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© Sustainalytics 2020 Second-Party Opinion Commonwealth Bank of Australia Green, Social and Sustainability Funding Framework Evaluation Summary Sustainalytics is of the opinion that the Commonwealth Bank of Australia Green, Social and Sustainability Funding Framework is credible and impactful and aligns with the four core components of the Green Bond Principles, Social Bond Principles, and Sustainability Bond Guidelines. This assessment is based on the following: The eligible categories for the use of proceeds are aligned with those recognized by the Green Bond Principles, the Social Bond Principles and the Sustainability Bond Guidelines. Sustainalytics considers projects and activities related to (i) renewable energy, (ii) green commercial and residential buildings, (iii) energy efficiency, (iv) clean transportation, (v) sustainable water and wastewater management, (vi) pollution prevention and control, (vii) health, healthcare and wellbeing, (viii) education and vocational training and (ix) affordable housing to have positive environmental or social impacts and to advance the UN Sustainable Development Goals. CBA’s internal process for evaluating and selecting projects is managed by the Green, Social and Sustainability Funding Steering Committee (the “Committee”), which is comprised of various departments and management employees. The Committee is responsible for the Framework, review and approval of eligible assets. The process is aligned with market practice. CBA uses internal systems to tag and track the use of proceeds, including a Register with eligible assets as well as a Green Eligible Assets sub-register and a Social Eligible Assets sub-register. The proceeds will be managed on a portfolio basis within the sub-registers. The Committee monitors the assets on the Register and each sub-register on a quarterly basis to make sure the amount is equal or greater than the aggregate amount raised under the Framework. Pending full allocation or reallocation, CBA will invest unallocated proceeds as per its investment management policy. The process is aligned with market practice. CBA intends to report on the allocation of proceeds on its website on an annual basis. CBA is committed to disclose an annual impact report, including impact metrics. An independent auditor will oversee verifying the tracking of proceeds annually, which is aligned with market best practice. Overall, Sustainalytics views CBA’s allocation and impact reporting as ali gned with market practices. Evaluation date February 2020 Issuer Location Sydney, Australia Report Sections Introduction ............................................... 2 Sustainalytics’ Opinion .............................. 3 Appendices ..............................................12 For inquiries, contact the Sustainable Finance Solutions project team: Lili Hocke (Amsterdam) Project Manager [email protected] (+31) 20 205 00 40 Evan Bruner (Amsterdam) Project Support [email protected] (+31) 20 205 0027 Charles Cassaz (Amsterdam) Project Support [email protected] (+31) 20 205 02 09 Jean-Claude Berthelot (Amsterdam) Client Relations [email protected] +44 20 3880 0193

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Page 1: Second-Party Opinion Commonwealth Bank of Australia Green ... · 1. Renewable Energy 2. Green Commercial Buildings 3. Green Residential Buildings 4. Energy Efficiency 5. Clean Transportation

© Sustainalytics 2020  

Second-Party Opinion

Commonwealth Bank of Australia Green, Social and Sustainability Funding Framework

Evaluation Summary

Sustainalytics is of the opinion that the Commonwealth Bank of Australia Green, Social and Sustainability Funding Framework is credible and impactful and aligns with the four core components of the Green Bond Principles, Social Bond Principles, and Sustainability Bond Guidelines. This assessment is based on the following:

The eligible categories for the use of proceeds are aligned with those recognized by the Green Bond Principles, the Social Bond Principles and the Sustainability Bond Guidelines. Sustainalytics considers projects and activities related to (i) renewable energy, (ii) green commercial and residential buildings, (iii) energy efficiency, (iv) clean transportation, (v) sustainable water and wastewater management, (vi) pollution prevention and control, (vii) health, healthcare and wellbeing, (viii) education and vocational training and (ix) affordable housing to have positive environmental or social impacts and to advance the UN Sustainable Development Goals.

CBA’s internal process for evaluating and selecting projects is managed by the Green, Social and Sustainability Funding Steering Committee (the “Committee”), which is comprised of various departments and management employees. The Committee is responsible for the Framework, review and approval of eligible assets. The process is aligned with market practice.

CBA uses internal systems to tag and track the use of proceeds, including a Register with eligible assets as well as a Green Eligible Assets sub-register and a Social Eligible Assets sub-register. The proceeds will be managed on a portfolio basis within the sub-registers. The Committee monitors the assets on the Register and each sub-register on a quarterly basis to make sure the amount is equal or greater than the aggregate amount raised under the Framework. Pending full allocation or reallocation, CBA will invest unallocated proceeds as per its investment management policy. The process is aligned with market practice.

CBA intends to report on the allocation of proceeds on its website on an annual basis. CBA is committed to disclose an annual impact report, including impact metrics. An independent auditor will oversee verifying the tracking of proceeds annually, which is aligned with market best practice. Overall, Sustainalytics views CBA’s allocation and impact reporting as aligned with market practices.

Evaluation date February 2020

Issuer Location Sydney, Australia

Report Sections

Introduction ............................................... 2

Sustainalytics’ Opinion .............................. 3

Appendices ..............................................12

For inquiries, contact the Sustainable Finance Solutions project team:

Lili Hocke (Amsterdam) Project Manager [email protected] (+31) 20 205 00 40

Evan Bruner (Amsterdam) Project Support [email protected] (+31) 20 205 0027

Charles Cassaz (Amsterdam) Project Support [email protected] (+31) 20 205 02 09

Jean-Claude Berthelot (Amsterdam) Client Relations [email protected] +44 20 3880 0193

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Introduction

Commonwealth Bank of Australia (CBA) was created in 1911 by the Australian government. CBA was the central bank of Australia for four decades, from 1920 until 1960. In 1996 CBA was privatised by the Australian government and is now a publicly traded company on the Australian Securities Exchange. Now, CBA is a multinational bank with operations in Australia, New Zealand, Europe, North America and Asia. These services include retail, premium, business and institutional banking, and share-broking products and services. CBA has developed a Green, Social and Sustainability Funding Framework (the “Framework”) under which it intends to issue green, social and sustainability bonds and asset-backed or residential mortgage-backed securities. CBA intends to use the proceeds to finance and refinance, in whole or in part, existing and future social and environmental sustainability projects which will contribute to reduce Greenhouse Gas (GHG) emissions and improve the wellbeing of Australians. The Framework defines eligibility criteria in ten areas:

1. Renewable Energy 2. Green Commercial Buildings 3. Green Residential Buildings 4. Energy Efficiency 5. Clean Transportation 6. Sustainable Water and Wastewater Management 7. Pollution Prevention and Control 8. Health, Healthcare and Wellbeing 9. Education and Vocation Training 10. Affordable Housing

CBA engaged Sustainalytics to review its Green, Social and Sustainability Funding Framework, dated December, 2019 and provide a second-party opinion on the Framework’s environmental credentials and its alignment with the Green Bond Principles 2018 (GBP), Social Bond Principles 2018 (SBP) and Sustainability Bond Guidelines (SBG).1 This Framework has been published in a separate document.2

As part of this engagement, Sustainalytics held conversations with various members of CBA’s management team to understand the sustainability impact of their business processes and planned use of proceeds, as well as management of proceeds and reporting aspects of CBA’s Green, Social and Sustainability Funding Framework. Sustainalytics also reviewed relevant public documents and non-public information. This document contains Sustainalytics’ opinion of the Commonwealth Bank of Australia Green, Social and Sustainability Funding Framework and should be read in conjunction with that Framework.

1 The Green Bond Principles are administered by the International Capital Market Association and are available at https://www.icmagroup.org/green-social-and-sustainability-bonds/green-bond-principles-gbp/ 2 The Commonwealth Bank of Australia Green, Social and Sustainability Funding Framework is available on CBA’s website at: https://www.commbank.com.au/sustainabilityinstruments

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Sustainalytics’ Opinion

Section 1: Sustainalytics’ Opinion on the Commonwealth Bank of Australia Green, Social and Sustainability Funding Framework

Summary

While the Framework also refers to deposits, Sustainalytics’ opinion only refers to bonds, and asset-backed or residential mortgage-backed securities issued under the Framework.

Sustainalytics is of the opinion that the Commonwealth Bank of Australia Green, Social and Sustainability Funding Framework is credible and impactful, and aligns with the four core components of the GBP, SBP and SBG. Sustainalytics highlights the following elements of CBA’s Green, Social and Sustainability Funding Framework:

• Use of Proceeds:

- The eligible use of proceeds categories (Renewable Energy, Green Commercial Buildings,

Green Residential Buildings, Energy Efficiency, Clean Transportation, Sustainable Water and

Wastewater Management, Pollution Prevention Control, Health, Healthcare and Wellbeing,

Education and Vocation Training, Affordable Housing) are aligned with either the Green Bond

Principles 2018, the Social Bond Principles 2018 or the Sustainability Bond Guidelines 2018 and

are considered credible and impactful.

- CBA intends to use the green, social and sustainable bond proceeds to finance and refinance

loans for existing assets and assets in construction, as well as CBA’s own expenditures to social

projects. CBA also finance general purpose loans under its social eligibility criteria to

organisations that derive 90% or more of its revenues from activities defined under the social

eligibility criteria. Sustainalytics recognizes that the SBP prefer project-based lending and

financing, and that there is, in general, less transparency with non-project-based lending.

Sustainalytics notes that the social categories do have clear target populations (see below) and

considers organizations that are dedicated to the defined social categories to have a positive

social impact.

- CBA does not indicate a look-back period in its sustainability bond framework. Though

Sustainalytics acknowledges that the market may view the refinancing of older projects to reduce

the additionality of the green bond, Sustainalytics positively views CBA’s efforts to transparently

report on the portion of financing and refinancing projects and further encourages CBA to

indicate the completion year of its projects.

- Sustainalytics views positively CBA’s investments in solar PV, wind or hydro generation facilities,

transmission infrastructure dedicated to renewable energy and storage systems and positively

notes that hydro generation is limited to small-scale projects with a capacity of less than 25 MW.

- Regarding Green Commercial Buildings, the Framework enables CBA to finance new and

existing commercial buildings that align with green building certification schemes or the top 15%

of the energy performance of similar building in the respective city. CBA uses credible third-party

standards for green building certification, such as Green Star 5, NABERS 5, or BREEAM

Excellent certification. Sustainalytics conducted an assessment of the certification schemes and

considers them credible and impactful (please see Appendix 1 for a detailed analysis of the

standards).

- The Framework enables CBA to finance mortgage loans for new and existing buildings with a

renewable energy output of 5kW3 or new buildings that fall into the top 15% of residential

buildings in terms of energy performance. Sustainalytics positively notes that the criteria align

with the Climate Bonds Initiative low-carbon building standard. To identify the top 15% of

buildings, CBA uses local building codes as a proxy for energy performance. Given that the

Australian building codes define energy efficiency measures such as glazing and insulation for

different climate regions of the country,4 and given that the Building Code Australia (BCA) 2011

in Victoria, BCA 2013 in Tasmania, and the BASIX Energy40 certification in New South Wales

3 or the minimum set for the postcode of the property in accordance with Climate Bonds Initiative standards for Australia 4 National Construction Code: https://ncc.abcb.gov.au/ncc-online/NCC

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are considered eligible under Climate Bonds Standards, Sustainalytics considers building codes

to be an adequate and credible proxy.

- Sustainalytics also positively notes that CBA set a minimum threshold of 30% for energy

efficiency improvement in building refurbishment or upgrade.

- CBA's framework allows for allocation to “smart grid” investments that are intended to improve

the efficiency of energy transmission and distribution. CBA confirmed that proceeds will not be

allocated to projects that facilitate new connections to fossil fuel power plants. Sustainalytics

views positively investments that are designed to improve grid efficiency and encourages CBA

to select projects that are clearly anticipated to deliver tangible efficiency improvements.

- CBA also intends to finance the development and upgrade of electrified rail transport for

passengers and freight (non-diesel rolling stock), transportation infrastructure and e-charging

stations. Sustainalytics positively notes that financing of hybrid public transportation is limited to

vehicles with an emissions intensity of less than 56gCO2 per passenger per km and that CBA

excludes financing of freight transport dedicated to fossil fuel transport.5

- The Framework enables CBA to finance activities that contribute to soil remediation, waste

prevention and collection, waste reduction and waste recycling such as, including the

development, operation and upgrade of recycling facilities for metals, plastic or paper as well as

recycling or composting to divert waste from landfill.

- CBA also intends to finance activities that seek to improve water treatment infrastructure such

as wastewater treatment systems or storm water management and drought resilience.

Sustainalytics positively highlights CBA’s commitment to conduct appropriate environmental

assessments and internal and external certifications of the eligible projects, which Sustainalytics

considers mitigates potential environmental risks related to large-scale water infrastructure

construction. - Sustainalytics highlight CBA’s focus on target populations in the following social categories:

- Financing of aged care services is limited to those services that serve low means, supported, concessional and assisted residents;

- Financing of public or not-for-profit education and expanded access to educational infrastructure, through, for example, the construction of campuses or training facilities;

- Financing of healthcare facilities, education and vocational training is limited to public or not-for profit facilities and services;

- Financing of affordable housing is limited to those projects that increase access to

affordable housing for low socio-economic groups,6 Aboriginal and Torres Strait Islanders

or victims of domestic or family violence, including financing of housing associations or

community housing providers and Government-led initiatives that increase the supply of

social housing where accommodation is provided at no more than 80% of the current market

rental rate;

- Financial literacy programs for students in primary and secondary school.

• Project Evaluation and Selection:

- CBA’s internal process for evaluating and selecting projects is managed by the Green, Social

and Sustainability Funding Steering Committee (the “Committee”). The Committee is

responsible for the Framework, review and approval of eligible assets. It is chaired by the Head

of Term Funding and comprised of representatives from Retail Banking Services, Business &

Private Banking, Institutional Banking & Markets, Investor Relations, Corporate Responsibility

and Group Treasury. The project evaluation and selection process are aligned with market

practice.

• Management of Proceeds:

- CBA uses its internal tracking system to track and report the funds. CBA set up a Register of

Eligible Assets which is divided into a Green Eligible Assets sub-register and a Social-Eligible

Assets sub-register. The proceeds will be managed on a portfolio basis within the sub-registers.

The Committee oversees monitoring funds on the Register and each sub-register on a quarterly

basis to make sure the amount is equal or greater than the aggregate amount raised under the

5 CBA in its Green, Social & Sustainability Funding Framework excludes financing of transport where more than 50% of the freight transported is fossil fuels (tonne/km) 6 Low socio-economic groups are defined as people who are homeless or are in receipt of Australian Commonwealth Rent Assistance

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Framework. CBA intends to allocate proceeds within 24 months, which is aligned with market

practice. Pending full allocation or reallocation, CBA will invest unallocated proceeds as per its

investment management policy. This process is aligned with market practice.

• Reporting:

- CBA intends to disclose an annual Green, Social and Sustainability Report which will include the

allocation of net proceeds and the environmental and social impact of specific projects and

activities. The report will be publicly available on the company website. It will include the share

of financing versus refinancing. CBA will also report annually on impact metrics such as CO2

emissions avoided, installed capacity (MW), new clean infrastructure built (km) or the volume of

water saved/reduced/treated (m³). An independent auditor will oversee verifying the tracking of

proceeds annually. Sustainalytics views CBA’s allocation and impact reporting as aligned with

market practices.

Alignment with Green and Social Bond Principles 2018 and the Sustainability Bond Guidelines 2018

Sustainalytics has determined that the CBA’s Green, Social and Sustainability Funding Framework aligns to the four core components of the Green Bond Principles 2018, Social Bond Principles 2018, and the Sustainability Bond Guidelines 2018. For detailed information please refer to Appendix 2: Sustainability Bond/ Sustainability Bond Programme External Review Form.

Section 2: Sustainability Performance of the Issuer

Contribution of Framework to CBA’s sustainability strategy and performance

CBA states that it is committed to delivering balanced and sustainable outcomes across its stakeholders through corporate strategies and commitments. CBA’s group-wide Environmental and Social Policy provides a reference point to illustrate the minimum standards the bank seeks to abide by.7 It provides the framework for the organization to conduct business, with focus areas including climate change, human rights, biodiversity, agriculture, forestry, and fisheries and defence supported by other work undertaken by CBA in diversity and inclusion, financial inclusion, community giving, indigenous reconciliation, financial education, customer advocacy, and privacy and data protection. In addition, CBA supports, participates in, or is signatory to several external frameworks and initiatives. These include, but are not limited to, Carbon Disclosure Project, Equator Principles, Paris Agreement, RE100, Task Force for Climate-related Financial Disclosures, UN Sustainable Development Goals.8

In 2019, CBA released its Environment and Social Framework, which outlines CBA’s role in limiting climate change in line with the Paris Agreement, and supporting a responsible global transition to net zero emissions by 2050. Commitments under this statement include:9

• Reduce own emissions continuously (target to source renewable energy for 100% of power needs by 2030)

• Increase support for low carbon projects (target of AUD 15bn in low carbon projects by 2025)

• Ensure lending policies support a responsible transition to a net zero emissions economy by 2050

• Adopt the recommendations of the Task Force on Climate Related Financial Disclosures (TCFD). The core elements of the recommendations focus on governance, strategy to identify and measure

7 CBA Environmental and Social Framework https://www.commbank.com.au/content/dam/commbank/about-us/download-printed-forms/environment-and-social-framework.pdf 8 Carbon Disclosure Project: Assists companies and cities to disclose environmental impact of major corporations; Equator Principles: A risk management framework for financial institutions, in assessing and managing environmental risk in project finance; RE100: A corporate led initiative aimed at increasing the demand and supply of renewable energy, Task Force for Climate-related Financial Disclosures: A set of voluntary climate-related financial risk disclosures for use by companies in providing information to investors, lenders, insurers, and other stakeholders. 9 CBA Environmental and Social Framework, (2019), at: https://www.commbank.com.au/content/dam/commbank/about-us/download-printed-forms/environment-and-social-framework.pdf

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climate-related risks, the process for mitigating climate-related risks, and the metrics used to monitor them.10

In addition, CBA is working on and has implemented several social initiatives and programmes:

• CBA is working on new models of financial support for victims of domestic and financial abuse and financial empowerment. CBA provides access for its clients to the Domestic & Family Violence Assistance Program and states that it aims to provide hardship assistance by for example minimising the need for additional documentation or providing longer term assistance with repayments.11

• CBA works with the Indigenous Consumer Assistance Network to increase diversity within the financial counselling sector. The bank provides scholarships for people from multicultural backgrounds to become accredited financial counsellors, including courses on financial abuse and effective strategies to support victims of domestic and financial abuse.

Sustainalytics notes that the instruments issued under this Framework can help CBA achieve their goal of financing AUD15 billion of Low Carbon Projects by 2025 and further demonstrate their commitment to addressing climate change in support of UN SDG 13. Given CBA’s sustainability and climate strategy and targets, as well as CBA’s social efforts, Sustainalytics is of the opinion that the use of proceeds of the Green, Social and Sustainability Funding Framework will support and complement the objectives of CBA’s sustainability targets and goals.

Well positioned to address common environmental and social risks associated with the projects

Sustainalytics is of the opinion that the activities being financed by the Framework will lead to overall positive climate, social and sustainable impacts, and contribute to global climate goals. While the eligible categories are recognized as impactful by the Green Bond Principles, Social Bond Principles and the Sustainability Bond Guidelines, Sustainalytics recognizes that the construction of the various projects funded by these instruments can pose challenges to worker health and safety, have an adverse impact on land use and biodiversity, and affect community relations. In addition, social projects that are funded without a targeted population strategy are at risk of resulting in negative consequences. For example, a risk in increasing social inequalities. To help mitigate these risks, CBA has policies and procedures in place to ensure that its lending practices support a responsible transition to a low carbon economy:

• CBA is signatory to the Equator Principles III, which are non-binding principles that provide guidance to identify and assess major environmental and/or social risks related to major infrastructure projects. CBA states that it uses the standards to manage, mitigate, and monitor Environmental, Social, and Governance (ESG) risks in project-related financing.

- CBA has developed an ESG assessment that is integrated into its risk management process, including human rights as defined by the UN Global Compact Principles and UN Guiding Principles on Business and Human Rights, climate change risks, negative impacts on World Heritage sites or other high value conservation areas, and water scarcity,12 applicable for all loans made by the institutional banking division and for loans above AUD 30mio from its business and private banking activities.

• CBA’s Green, Social and Sustainability Funding Framework excludes financing of activities related to projects which are known to have high levels of environmental or social risk, namely aviation and shipping, defence and security, fossil fuels, gambling, mining, and tobacco, further mitigating the risk of loans to risky projects and industries.

• CBA has identified target populations, as identified in Section 1 above, in its Social and Sustainability Funding Framework, mitigating risks related to unintended negative social impacts.

Sustainalytics is of the opinion that the internal processes and procedures put in place to ensure responsible lending practices will help CBA to mitigate social and environmental risks. Sustainalytics believes that the company is well positioned to identify and mitigate risks associated with the projects funded by the financing instruments.

Section 3: Impact of Use of Proceeds

10 Task Force on Climate Related Financial Disclosures https://www.fsb-tcfd.org/wp-content/uploads/2017/06/FINAL-2017-TCFD-Report-11052018.pdf 11 Commonwealth Bank of Australia, Domestic & Family Violence Assistance Program: https://www.commbank.com.au/support/dv-assistance.html 12 Commonwealth Bank of Australia, CBA Environmental and Social Framework, https://www.commbank.com.au/content/dam/commbank/about-us/download-printed-forms/environment-and-social-framework.pdf

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All ten use of proceeds categories are recognized as impactful by GBP, SBP and SBG. Sustainalytics has focused on eight below where the impact is specifically relevant in local context.

The Importance of Energy Efficiency in Commercial and Residential Buildings CBA intends to use part of the proceeds to finance green commercial and residential buildings as well as energy efficiency measures in both building types. In Australia, residential and commercial buildings are responsible for 11% and 8% of total final energy consumption, respectively,13 and their lifetime emissions – construction, maintenance and use – are responsible for approximately 25% of Australian’s GHG emissions.14 Cutting down buildings-related emissions is consequently crucial to meet Australia’s Paris Agreement targets of 26-28% GHG emissions reduction by 2030 compared to 2005 levels. According to the Australian Energy Efficiency Council (EEC), the implementation of global energy efficiency standards for building equipment and appliances could help Australia cut its GHG emissions halfway to its Paris agreement objective.15 In fact, energy efficiency lies at the cornerstone of buildings GHG emissions cut, by reducing energy consumption and enhancing energy productivity.16 Studies found that energy efficiency technologies could globally reduce new commercial buildings energy consumption by 20 to 30% on average.17 In addition, according to the Australian Sustainable Built Environment Council (ASBEC) energy efficiency measures could reduce national buildings’ energy consumption by 25% by 2030,18 indicating the importance to reduce energy consumption in buildings. Nevertheless, according to EEC “Australia’s rate of energy efficiency improvement has continued to fall behind other developed economies”.15 Several energy efficiency strategies were issued, setting a goal to improve energy productivity by 40% between 2015 and 2030; but key measures are still to be implemented. Given the above-mentioned context, Sustainalytics views positively CBA’s lending in green commercial and residential buildings and energy efficiency projects and is of the opinion that the projects financed can contribute to increase Australia’s energy efficiency.

Shifting Away from Fossil Fuels through Renewable Energy and Clean Transportation CBA intends to use part of the proceeds to lend to low carbon transport assets and dedicated infrastructure. Examples include electric and hybrid passenger transport, electric freight transport, e-charging stations and renewable energy plants. The Australian electricity mix is heavily dominated by fossil fuels: coal accounting for 60%, gas for 19% and 19% renewables of the electricity generation in 2018,19 underlining the need of decarbonizing electricity generation. In 2017, electricity generation accounted for 33% of Australia’s overall emissions.20 Australia committed to increase its generation of renewable energy to 33,000 GWh in 2020, accounting or 23.5% of Australia’s electricity generation by that year.21 Given the importance to increase renewable energy,

13Energy efficiency council, “Australian Energy Efficiency Policy Handbook”, (2016), at: http://www.eec.org.au/uploads/Documents/Platofrm%20Documents/Australian%20Energy%20Efficiency%20Policy%20Handbook%20%E2%80%93%20July%202016.pdf 14 Van der Heijden, J., (2017), “From leaders to majority: a frontrunner paradox in built-environment climate governance experimentation”, at: https://www.researchgate.net/publication/318754386_From_leaders_to_majority_a_frontrunner_paradox_in_built-environment_climate_governance_experimentation 15 Zhou, N., (2019), “Australia missing out on huge cuts in emissions through energy efficiency failure”, at: https://www.theguardian.com/australia-news/2019/jun/12/australia-could-cut-emissions-halfway-to-paris-target-under-global-energy-standards#targetText=Since%202015%2C%20Australia%20has%20only,below%20the%202.3%25%20rate%20needed.&targetText=The%20report%20said%20Australians%20should,grid%20and%20reducing%20power%20bills. 16 Energy productivity is an indicator resulting from the division of the GDP by the gross inland consumption of energy. It “provides a picture of the degree of decoupling of energy use from growth in GDP.” For instance, a country with low energy productivity, such as Australia, consumes an highest amount of energy for the same amount of value created than a country with high energy productivity; therefore, it is related to energy efficiency. Eurostat, “Energy productivity”, at: https://ec.europa.eu/eurostat/web/products-datasets/product?code=t2020_rd310 17 Kneifel, J., (2010), “Life-cycle carbon and cost analysis of energy efficiency measures in new commercial buildings”, at: https://www.sciencedirect.com/science/article/pii/S0378778809002254 18 Australian Sustainable Built Environmental Council, “Low Carbon, High Performance”, (2016), at: https://www.asbec.asn.au/wordpress//wp-content/uploads/2016/05/160509-ASBEC-Low-Carbon-High-Performance-Full-Report.pdf 19Australian Government – Department of the Environment and Energy, “Australian Energy Update 2019”, (2019), at : https://www.energy.gov.au/sites/default/files/australian_energy_statistics_2019_energy_update_report_september.pdf 20 Climate Council, “Australia’s Rising Greenhouse Gas Emissions”, (2018), at: https://www.climatecouncil.org.au/wp-content/uploads/2018/06/CC_MVSA0143-Briefing-Paper-Australias-Rising-Emissions_V8-FA_Low-Res_Single-Pages3.pdf 21 Australian Government, Department of Environment and Energy: https://www.environment.gov.au/climate-change/government/renewable-energy-target-scheme

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Sustainalytics considers CBA’s investments in solar, wind and hydro power plants to contribute achieving Australia’s renewable energy targets. In addition, the transport sector is responsible for 18% of Australia’s GHG emissions (102 MtCO2 in 2018) and is projected to further increase by 8% until 2030.22 Road transport represented 85% of the sector’s emissions in 2018, cars and light vehicles alone making up over 60% of Australia’s transport emissions level. Considering that almost 9 out of 10 Australians commute to work, school or university by car, providing alternative low carbon public and freight transportation modes is of high importance to reduce GHG emissions from the sector. For example, the Australian Capital Territory’s Capital Metro Light Rail (“CMLR”) is a 12km rail line from Gungahlin to Canberra. It is expected to educe CO2 emissions by 30% on the transit corridor.23 Furthermore, infrastructure investments in charging stations can foster the use of electric vehicles (EVs). On the contrary, lack of charging infrastructure is a hurdle for EVs development.24 Moreover, since EVs rely on electricity, the energy mix of the respective country plays an important role in the electrification of transport. In countries with fossil fuel-intensive electricity generation environmental benefits from EV are smaller and lifetime CO2 emission can be comparable to thermal vehicles,25 further emphasizing the impact that can be achieved through increasing renewable energy generation. Given the above context Sustainalytics considers CBA’s investments in renewable energy and clean transportation to contribute to reduce GHG emissions and achieve Australia’s renewable energy targets.

Sustainable Water and Wastewater Management in the Era of Climate Change CBA intends to use part of the proceeds to fund water treatment infrastructure to improve water quality, distribution efficiency and conservation, and engineered water infrastructure for flood defense, storm water management or drought resilience. Being the world driest inhabited continent, with 70% of the mainland being arid or semi-arid (i.e. receiving less than 500 mm of rain yearly), 26 Australia successfully overcame structural water management challenges, providing safe, reliable and affordable water to people and industry.27 However, Australia’s annual water withdrawal per capita accounted for 660 m3 in 2016, making it one of the highest water consumers per capita compared to other developed countries,28 highlighting the need of sustainable and efficient water management. In addition, climate change is putting Australia’s water management under pressure. The water sector is heavily dependent on rainfall to replenish storages, groundwater and streams. Global warming – hence higher temperatures – steps water loss up through evapotranspiration. Moreover, droughts are expected to become more intense,29 more common and longer lasting30 in the near future. From 1997 to early 2010, Australia went through one of the most severe droughts in its history (i.e. “Millennium drought”). The drought severely damaged the Murray–Darling Basin, Australia’s largest river system, which provides one third of Australia’s food supply.31, 32 On another note, extreme weather events such as cyclones, floods or bushfires can disrupt wastewater management processes,27 highlighting the need for infrastructure structures to protect communities.

22 Australian Government – Department of the Environment and Energy, “Australia’s emissions projections 2018”, (2018), at: https://www.environment.gov.au/system/files/resources/128ae060-ac07-4874-857e-dced2ca22347/files/australias-emissions-projections-2018.pdf 23 Estimation is based on the forecasts of number of people switching from private cars to rail. Source: Climate Council, “Waiting for the Green Light: Transport Solutions to Climate Change”, (2018), at: https://www.climatecouncil.org.au/wp-content/uploads/2018/09/CC_MVSA0154-Report-Transport_V5-FA_Low-Res_Single-Pages.pdf 24 McKinsey & Company, “Charging ahead: Electric-vehicle infrastructure demand”, (2018), at: https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/charging-ahead-electric-vehicle-infrastructure-demand# 25 Hausfather, Z., (2019), “Factcheck: How electric vehicles help to tackle climate change”, at: https://www.carbonbrief.org/factcheck-how-electric-vehicles-help-to-tackle-climate-change 26 Australian Government – Geoscience Australia, “Deserts”, at: https://www.ga.gov.au/scientific-topics/national-location-information/landforms/deserts 27 Infrastructure Australia, « Australia Infrastructure Audit 2019, 9. Water » (2019) at : https://www.infrastructureaustralia.gov.au/sites/default/files/2019-08/Australian%20Infrastructure%20Audit%202019%20-%209.%20Water.pdf 28 France accounted for 452 m3 per capita, Switzerland for 250 m3 per capita, Brazil for 300m3 per capita and Germany for 308 m3 per capita. Food and Agriculture Organization of the United Nations, Aquastat, at: http://www.fao.org/nr/water/aquastat/data/query/index.html?lang=en 29 Trenberth, K. et al., (2014), “Global warming and changes in drought”, at: https://www.nature.com/articles/nclimate2067 30 Climate Reality Project, “How Is Climate Change Affecting Australia?”, (2019), at: https://www.climaterealityproject.org/blog/how-climate-change-affecting-australia 31 Australian Government, “The Murray-Darling Basin, Australia’s largest and most diverse river system”, (2014), at: https://www.mdba.gov.au/sites/default/files/pubs/MDBA-Overview-Brochure.pdf 32 The basin receives only 7% of Australia’s water runoff despite being responsible for two-thirds of Australia’s irrigation water use. McCormick, B., “Water management”, at: https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/BriefingBook45p/WaterManagement

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Given the increased risk of flooding and droughts as well as Australia’s high water consumption, Sustainalytics views CBA’s financing of infrastructure for water treatment, flood defence, storm water management and drought resilience to contribute to help Australia’s climate change adaption. The Need to Promote an Inclusive Healthcare CBA intends to use part of the proceeds to finance public and not for profit private hospitals, and aged care services. While the Australian healthcare system ranks amongst the best in the world,33 34 research indicates that the system has come under pressure due to changes in healthcare needs, including increased demand, healthcare costs and inequities amongst others.35 Increasing demand on health services is partly due to an ageing population: 36 the number of people aged 65 years and above increased from 14% of the population in 2011 to 16% in 2016.37 Consequently, the number of people living in residential care increased by 23% between 2009 and 2015.37 Additionally, several factors affect elderly Australians’ access to health care services, including uneven availability, geographical accessibility constraints, accommodation38 and affordability.39 Given the importance of medical care, especially for elderly, Sustainalytics considers CBA’s investments in aged care services as socially impactful, fostering inclusion and expanding access to healthcare for vulnerable people. And considers investments in health, healthcare and wellbeing as relevant, contributing to improve healthcare services in the country. Importance to ensure Affordable Dwellings for Disadvantaged People CBA intends to finance activities to expand the access to affordable housing to people from low socio-economic background, Aboriginal and Torres Strait Islanders or victims of domestic or family violence. Stable housing helps individuals to improve their education, access employment and proper health and nutrition.40 In Australia, since 1993, median house value has risen by 412%, while house ownership for individuals aged 25 to 34, declined from 60% in 1981, to 20% in 2016, with increasing housing costs affecting low-income individuals the most.41 The majority of disadvantaged households that manage to buy a house move to the suburbs, while jobs are increasingly concentrated in city centres, which restricts their access to employment and increases commutes. Moreover, prices for low-cost dwellings have increased the fastest - in comparison with higher standards houses - doubling in price from those in 2003-04 to those in 2015-16.42 Regarding social housing, lack of State investments in public housing has led to a gap between supply and demand for social housing.43 To meet existing backlog and newly emerging need, Australia needs to triple its stock of social housing over the next 20 years.44 In addition studies indicate that, in the past, Aboriginal and Torres Strait Island (“Indigenous”) have had less access to secure and affordable accommodation than other Australian. Australian housing access policies for Indigenous have made progress, achieving a substantial

33 Australian Healthcare system was ranked 32nd in 2000, according to the World Health Organization (WHO). WHO, “World Health Organization Assesses the World's Health Systems”, (2000), at: https://www.who.int/whr/2000/media_centre/press_release/en/#targetText=The%20World%20Health%20Organization%20has,%2C%20Oman%2C%20Austria%20and%20Japan. 34 Australian Healthcare system was ranked 2nd in the world in 2017, according to The Commonwealth Fund study. Schneider, E.C. et al., (2017) “Mirror, Mirror 2017: International Comparison Reflects Flaws and Opportunities for Better U.S. Health Care”, at: https://interactives.commonwealthfund.org/2017/july/mirror-mirror/ 35 Sunil K Dixit and Murali Sambasivan, SAGE Open Med. 2018; 6: A review of the Australian healthcare system: A policy perspective: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5900819/ 36 Australian Government – Department of Health, “The Australian health system”, (2019), at: https://www.health.gov.au/about-us/the-australian-health-system 37 Australian Bureau of Statistics, “Disability, Ageing and Carers, Australia: Summary of Findings”, (2015), at: https://www.abs.gov.au/AUSSTATS/[email protected]/Lookup/4430.0Main+Features1022015?OpenDocument#targetText=The%20number%20of%20people%20aged,in%20five%20by%2020312. 38 Accommodation refers to long waiting times and difficulties in getting an appointment with general practitioners (GPs) and specialist health professional, especially in rural areas experiencing lack of workforce due to the lack of public incentives for GPs. 39 Van Gaans D. et al., (2018), “Issues of accessibility to health services by older Australians: a review”, at: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6047130/ 40 Bridge C. et al., (2007), “How does housing assistance affect employment, health and social cohesion?”, at: https://www.ahuri.edu.au/research/research-and-policy-bulletins/87 41 Daley, J et al., (2017), “Three charts on: poorer Australians bearing the brunt of rising housing cost”, The Conservation, at: https://theconversation.com/three-charts-on-poorer-australians-bearing-the-brunt-of-rising-housing-costs-87003 42 Ibid. 43 Lawson, J., et al., (2018), Australia needs to triple its social housing by 2036. This is the best way to do it”, The Conversation, at: https://theconversation.com/australia-needs-to-triple-its-social-housing-by-2036-this-is-the-best-way-to-do-it-105960 44 Department of Health and Family Services, “Homelessness in the Aboriginal and Torres Strait Islander context and its possible implications for the Supported Accommodation Assistance Program”, (1998), at: https://www.homelesshub.ca/resource/homelessness-aboriginal-and-torres-strait-islander-context-and-its-possible-implications

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increase in the proportion of Indigenous households owning homes: from 32% in 2001 to 38.1% in 2016.45 Yet, Indigenous are still considered as vulnerable: non-indigenous households were almost twice as likely to own a home in 2016.46

Sustainalytics consider the financing of social and low-cost housing as well as housing associations and community housing providers that particularly address the named target population to be impactful and to contribute to increase access to specific low-income individuals and disadvantaged groups.

Alignment with/contribution to SDGs The Sustainable Development Goals (SDGs) were set in September 2015 and form an agenda for achieving sustainable development by the year 2030. This Green, Social and Sustainability Funding Framework advances the following SDG goals and targets:

Use of Proceeds Category

SDG SDG target

Renewable Energy

7. Affordable and Clean Energy

7.2 By 2030, increase substantially the share of renewable energy in the global energy mix

Green Residential Buildings Green Commercial Buildings

7. Affordable and Clean Energy 11. Sustainable Cities and Communities

7.3 By 2030, double the global rate of improvement in energy efficiency 11.3 By 2030, enhance inclusive and sustainable urbanization and capacity for participatory, integrated and sustainable human settlement planning and management in all countries

Energy Efficiency 7. Affordable and Clean Energy

7.3 By 2030, double the global rate of improvement in energy efficiency

Clean Transportation

11. Sustainable Cities and Communities

11.2 By 2030, provide access to safe, affordable, accessible and sustainable transport systems for all, improving road safety, notably by expanding public transport, with special attention to the needs of those in vulnerable situations, women, children, persons with disabilities and older persons

Sustainable Water and Wastewater Management

6. Clean Water and Sanitation 11. Sustainable Cities and Communities

6.3 By 2030, improve water quality by reducing pollution, eliminating dumping and minimizing release of hazardous chemicals and materials, halving the proportion of untreated wastewater and substantially increasing recycling and safe reuse globally 11.5 By 2030, significantly reduce the number of deaths and the number of people affected and substantially decrease the direct economic losses relative to global gross domestic product caused by disasters, including water-related disasters, with a focus on protecting the poor and people in vulnerable situations

Pollution Prevention and Control

11. Sustainable Cities and Communities

11.6 By 2030, reduce the adverse per capita environmental impact of cities, including by paying special attention to air quality and municipal and other waste management

Health, Healthcare and Wellbeing

3. Good Health and Well-Being

3.8 Achieve universal health coverage, including financial risk protection, access to quality essential health-care services and access to safe, effective, quality and affordable essential medicines and vaccines for all

Education and Vocation Training

4. Quality Education

4.3 By 2030, ensure equal access for all women and men to affordable and quality technical, vocational and tertiary education, including university

45 Australian Government – Australian Institute of Health and Welfare, “Aboriginal and Torres Strait Islander people: a focus report on housing and homelessness”, (2019), at: https://www.aihw.gov.au/getmedia/1654e011-dccb-49d4-bf5b-09c4607eecc8/aihw-hou-301.pdf.aspx 46Australian Bureau of Statistics, Aboriginal and Torres Strait Islander Population, 2016: https://www.abs.gov.au/ausstats/[email protected]/Lookup/by%20Subject/2071.0~2016~Main%20Features~Aboriginal%20and%20Torres%20Strait%20islander%20Population%20Article~12

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4.4 By 2030, substantially increase the number of youth and adults who have relevant skills, including technical and vocational skills, for employment, decent jobs and entrepreneurship

Affordable Housing

11. Sustainable Cities and Communities

11.1 By 2030, ensure access for all to adequate, safe and affordable housing and basic services and upgrade slums

Conclusion

CBA has developed a Green, Social and Sustainability Funding Framework under which it intends to issue green, social and sustainability bonds and asset-backed or residential mortgage-backed securities and use the proceeds to finance future and existing projects within the following eligible categories: (i) Renewable energy, (ii) Green commercial buildings, (iii) Green residential buildings, (iv) Energy efficiency, (v) Clean transportation, (vi) Sustainable water and wastewater management, (vii) Pollution prevention and control, (viii) Health, healthcare and wellbeing, (ix) Education and vocation training, and (x) Affordable housing. The eligible categories and target populations are aligned with the GBP and SBP. CBA’s asset evaluation and selection processes as well as management of proceeds and reporting is aligned with market practice. Based on the above points, Sustainalytics considers CBA’s Green, Social and Sustainability Funding Framework to be robust, credible and transparent and in alignment with the SBP, GBP and SBG.

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Appendices

Appendix 1: Green Buildings Certification GBCA47 BREEAM NABERS

Background Established in 2003, the Green Building Council of Australia’s Green Star system is the nation’s authority on sustainable buildings, communities and cities. The rating system assesses buildings in one of four categories: Communities, Design & As Built, Interiors, and Performance.

BREEAM (Building Research Establishment Environmental Assessment Method) was first published by the Building Research Establishment (BRE) in 1990. Based in the UK. Used for new, refurbished and extension of existing buildings.

The National Australian Built Environment Rating System (NABERS) is a performance rating tool for existing buildings in Australia. It is administered by the NSW Office of Environment and Heritage, and is used to measure building’s energy efficiency, carbon emissions, water consumed, waste produced, and compare it with similar buildings.

Certification levels

1 Star (Minimum Practice) 2 Star (Average Practice) 3 Star (Good Practice)48 4 Star (Best Practice) 5 Star (Australian Excellence) 6 Star (World Leadership)

Pass Good Very Good Excellent Outstanding

1-star (Poor) 2-stars (Below Average) 3-stars (Average) 4-stars (Good) 5-stars (Excellent) 6-stars (Market Leading)

Areas of Assessment: Environmental Project Management

Areas assessed for Communities: Governance Liveability Economic Prosperity Environment Innovation

Management (Man) addresses various aspects: project management, deployment, minimal environmental disturbance worksite and stakeholder engagement.

There are several ratings available based on the type of building and the applicant (building tenant, or owner and/or manager). The rating tools available for office buildings are:

•Energy (without Greenpower)

•Energy (with Greenpower)

•Carbon Neutral

•Waste

•Water

•Indoor Environment

Areas of Assessment: Environmental Performance of the Building

Areas assessed for Design & As Built, Interiors, and Performance: Management Indoor Environment Quality Energy Transport Water Materials Land Use and Ecology Emissions Innovation

Energy Land Use and Ecology Pollution Transport Materials Water Waste Health and Wellbeing Innovation

Requirements Point system, “category score” awarded based on performance (% of points achieved) within a given category. For some categories there is a minimum threshold (ie GHG/sqm/yr) and points are awarded for exceeding the minimum. Categories are wighted based on building location (to reflect that in

Prerequisites depending on the levels of certification + Credits with associated points This number of points is then weighted by item49 and gives a BREEAM level of certification, which is based on the overall score obtained (expressed as a percentage). Majority of BREEAM issues are flexible, meaning that the client can

NABERS ratings for office buildings and tenancies are based on 12 months of (real) operational data, rather than potential performance estimate. There is a Carbon Neutral Certification available, as an extension to NABERS Energy rating, for buildings of NABERS Energy rating of 4-stars or above.

47 https://new.gbca.org.au/ 48 Buildings assessed on the Design & As-Built, Interiors, and Communities criteria can achieve certifications 4-star and higher. Buildings assessed on the Performance Rating scale can achive any score. 49 BREEAM weighting: Management 12%, Health and wellbeing 15%, Energy 19%, Transport 8%, Water 6%, Materials 12.5%, Waste 7.5%, Land Use and ecology 10%, Pollution 10% and Innovation 10%. One point scored in the Energy item is therefore worth twice as much in the overall score as one point scored in the Pollution item

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some areas of Autralia, certain metrics may be more relevant). Total score is then given out of 100. For the areas of Communities, Design & As Built, and Interiors, no certficiation is awarded for buildings scoring below 45 points/3 stars.

choose which to comply with to build their BREEAM performance score. BREAAM has two stages/ audit reports: a ‘BREEAM Design Stage’ and a ‘Post Construction Stage’, with different assessment criteria.

There are rating system for different types of buildings, including apartment buildings, office buildings, office tenancies, shopping centers, data centres, and hotels.

Performance display

Accreditation Certification by an independent panel commissioned by the GBCA to review ratings.

BREEAM International Assessor BREEAM AP BREEAM In Use Assessor

Qualitative considerations

Commonly used in Australia, New Zealand, and South Africa. Set up similar to BREEAM and LEED. Some suggest that Green Star is less stringent than BREEAM, and that a 6-star rating is roughly equivalent to “very good”, however the Green Star system has been updated since most assessments have been published, so may now be more stringent. Tailored to countries with varied climates.

Used in more than 70 countries: Good adaptation to the local normative context. Predominant environmental focus. BREEAM certification is less strict (less minimum thresholds) than HQE and LEED certifications.

Mandatory for commercial buildings (> 1,000 sq metres) sold or leased after 2010. NABERS is not about design building but actual performance, as it is issued after the building construction. Every 1 star increase in NABERS rating is synonym of 15% saving in energy costs.

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Appendix 2: Sustainability Bond / Sustainability Bond Programme - External Review Form

Issuer name: Commonwealth Bank of Australia

Green Bond ISIN or Issuer Green Bond Framework Name, if applicable: [specify as

appropriate]

Commonwealth Bank of Australia Green, Social and Sustainability Funding Framework

Review provider’s name: Sustainalytics

Completion date of this form: December 2019

Publication date of review publication: [where appropriate, specify if it is an update and add

reference to earlier relevant review]

Section 2. Review overview

SCOPE OF REVIEW

The following may be used or adapted, where appropriate, to summarise the scope of the review.

The review assessed the following elements and confirmed their alignment with the GBPs and SBPs:

☒ Use of Proceeds ☒ Process for Project Evaluation and Selection

☒ Management of Proceeds ☒ Reporting

ROLE(S) OF REVIEW PROVIDER

☒ Consultancy (incl. 2nd opinion) ☐ Certification

☐ Verification ☐ Rating

☐ Other (please specify):

Note: In case of multiple reviews / different providers, please provide separate forms for each review.

EXECUTIVE SUMMARY OF REVIEW and/or LINK TO FULL REVIEW (if applicable)

Please refer to Evaluation Summary above.

Section 3. Detailed review

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Reviewers are encouraged to provide the information below to the extent possible and use the comment section to explain the scope of their review.

1. USE OF PROCEEDS

Overall comment on section (if applicable):

The eligible categories for the use of proceeds are aligned with those recognized by the Green Bond Principles, the Social Bond Principles and the Sustainability Bond Guidelines. Sustainalytics considers projects and activities related to renewable energy, green commercial and residential buildings, energy efficiency, clean transportation, sustainable water and wastewater management, pollution prevention and control health, healthcare and wellbeing, education and vocational training and affordable housing to have positive environmental or social impacts and to advance the UN Sustainable Development Goals.

Use of proceeds categories as per GBP:

☒ Renewable energy ☒ Energy efficiency

☒ Pollution prevention and control ☐ Environmentally sustainable management of living natural resources and land use

☐ Terrestrial and aquatic biodiversity conservation

☒ Clean transportation

☒ Sustainable water and wastewater management

☐ Climate change adaptation

☐ Eco-efficient and/or circular economy adapted products, production technologies and processes

☒ Green buildings

☐ Unknown at issuance but currently expected to conform with GBP categories, or other eligible areas not yet stated in GBPs

☐ Other (please specify):

If applicable please specify the environmental taxonomy, if other than GBPs:

Use of proceeds categories as per SBP:

☐ Affordable basic infrastructure ☒ Access to essential services

☒ Affordable housing ☐ Employment generation (through SME financing and microfinance)

☐ Food security ☐ Socioeconomic advancement and empowerment

☐ Unknown at issuance but currently expected to conform with SBP categories, or other eligible areas not yet stated in SBPs

☐ Other (please specify):

If applicable please specify the social taxonomy, if other than SBPs:

2. PROCESS FOR PROJECT EVALUATION AND SELECTION

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Overall comment on section (if applicable):

CBA’s internal process for evaluating and selecting projects is managed by the Green, Social and Sustainability Funding Steering Committee (the “Committee”), which is comprised of various departments and management employees. The Committee is responsible for the framework, review and approval of eligible assets. The process is aligned with market practice.

Evaluation and selection

☒ Credentials on the issuer’s social and green objectives

☒ Documented process to determine that projects fit within defined categories

☒ Defined and transparent criteria for projects eligible for Sustainability Bond proceeds

☐ Documented process to identify and manage potential ESG risks associated with the project

☒ Summary criteria for project evaluation and selection publicly available

☐ Other (please specify):

Information on Responsibilities and Accountability

☒ Evaluation / Selection criteria subject to external advice or verification

☐ In-house assessment

☐ Other (please specify):

3. MANAGEMENT OF PROCEEDS

Overall comment on section (if applicable):

CBA’s internal process for management of proceeds is divided into a Green Eligible Assets sub-register and a Social-Eligible Assets sub-register. The proceeds will be managed on a portfolio basis. The Committee oversees monitoring funds on the Register and each sub-register on a quarterly basis to make sure the amount is equal or greater than the aggregate amount raised under the Framework. Pending full allocation or reallocation, CBA will invest unallocated proceeds as per its investment management policy.

Tracking of proceeds:

☒ Sustainability Bond proceeds segregated or tracked by the issuer in an appropriate manner

☒ Disclosure of intended types of temporary investment instruments for unallocated proceeds

☐ Other (please specify):

Additional disclosure:

☐ Allocations to future investments only ☒ Allocations to both existing and future investments

☐ Allocation to individual disbursements ☐ Allocation to a portfolio of disbursements

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☐ Disclosure of portfolio balance of unallocated proceeds

☐ Other (please specify):

4. REPORTING

Overall comment on section (if applicable):

CBA intends to disclose an annual Green, Social and Sustainability Report which will include the allocation of net proceeds and the environmental and social impact of specific projects and activities. The report will be publicly available on the company website. It will include the share of financing versus refinancing. CBA will also report annually on impact metrics such as for instance CO2 emissions avoided or the volume of water saved/reduced/treated (m³). An independent auditor will oversee verifying the tracking of proceeds annually. Sustainalytics views CBA’s allocation and impact reporting as aligned with market practices.

Use of proceeds reporting:

☐ Project-by-project ☒ On a project portfolio basis

☐ Linkage to individual bond(s) ☐ Other (please specify):

Information reported:

☒ Allocated amounts ☐ Sustainability Bond financed share of total investment

☐ Other (please specify):

Frequency:

☒ Annual ☐ Semi-annual

☐ Other (please specify):

Impact reporting:

☐ Project-by-project ☒ On a project portfolio basis

☐ Linkage to individual bond(s) ☐ Other (please specify):

Frequency:

☒ Annual ☐ Semi-annual

☐ Other (please specify):

Information reported (expected or ex-post):

☒ GHG Emissions / Savings ☒ Energy Savings

☒ Decrease in water use ☒ Number of beneficiaries

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☒ Target populations ☒ Other ESG indicators (please specify):

New clean infrastructure build (m2) Total installed capacity (MW) The amount of lettable area (m2) The rate at which the property exceeded the benchmark New clean infrastructure built (km) Number of passengers carried per annum Total population served by the system (i.e. water system) Waste diverted from landfill (tonnes) Number of places in care facilities or patients served Bed density Number facilities constructed or upgraded Number of students supported Number of educational grants given Number of housing units built or refurbished, Share of underserved tenants, Rental costs compared to city average

Means of Disclosure

☐ Information published in financial report ☐ Information published in sustainability report

☒ Information published in ad hoc documents ☐ Other (please specify):

☐ Reporting reviewed (if yes, please specify which parts of the reporting are subject to external review):

Where appropriate, please specify name and date of publication in the useful links section.

USEFUL LINKS (e.g. to review provider methodology or credentials, to issuer’s documentation, etc.)

www.commbank.com.au

SPECIFY OTHER EXTERNAL REVIEWS AVAILABLE, IF APPROPRIATE

Type(s) of Review provided:

☐ Consultancy (incl. 2nd opinion) ☐ Certification

☐ Verification / Audit ☐ Rating

☐ Other (please specify):

Review provider(s): Date of publication:

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ABOUT ROLE(S) OF INDEPENDENT REVIEW PROVIDERS AS DEFINED BY THE GBP AND THE SBP

i. Second Party Opinion: An institution with environmental expertise, that is independent from the issuer may issue a Second Party Opinion. The institution should be independent from the issuer’s adviser for its Green Bond framework, or appropriate procedures, such as information barriers, will have been implemented within the institution to ensure the independence of the Second Party Opinion. It normally entails an assessment of the alignment with the Green Bond Principles. In particular, it can include an assessment of the issuer’s overarching objectives, strategy, policy and/or processes relating to environmental sustainability, and an evaluation of the environmental features of the type of projects intended for the Use of Proceeds.

ii. Verification: An issuer can obtain independent verification against a designated set of criteria, typically pertaining to business processes and/or environmental criteria. Verification may focus on alignment with internal or external standards or claims made by the issuer. Also, evaluation of the environmentally sustainable features of underlying assets may be termed verification and may reference external criteria. Assurance or attestation regarding an issuer’s internal tracking method for use of proceeds, allocation of funds from Green Bond proceeds, statement of environmental impact or alignment of reporting with the GBP, may also be termed verification.

iii. Certification: An issuer can have its Green Bond or associated Green Bond framework or Use of Proceeds certified against a recognised external green standard or label. A standard or label defines specific criteria, and alignment with such criteria is normally tested by qualified, accredited third parties, which may verify consistency with the certification criteria.

iv. Green Bond Scoring/Rating: An issuer can have its Green Bond, associated Green Bond framework or a key feature such as Use of Proceeds evaluated or assessed by qualified third parties, such as specialised research providers or rating agencies, according to an established scoring/rating methodology. The output may include a focus on environmental performance data, the process relative to the GBP, or another benchmark, such as a 2-degree climate change scenario. Such scoring/rating is distinct from credit ratings, which may nonetheless reflect material environmental risks.

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Disclaimer

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The intellectual property rights to the information contained herein is vested exclusively in Sustainalytics. No part of this deliverable may be reproduced, disseminated, comingled, used to create derivative works, furnished in any manner, made available to third parties or published, parts hereof or the information contained herein in any form or in any manner, be it electronically, mechanically, through photocopies or recordings without the express written consent of Sustainalytics.

As the information herein is based on information made available by the issuer, the information is provided “as is” and, therefore Sustainalytics does not warrant that the information presented in this deliverable is complete, accurate or up to date, nor assumes any responsibility for errors or omissions and Sustainalytics will not accept any form of liability for the substance of the deliverable and/or any liability for damage arising from the use of this deliverable and/or the information provided in it. Any reference to third party names is for appropriate acknowledgement of their ownership and does not constitute a sponsorship or endorsement by such owner.

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Sustainalytics

Sustainalytics is a leading independent ESG and corporate governance research, ratings and analytics firm that supports investors around the world with the development and implementation of responsible investment strategies. With 13 offices globally, the firm partners with institutional investors who integrate ESG information and assessments into their investment processes. Spanning 30 countries, the world’s leading issuers, from multinational corporations to financial institutions to governments, turn to Sustainalytics for second-party opinions on green and sustainable bond frameworks. Sustainalytics has been certified by the Climate Bonds Standard Board as a verifier organization, and supports various stakeholders in the development and verification of their frameworks. In 2015, Global Capital awarded Sustainalytics “Best SRI or Green Bond Research or Ratings Firm” and in 2018 and 2019, named Sustainalytics the “Most Impressive Second Party Opinion Provider. The firm was recognized as the “Largest External Reviewer” by the Climate Bonds Initiative as well as Environmental Finance in 2018, and in 2019 was named the “Largest Approved Verifier for Certified Climate Bonds” by the Climate Bonds Initiative. In addition, Sustainalytics received a Special Mention Sustainable Finance Award in 2018 from The Research Institute for Environmental Finance Japan and the Minister of the Environment Award in the Japan Green Contributor category of the Japan Green Bond Awards in 2019.

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