Rizal Commercial Banking : SUSTAINABILITY AND IMPACT REPORT 2022

ABOUT THE REPORT

CONTENTS

Propelled by a 60-year track record in Philippine banking, RCBC is forging ahead into the future, LEADING FORWARD by embedding environmental, social, and governance (ESG) principles into its operations.

First of its Kind

For the first time since reporting on its sustainability performance, the Bank has combined its Sustainability Report and Impact Report into one publication, signaling its determination to make sustainability, and its diverse aspects, a core part of its business strategy.

This Report also contains RCBC's contributions to the United Nations Sustainable Development Goals (UN SDGs). It includes the Bank's first disclosure of UN SDG loans based on the internal mapping of its total loan portfolio versus the UN SDGs.

Being the first of its kind for RCBC, this 2022 Sustainability and Impact Report (SIR) highlights these pioneering strategies:

• Strategic financial inclusion through the launch of "Moneybela: Barangayan Banking," the country's first human-assisted remote banking service;
• Climate risk management through the conduct of an initial greenhouse gas (GHG) emissions accounting of its business loans as part of the Partnership for Carbon Accounting Financials (PCAF), the first Philippine bank to participate;
• People transformation by integrating deep awareness of Customer Experience (CX) principles and practices on all employees; and
• Sustainable value chain by issuing recycled or environment- friendly cards by 2023, an unprecedented innovation made possible through RCBC Credit Cards' collaboration with its supplier, Thales.

Reporting Frameworks

This Report was designed in accordance with these references:

• Sustainability Reporting Guidelines for Publicly Listed Companies under the Securities and Exchange Commission (SEC) Memorandum Circular No. 4 Series of 2019 Consistent with the SEC's guidelines
  on Sustainability Reporting, these four material topics are extensively discussed:
• • Economic
  • Environment
  • Social
  • Contributions of RCBC products and services to the UN SDGs;
• BSP Circular 1085 and BSP Circular 1128 mandating banks to adopt a Sustainable Finance Framework and requiring banks to integrate environmental and social risks in the Environmental and Social Risk Management Framework, respectively.

• RCBC's Sustainable Finance Framework (April 2019) RCBC publishes an Allocation Report and an Impact Report that conform to the disclosure requirements of BSP Circular 1085. Reporting takes place a year following the issuance of the Sustainable Financing Instruments (SFIs) and renewed annually until the net proceeds are fully allocated.
• • The Allocation Report shows how the net proceeds from the SFI are distributed in the Eligible Green and Social Portfolio.
  • The Impact Report shows the aggregated impact of the Eligible Green and Social Portfolio, as well as the impact of the Eligible Green and Social Portfolio based on the UN SDGs.
• PCAF's Global GHG Accounting and Reporting Standard Part A: Financed Emissions (Second Edition) RCBC's disclosure on its financed GHG emissions is based on the PCAF's methodological guidance for asset classes, particularly for business loans. The following are included in the disclosure:
• • Financed Emissions, representing RCBC's Scope 3 GHG emissions. This supplements the SEC guidelines on Sustainability Reporting (limited to disclosure of Scope 1 and Scope 2 GHG emissions).
  • Avoided Emissions, derived from loans to Renewable Energy projects. Per the PCAF Standard, these projects "can result in emissions being avoided as they displace the emissions that normally would have occurred without the project's implementation."
  • Data Quality Scoring, in recognition of data limitations. Inputs in applying the PCAF Standard formula rely on assumptions that depend on the available data. According to the PCAF Standard, this data quality scoring "enables financial institutions to develop a strategy to improve data over time."

The results in this Report are in fulfilment of the Bank's commitment to PCAF, more than a year before the three- year deadline since it started participating in PCAF in September 2021.

60 80

RCBC started its operations in the province of Rizal and was incorporated on September 23, 1960 under the name Rizal Development Bank. RCBC received approvals from the Bangko Sentral ng Pilipinas (BSP) to operate as a commercial bank in 1963 under its present name and then as a universal bank in 1989.

RCBC is listed in the Philippine Stock Exchange and trades under the stock symbol 'RCB'.

For over 60 years, the Bank has been a pillar of the banking industry in the Philippines with a wide range of services in investments, microfinancing, and overseas remittances, among many others.

RCBC is majority owned by a Filipino conglomerate known as the Yuchengco Group of Companies (YGC), a premier business organization in the Philippines covering over 60 businesses involved in a wide range of financial and non-financial services. YGC is recognized as one of the oldest and largest conglomerates in Southeast Asia.

RCBC ranks as the fifth largest private universal bank in the Philippines with total resources of Php1.2 trillion

(including subsidiaries and affiliates) and net income of Php12.1 billion as of December 31, 2022. The Bank recorded an increase in asset volume of 23%.

As a diversified financial institution, RCBC serves corporate and individual banking needs through multiple customer channels offering innovative products and services to various markets. Its inclusive financial business model expanded in 2010 when it ventured into the microfinance business via Rizal MicroBank (RMB, the thrift bank subsidiary) to serve the unbanked and underserved segments of the country's population. One of the youngest affiliates of YGC, RMB mainly provides loans to microenterprise and small business operators as well as agricultural value chain players.

RCBC has been recognized for its digital and innovative solutions and aggressive business growth. In 2022, it garnered over 60 awards including: "Asia's Best Digital Bank" for three consecutive years by Asiamoney; "The Best Financial Inclusion Initiative" by the Asian Banker Financial Technology Innovation Awards for two consecutive years; "The Best SME Bank" by the Asian Banker Philippines Awards; "The Best Retail Bank" and

1. "The Best Corporate Bank in the Philippines" both by the Global Banking Finance Awards.

The Asset Benchmarking

Award for ESG - Platinum

Award

2022 ESG Corporate Awards

Given by The Asset

January 2023

MESSAGE FROM THE CHAIRPERSON

LEADING IN OUR INCREASINGLY FRAGILE WORLD

Being truly committed to sustainability means doing anything possible to make the world a better place for future generations to inherit. It also demands that we act now to safeguard lives, uplift society, and protect the planet.

This has never been truer than now. The world we live in has become increasingly fragile since the COVID-19 pandemic.

According to OECD estimates, the pandemic has wiped out more than four years of gains on poverty eradication and pushed 93 million more people into extreme poverty in 2020. Disrupted essential health services resulted in a drop in immunization coverage for the first time in a decade and a rise in deaths from tuberculosis and malaria. More than 24 million learners- from pre-primary to university level- are at risk of never returning to school.

Compounding the lingering effects of the pandemic in 2022 were geopolitical conflicts such as the war between Russia and Ukraine, which created one of the largest refugee crises of modern time. The OECD said a quarter of the global population live in conflict-affected countries and a record 100 million people have been forcibly displaced worldwide. The war in Ukraine has also caused food, fuel and fertilizer prices to skyrocket, escalating into a global food crisis.

Closer to home, we are among the world's populations experiencing increased heatwaves, droughts, floods, and other extreme weather disturbances. Their devastating effects on millions of people and potentially irreversible damage to the Earth's ecosystems are further exacerbated by record inflation, rising interest rates, and looming debt burdens.

Our bigger purpose

Now more than ever, financing for sustainable development plays a critical role in human survival. In 2020 alone, the projected shortfall for financing the 17 UN Sustainable Development Goals (SDGs) already stood at USD1.7 trillion. This is on top of the existing gap of USD2.5 trillion in annual financing needed to achieve the 17 SDGs by 2030.

It would take a much stronger commitment to stem the tide. It is estimated that 80% of global financial assets are held in advanced economies and only 20% in developing countries where more than 80% of people on the planet live. If banks, institutional investors, and asset managers would reallocate just 1.1% of their total assets - estimated at USD4.2 trillion - to bridge the SDG financing gap, then all is not lost.

We feel this sense of urgency at RCBC, the fifth biggest privately owned universal bank in the Philippines. Being a major allocator of capital and financial intermediary in a country considered one of the world's most vulnerable to climate change, we have a responsibility to channel private financing towards the transition to a carbon-

neutral, climate-resilient, resource efficient, and fair economy.

For more than a decade now, we have been putting sustainability at the heart of our business strategy. In 2011, we put in place an Environmental and Social Management System (ESMS) that enables us to promote sustainable practices in our clients' operations. Our commitment grew stronger in 2019 when we established our Sustainable Finance Framework, ahead of BSP Circular 1085 that mandates banks to integrate sustainability considerations in their governance frameworks, risk management systems, strategies and operations.

Our continuing journey

While the pandemic prompted many to push the "pause" button on their sustainability plans, we at RCBC forged ahead, driven by the realization that the world will only get more fragile if we do not do our part and act now.

This sense of urgency has emboldened us to take on diverse challenges and score many milestones in 2022, which include being the first Philippine bank to adopt quantitative tools to assess the global risk from climate change. We are proud to report these achievements in our 2022 Sustainability and Impact Report which we have put together into one publication for the first time. This represents our firm resolve to improve on our sustainability reporting journey, now on its fourth year.

We see this journey to be never-ending, much like the hard work we need to put in to tackle the world's problems. Transitioning to more sustainable, resilient and socially inclusive economies demands a great deal of commitment and sacrifice, huge investments, innovations, and a reinvention of how we live and do business.

In many ways, this is also what RCBC has been doing for more than 60 years, helping our customers navigate through challenges and opportunities. We have been unlocking the potential in people and businesses, using the power of finance to create sustainable progress.

We have a clear ambition to be a leader in sustainable finance and to lead forward by showing others the way to sustainability - the only way for humanity and our planet to survive.

HELEN YUCHENGCO-DEE

Chairperson

PRESIDENT'S REPORT

LEADING THE WAY

FOR SUSTAINABILITY

The year 2022 was the fifth warmest year on record.1 Heat waves swept many continents while others grappled with extreme weather events. Many developed economies also faced an energy crisis as a consequence of the conflict in Ukraine.

In the Philippines, climate change is exacting a heavy toll on human lives, properties, and livelihoods. Half of our population live in urban areas while many cities are in coastal areas. This is why our country is considered one of the most vulnerable to the effects of climate change, particularly sea level rise. Annual losses from typhoons have been estimated to cost us 1.2% of our GDP.2

It also has a deep social and economic impact on the poor and on the most fragile, posing a major obstacle to the country's ambition to become an upper middle- income country by 2040. It hence serves as a wake-up call to champion social responsibility and accelerate the transition towards greener solutions and technologies.

The private financial sector plays a vital role in this transition to a resilient, low-carbon world. We hold the decision to ramp up climate finance by working with other local financial institutions, our clients, and our regulators.

The pursuit of true leadership

At RCBC, we see this as an opportunity to lead and lead forward.

In 2022, the Bank climbed in ranking and emerged as the fifth largest privately owned universal bank in the country in terms of assets. This represents, not just a steady climb to industry leadership, but one that carries a big badge of responsibility.

For us, true leadership demands more than just allocating capital. It is also about making impactful financing and investment decisions that would make our world a better place.

This mission emboldened us to embark on a sustainability journey as early as 2011 when we put in place an Environmental and Social Management System (ESMS). It enabled us to adhere to the International Finance Corporation's (IFC) eight performance standards.

In 2020, we were the first bank to publicly declare our commitment to cease funding for the construction of new coal power plants in the country. We will have zero exposure to coal-fired power projects by 2031.

To demonstrate the seriousness of our commitment, we became the first Philippine bank to be a signatory of the Partnership for Carbon Accounting Financials (PCAF) and the first Southeast Asian advisory engagement of IFC and 2 Degrees Investing Initiative (2DII) for the use of the Paris Agreement Capital Transition Assessment (PACTA) tool. In 2022, we started adopting these quantitative global climate risk analysis tools to help address climate change in terms of our loan portfolio. The results generated from these tools form part of our 2022 Sustainability and Impact Report.

Partnerships for the future

While climate change is one big fight we see, we are also cognizant of other issues that continue to expose the fragility of our society and widen the divides such as poverty, hunger and malnutrition, social inequity, and illiteracy.

To help address these challenges, we continue to develop and issue Sustainable Financing Instruments (SFIs) for projects with clear environmental and social benefits, in line with RCBC's Sustainable Finance Framework. Since 2019, we have issued USD1.4 billion worth of SFIs that refinanced our funding for over 8,000 sustainable projects. Our firm commitment towards sustainability assures investors that investment proceeds go to green and social projects that will ensure a healthy environment for future generations.

In 2022, we pioneered the country's first Peso green time deposit which expanded our SFIs. This enabled our customers to participate in our sustainability journey as well as ensure their own financial future while helping save the planet.

There is a lot more we can do, and even more when we lead and show others the way. In the coming years, our sustainability journey will be more exciting as we expand our efforts toward nature and wildlife preservation. By nurturing and broadening partnerships on a rock-solid foundation rooted in sustainability, we stay true to our DNA. After all, sustainability is a shared responsibility that we gladly embrace alongside our stakeholders.

EUGENE S. ACEVEDO

President and CEO