is no intention to report on their allocation and benefits of the proceeds, we will rate thebond Negative. Where there is a valid report, we assess how the proceeds were allocated andwhat the benefits were. We also review the issuer’s methodology for measuring the benefits. Webelieve issuers should obtain third-party verification or assurance on the numbers disclosed inthe report as best practice. Finally, we are looking for further details from the issuer on how thebond contributes to their sustainability ambition.

U N D E R STA N D I N G G R E E N B O N D S - 4 -ENGAGEMENT
We believe engagement with green bond issuers is key to achieving and improving the benefits ofgreen bonds, but also protecting clients’ investments from the potential risk of ‘reputation washing’.
•At-issuance engagement – We focus on 1) an issuer’s sustainability credentials and integrity,2) ‘green-ness’ of the project, and 3) the bond’s proposed ambition, expected allocation andimplementation. A project’s limited ‘green-ness’, a weak issuer ESG rating or unsatisfactory
engagement feedback may result in a Negative rating.

•Engagement after investment – We focus on output and impact indicators and the actual project
allocation. If the issuer fails to provide a satisfactory explanation for not providing impact
indicators, we may give the bond a Negative rating.

ENVIRONMENTAL BENEFITS
Several metrics help quantify the physical impact of projects green bonds finance. These include
renewable energy produced, the floor space of green buildings, passenger kilometres travelled on
low carbon transport, and energy saved through energy-efficient products. Most green bonds also
contribute towards climate mitigation and their contribution is measured using avoided emissions.
We believe transparency by the issuer on how the environmental benefits of the green bond aremeasured is critical for us to continue to regard the green bond as credible.

Also read:An outlook for the sustainable bond market (bnpparibas-am.com)
EU aims to make green bonds greener (bnpparibas-am.com)

U N D E R STA N D I N G G R E E N B O N D S - 5 -INVESTMENTS RISKS
Investments are subject to market fluctuations and other risks inherent to investing insecurities. The value of investments and the income they generate may rise or fall and it ispossible that investors may not recover their initial investment.
The sub-fund may be exposed to specific risks listed below:••••

Credit Risk
Emerging Markets Risk
Extra-Financial Criteria Investment Risk / Environmental, Social and Governance (ESG)
Investment Risk
Small Cap, Specialised or Restricted Sectors Risk

The sub-fund may be exposed to specific risks related to investments in Mainland China:•Risks related to Bond Connect

DISCLAIMER
BNP PARIBAS ASSET MANAGEMENT France, “the investment management company”, is a simplified joint stock company withits registered office at 1 boulevard Haussmann 75009 Paris, France, RCS Paris 319 378 832, registered with the “Autorité desmarchés financiers” under number GP 96002. This material is issued and has been prepared by the investment managementcompany. It contains opinions and statistical data that are considered lawful and correct on the day of their publicationaccording to the economic and financial environment at the time. This document does not constitute investment advice orform part of an offer or invitation to subscribe for or to purchase any financial instrument(s) nor shall it or any part of it
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a summary of investor rights in French. BNP PARIBAS ASSET MANAGEMENT FRANCE may decide to discontinue the marketingof the financial instruments, in the cases covered by the applicable regulations.
“The sustainable investor for a changing world” reflects the objective of BNP PARIBAS ASSET MANAGEMENT France tointegrate sustainable development into its activities, although not all funds managed by BNP PARIBAS ASSET MANAGEMENTFrance fulfil the requirement of either Article 8, for a minimum proportion of sustainable investments, or those of Article 9
under the European Regulation 2019/2088 on sustainability-related disclosures in the financial services sector (SFDR). For
more information, please see www.bnpparibas-am.com/en/sustainability

The sustainable
investor for achanging world

December 2023 - Design: AM Graphic Design - P2311011

For a complete description and definition of generic and specific risks, please refer to theAppendix 3 of Book I of the Prospectus.