Australia and New Zealand Banking : 2016 Half Year Corporate Sustainability Update

56ea758a-8182-4991-b2d5-acbeea5294ba.pdf 2016 HALF YEAR CORPORATE SUSTAINABILITY UPDATE CEO'S mESSAgE

Shayne Elliott

Chief Executive Officer

This update is being released at a time when trust in our sector is under question. The conduct of the industry has at times led to unfair and unacceptable customer outcomes. I acknowledge, and am personally deeply disappointed that our own bank has not met the standards that our customers, shareholders and employees expect. We know that it is going to take a lot of hard work and meaningful action to regain trust, and we are committed to creating sustainable changes.

We have recently been formally discussing these issues with a broad range of stakeholders, including customers, investors, regulators, employees and community organisations. Resoundingly they have reminded us that ethical and fair conduct must be at the heart of everything we do. How we treat our customers, employees and the communities in which we operate speaks to the values we hold as an organisation. This is not a surprise.

Banking has always been founded on trust, but the industry has lost its way in some areas and allowed poor practices, weak procedures and misaligned incentives to take us away from our core purpose: the service of customers and creating a future where local communities can thrive.

Together with other Australian banks, we recently announced a range of initiatives to achieve substantial improvements. These include a review of retail sales commissions, stronger whistle blower protection and complaints handling measures. As important as this is, we also need to play our role

in responding to "mega trends" like our ageing society, continuing rapid technological change, climate change and the resulting structural social and economic shifts.

Our 2016 sustainability targets, performance against which is reported in this update, reflect the actions we are taking on, for example, social inclusion, financial hardship and cyber security. Case studies show how

we are supporting our customers to transition to a low carbon economy. While we still have much to achieve, and acknowledging the rightfully high expectations of the community, I am proud of the achievements to date. They are a solid foundation from which we can build further and I hope they give all stakeholders confidence that we can, and will, make further improvements in the future.

The progress being made across the range of sustainability initiatives discussed in this update would not be possible without the dedication and commitment of our people. I would like to take this opportunity to thank them all for their efforts to date and ask them for their continued support to make ANZ a fairer and more sustainable organisation.

Note: The information provided in this half year update covers the period 1 October 2015 - 31 March 2016. KPMG has provided independent assurance in relation to Project Finance emissions reported on page 8. A copy of KPMG's assurance report is on page 11.

2016 SUSTAINABILITY TARgETS AND PERFORmANCE

Each year we set public sustainability targets and a corresponding Group- wide program of work to support the delivery of our business strategy.

Progress against our targets1 is reviewed by the Corporate Sustainability

and Diversity Committee, chaired by our CEO, and twice a year by the Board Governance Committee, led by our Chairman. A number of these targets are directly aligned with the United Nations' Sustainable Development Goals.

59%

ON TRACK TO ACHIEVE

38%

IN PROGRESS

3%

OFF TRACK

SUSTAINABLE DEvELOPmENT

Commitment - Integrate social and environmental considerations into our business decisions, products and services to help our customers achieve their sustainability objectives.

OBjECTIvE AND FY16 TARgETS PROgRESS COmmENTARY

1. Engage with and support our customers to manage their environmental, social and governance (ESG) risks and opportunities

   • Deliver social and environmental banking risk training to at least 250 bankers in our Institutional and Corporate and Commercial Divisions

     • We are on track to meet this target, with training scheduled to be undertaken by bankers in Singapore, Hong Kong, Australia and New

     Zealand before year end.

2. Integrate social and environmental considerations into our business decisions

   • Review and update our Human Rights Standards • We are on track to meet this target. Feedback gathered through internal and external stakeholder workshops will inform the revision of ANZ's

     Human Rights Standards.

3. Support transition to a low carbon economy

   • Facilitate at least $10 billion in investment by 2020 in low carbon and sustainable solutions, including renewable energy generation, green buildings and less emissions intensive manufacturing and transport

     • ANZ has facilitated more than $1.1 billion in low carbon investments and sustainable solutions, such as green buildings, renewable energy, energy

     efficiency, water, waste, and transportation, since 1 October 2015 (see case study examples on page 10 of this report).

     1 Unless stated targets are at Group level.

     DIvERSITY AND INCLUSION

     Commitment - Build the most diverse and inclusive workforce of any major bank in our region to help us innovate, identify new markets, connect with customers and make more informed decisions for our business.

     OBjECTIvE AND FY16 TARgETS PROgRESS COmmENTARY

4. Achieve gender balance in all aspects of our operations

   • Increase the representation of Women in Management by at least 3% from 2015 to 2018

   • 50:50 gender representation on recruitment of graduates and key Enterprise Talent programs (Building Enterprise Talent, Generalist Bankers) and no less than 40% women on Leadership Pathways

     • Group-wide representation of Women in Management is at 40.8%, up from 40.4% at 30 September 2015.

       • Our 2016 Graduate, Building Enterprise Talent and Generalist Bankers programs are gender balanced, with 55%, 52% and 50% female participation

       respectively. Leadership Pathway program participation rates will be discussed in our full year Corporate Sustainability Review.

   • Increase women on ANZ's Board to 30% by calendar year end 2017 • 25% of Board members are women.

5. Provide employment opportunities for disadvantaged and under-represented groups to support economic and social inclusion in our communities

   • Increase both the number of people with a self-disclosed disability and the number of people with a disability recruited through traineeships, graduate programs and permanent employment opportunities by 15% from 2015

   • Increase the number of Indigenous Australians recruited through traineeships, graduate programs and permanent employment opportunities by 15% from 2015

     • Results for self-disclosure of disability will be available after the next

     'My Voice' employee survey, and will be discussed in our full year Corporate

     Sustainability Review.

     • 61 people with a disability have been employed across the region, against a target of 146.

       • We have recruited 65 Indigenous Australians (8 employees and 57 trainees), against a target of 124.

6. Mainstream flexibility across Australia and New Zealand, and extend flexibility to other geographies

   • Maintain 80% or more of staff using flexible working options • Results for flexibility will be available after the next 'My Voice' employee survey, and will be discussed in our full year Corporate Sustainability Review.

   • Flexible working policies in place for a minimum of 90% of ANZ geographies by 2018 • ANZ's Flexibility Policy continues to be rolled-out across the countries in

which we operate, with the policy recently launched in Laos.