Interim Pillar 3 disclosures

Appendix II – Environmental, Social and Governance 2023 Risks

BANK OF CYPRUS HOLDINGS GROUP

Interim Pillar 3 Disclosures 2023 – Appendix II

1. Environmental risk

1.1. Business strategy and processes

1.1.1. Business strategy to integrate environmental factors and risks

The Group’s approach to climate action is evolving over time and has progressively been embedded into the Group’s activities and actions. The Group is determined to create a stronger, safer, and future-focused organisation. Consequently, the Group focuses on creating lifelong partnerships with customers, as well as guiding and supporting them in a changing world by financing projects which bear a positive climate impact. Underpinning the Group’s Climate Strategy (a pillar within its ESG strategy), there are three strategic areas where, moving forward, the Group will focus our climate action:

• Reinforcing the impact of climate financing;

• Building resilience to climate change; and

• Further integrating climate change considerations across all of Group’s standards, methods and processes.

The commitments made by the Group in its ESG Strategy focus on the following key objectives:

• Become carbon neutral by 2030;
• Become Net Zero by 2050;
• Steadily increase Green Asset Ratio; and
• Steadily increase Green Mortgage Ratio.

In supporting the net zero commitments, the Group’s Scope 1, Scope 2 and material non-Financed Scope 3 GHG emissions were calculated for 2021, using a widely accepted methodology and bringing the Group in a position where it can set a feasible roadmap of actionable tasks to reduce its carbon footprint and achieve its decarbonisation goals.

Given the fact that BOC PCL is the main contributor of GHG emissions of the Group, BOC PCL has formulated a decarbonisation plan to reduce its own carbon footprint relating to Scope 1 and Scope 2 GHG emissions and ultimately reach its Carbon Neutral target by 2030.

BOC PCL plans to invest in energy efficient installations and actions and replace fuel intensive machineries and vehicles from 2023 to 2025, leading to c.5-10% reduction in Scope 1 and Scope 2 GHG emissions by 2025 compared to 2021. BOC PCL expects that the Scope 2 GHG emissions will be reduced further when the energy market in Cyprus shifts further towards renewable energy. The actions planned by BOC PCL between

2023 to 2025 include:

• Air-conditioningsystems replacements
• Boiler replacements
• Photovoltaic (PV) installations
• Roof insulation
• CO2 sensors installation
• Heat recovery installation.

BOC PCL became a member of the Partnership for Carbon Accounting Financials (PCAF) and has estimated Financed Scope 3 GHG emissions derived from its loan portfolio based on PCAF standard and proxies. In 2023, the Group plans to estimate Financed Scope 3 GHG emissions associated with its investments and insurance portfolios. BOC PCL is currently in the process to set decarbonisation targets in specific sectors and asset classes of the loan portfolio. The decarbonisation targets that will be set in 2023 associated with the loan portfolio will also be embedded in the Group’s Financial Plan.

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BANK OF CYPRUS HOLDINGS GROUP

Interim Pillar 3 Disclosures 2023 – Appendix II

1.1.1. Business strategy to integrate environmental factors and risks (continued)

BOC PCL has also carried out an initial materiality assessment and has identified the exposures vulnerable to transition and physical risks. As a short-term measure, these exposures have been earmarked as appropriate to receive transition finance and BOC PCL will attempt to provide new lending in alignment with any available government initiatives for the green transition of the economy (Recovery & Resilience Facility). Business lines are expected to prioritize new lending for investment and capex that supports clients’ transition financing needs within the existing sector limits. It is noted that these considerations have been included in the business strategy for 2023 – 2026 even though currently there are no measurable decarbonization targets for the loan portfolio.

As a means to enhance not only its climate risk framework but also its ability to identify future opportunities BOC PCL is in the process of introducing new ESG scorecards within its credit granting process which will allow it to more granularly identify ESG risks but at the same time it will open a communication line with its clients to better prepare them to comply with upcoming EU legislation on disclosure, such as the CSRD, which will eventually be reflected within the Group’s own net-zero strategy by providing more accurate data and targets.

BOC PCL offers a range of environmentally friendly products to manage transition risk and help its customers become more sustainable. For example, a number of loan products are offered under the Fil-eco Product Scheme. BOC PCL offers Environmentally friendly Car Hire Purchase addressed to anyone who wants to buy a new hybrid or electric car, providing its customers the opportunity to buy a new electric vehicle and to move away from transport options reliant on fossil fuels. Moreover, an environmentally friendly loan for home renovation is offered to customers who want to renovate and upgrade the energy efficiency of their privately owned primary residence or holiday home and achieve a higher energy efficiency rating. Further, the customers may benefit from an Energy Loan for the installation of energy saving systems for home use. This product is addressed to customers who seek financing for the installation of photovoltaic systems for home use and other home energy-saving systems. Looking forward, in 2023 the Group will continue to build out its green product offering further. The Group expects to discuss ESG and climate matters with its clients at the point of loan origination. In addition, the Group has set up a Sustainable Finance Framework which will

facilitate the issuance of Green, Social or Sustainable bonds. The proceeds from such bonds will be allocated to eligible activities and products as designated in the Sustainable Finance Framework.

In terms of stress testing and climate scenario analysis, BOC PCL is currently building the necessary modelling approaches to conduct climate-related stress testing through a bottom-up methodology. Developing stress testing will further help us to assess the implications of physical and transition risks in our portfolios, and to inform our business strategy and capital planning. In addition, to incorporate physical risks in the loan origination process, BOC PCL is in the process of acquiring a third-partydatabase.

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BANK OF CYPRUS HOLDINGS GROUP

Interim Pillar 3 Disclosures 2023 – Appendix II

1.1.2. Objectives, targets and limits

The Group has estimated the Scope 1 and Scope 2 GHG emissions of 2021 relating to own operations in order to set the baseline for carbon neutrality target. For the Group to meet the carbon neutrality target, the Scope 1 and Scope 2 GHG emissions should be reduced by 42% (absolute target) by 2030. The absolute reduction target has been set following the climate scenario of 1.5C which is aligned with the Paris Agreement. BOC PCL in 2022, designed the plan of actions to meet the carbon neutrality target by 2030 and progress towards Net Zero target of 2050. The Group is in the process to design the decarbonization strategy for the reduction of Scope 1 and Scope 2 GHG emissions of its subsidiaries.

For the purpose of the calculation of the 2021, 2022 and during the six months ended 30 June 2023 Carbon

footprint, the Group has set its organisational boundaries based on the operational control approach. The 2021, 2022 and during the six months ended 30 June 2023 carbon footprint for Scope 1 and Scope 2 GHG

emissions was estimated based on the methodologies described in the Greenhouse Gas Protocol (‘GHG Protocol’) and ISO14064-1:2019 standard. The Group’s own carbon footprint will continue to be calculated on an annual basis which will enable comparisons to be made and progress against decarbonisation targets to be monitored.

In 2022, BOC PCL has formulated a plan of action to reduce Scope 1 and Scope 2 and meet carbon neutrality target by 2030 and plans to invest in energy efficient installations and actions and replace fuel intensive machineries and vehicles from 2023 to 2025, which would lead to c.5-10% reduction in Scope 1 and Scope 2 GHG emissions by 2025 compared to 2021. The Group expects that the Scope 2 GHG emissions will be reduced further when the energy market in Cyprus shifts further towards renewable energy.

A number of carbon reduction initiatives are already underway and contribute to the reduction of carbon footprint in the immediate future. These energy and waste initiatives include:

• installation of new solar panels;
• implementation of Energy Management system;
• installation of electric chargers for cars;
• improvement of waste measurement;
• increase initiatives for waste recycling; and
• reduction of paper use.

BOC PCL has managed to reduce its Scope 2 GHG emissions by 16% during the six months ended 30 June 2023 compared to during the six months ended 30 June 2022. In addition, BOC PCL invests continuously in updating its internal practices, and upgrading equipment and technologies, adopting new standards, and complying with international best practices.

The overall environmental impact relating to Scope 1 mobile and stationary combustion and Scope 2 purchased electricity GHG emissions reduced by 836 GHG emissions tonnes during the six months ended 30

June 2023 compared to during the six months ended 30 June 2022 which represents c.15% reduction.

Furthermore, BOC PCL has joined the Partnership for Carbon Accounting Financials (PCAF) in October 2022 and is following the recommended methodology for the estimation of the Financed Scope 3 GHG emissions. BOC PCL has estimated Financed Scope 3 GHG emissions relating to the loan portfolio based on PCAF standard and proxies. The PCAF Standard has been reviewed by the GHG Protocol and conforms with the requirements set forth in the Corporate Value Chain (Scope 3) Accounting and Reporting Standard for category 15 investment activities. In addition, PCAF provides a data quality ranking for the estimation of Financed Scope 3 GHG emissions based on data applied in the estimation for each asset class. The scale is between 1-5 with 1 being the highest quality and 5 being the lowest quality.

BOC PCL aims to continuously enhance the data quality used on the estimation of Financed Scope 3 GHG emissions and eliminate the data gaps, therefore in 2023 a client questionnaire is expected to be launched to gather the relevant data, where possible, as well as continue to enhance the loan origination process. BOC PCL has already established a policy in the loan origination process to gather Energy Performance Certificates (ratings and GHG emissions per square meters) for the financed properties and collateral properties. Additional data gathering actions will be performed during 2023.

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