NatWest Group plc 2020 Environmental, Social and Governance supplement Our purpose in action. 02 Group Chief Executive Officer’s statement We champion potential, helping people, families and businesses to thrive. Welcome to NatWest Group’s first Environmental, Social and Governance (ESG) supplement, which I hope will provide you with a deeper understanding of the work we are doing to tackle the most pressing challenges facing our customers, communities and society as a whole. In these pages, you will see how our purpose-led strategy, underpinned by our focus areas of enterprise, learning and climate, is helping us to drive positive change on ESG matters. We made strong progress on our ESG priorities in 2020. Alison Rose Nonetheless, as a relationship bank supporting the day-to-day financial needs of 19 million customers and 1 in 4 businesses in Group Chief Executive Officer every region of the UK and Ireland, we always have the opportunity to do more. Our response to COVID-19 has shown this organisation at its best, as we pivoted our operations at pace to support our customers, prioritised the safety and wellbeing of our colleagues, and leveraged existing partnerships to support the most vulnerable in society. We will harness this energy as we support our customers and the wider UK economy to rebuild more sustainably in the months and years ahead. 03 We were proud to become a founding signatory to the Our responsibility to society pandemic, we offered reassurance to all colleagues that we UN Principles for Responsible Banking (PRB), committing to During the pandemic, NatWest Group has been there to would continue to pay them, in full, even if they fell ill or aligning our strategy with the 2015 Paris Agreement and provide help and support to those who needed it most. were off work with caring responsibilities. And we remain UN Sustainable Development Goals (SDGs). Our three areas Whether it was through the extraordinary measures of financial committed to supporting all our front-line colleagues to obtain of focus are mapped to seven SDGs and in the additional support we put in place, the transformation of our head office a professional qualification within their first 18 months in role, disclosures of this supplement, we have published our first into a charity distribution hub or the donation of £10 million to enhancing their skills and giving them an even stronger self-assessment of progress on all six principles. We are the National Emergencies Trust COVID-19 appeal, our purpose foundation from which to help our customers. committed to making further progress and working has been shown to sit at the heart of everything we do, every Building a sustainable future collaboratively with the global community on environmental single day. While we don’t yet know what the long-term impact of the and societal goals. Events of the last year have shown we must redouble our coronavirus pandemic will be, we do know the crisis has had Protecting the environment efforts to reduce the barriers that are holding back too many a profound effect on society and on how we live and work. Climate change is the biggest challenge facing our planet, in our society. Our report, ‘Banking on Racial Equality’, sets Many of the changes we’ve seen over the last year are likely and the financial sector has a critical role to play in tackling out additional steps we are taking to champion the potential of to remain with us long into the future. These changes bring it. At NatWest Group we are determined to lead the way, Black, Asian and Minority Ethnic customers, colleagues and with them challenges, but also opportunities to do things better. and we are proud to be a principal partner and the banking communities. We know it is more difficult than it should be to As you will see in the pages that follow, our resolve to achieve sponsor of the UN’s COP26 later this year. Our contribution start up and then grow a business, particularly for female and our ESG priorities and to deliver on our purpose has only to the climate challenge starts with our own operations, Black, Asian and Minority Ethnic entrepreneurs. That’s why, strengthened over the last year. And, as we look to a future which became Net Zero Carbon in 2020 and are targeted to last year, we made a commitment to support 50,000 new beyond coronavirus, we will build on the strong progress we be Climate Positive by 2025. In 2020 we achieved our interim businesses to start up by 2023, concentrating our efforts on have already made to shape a more sustainable future for all target of using 90% renewable electricity coverage in our underrepresented groups and on geographical inequality. our stakeholders, while – crucially – delivering long term direct operations. sustainable returns to our shareholders. Good money management is an essential life skill. We want to We were the first UK bank to publish estimates of our financed improve people’s lives by reaching 2.5 million people each year emissions for residential mortgages and financing in three through financial capability interactions, such as our financial commercial sectors (agriculture, automotive manufacturing health checks and our flagship financial education programme, and oil & gas extraction). We also developed emissions MoneySense, which has reached more than 9 million young Alison Rose intensity estimates and identified a path to meet the objectives people since it was launched in 1994. Group Chief Executive Officer of the 2015 Paris Agreement in 2030 and 2050 for three of Strengthening our governance these sectors. We continue to strengthen our governance structures. We We’re also supporting our customers to make necessary have embedded our climate targets into executive director changes. We have revised our policies to reduce the financing remuneration, underlining the leadership’s commitment to of coal, oil and gas projects. And in 2020, we supported our building a more sustainable future. We also want to develop customers with £12 billion of new climate and sustainable more sustainable relationships with our network of suppliers. financing and funding, alongside launching climate-related In 2020, we launched our new Supplier Charter, outlining propositions such as a Green Mortgage, offering a lower what we expect from our suppliers and setting out our own interest rate to customers purchasing energy-efficient homes. commitments when it comes to ethical business conduct, human rights, environmental sustainability, diversity and inclusion, the Living Wage and prompt payment. And with 59,900 colleagues, we take our obligations as a responsible employer extremely seriously. At the onset of the coronavirus 04 Our 2020 reporting suite Contents All contained within the 2020 NatWest Group Annual Report and Accounts Building a purpose-led bank 05 Focus area – Learning 44 Strategic report and business review Our strategy and highlights 06 Our ambition 45 An overview of our business, our 2020 financial and non-financial performance and progress in terms of our Our operating environment 10 Building financial confidence purpose-led strategy to champion potential, helping people, families and businesses to thrive. and resilience 46 How we engage with stakeholders 11 External collaboration 48 Governance and remuneration report How we create value 13 A detailed review of our corporate governance and remuneration, including the report of the directors and Helping colleagues realise Supporting our customers, annual report on remuneration. their potential 49 colleagues and communities Risk and capital management report as we respond to COVID-19 14 What’s next? 52 A detailed overview of the management of key risks relating to our business operations and disclosures on Responsible governance 15 Responsible Business 53 our capital, liquidity and funding position. Collective action 17 How we do business 54 Financial statements Integrating ESG across our Engaging our suppliers 60 Our financial statements and related notes, including the independent auditor’s report. services and operations 22 A responsible approach to tax 61 Focus area – Climate 24 Respecting human rights 63 Our ambition 25 Company announcement and Financial supplement Supporting our customers 64 Our latest company information including our financial performance for the year with a focus on key metrics Our approach to the climate challenge 26 Supporting our communities 71 and measurement. The financial supplement provides key financial performance data for the nine quarters Progress against our climate ambition 27 ended 31 December 2020. Supporting our colleagues 74 Our approach to climate metrics 31 Additional disclosures 83 Climate-related disclosures report Our approach to climate governance Details our progress in 2020 on our climate ambitions including an overview of our approach to climate- and risk management 34 UN Principles for Responsible related strategy, scenario analysis, risk management and metrics. Banking reporting (PRB) 84 Biodiversity and nature 35 ESG supplement World Economic Forum International Focus area – Enterprise 37 Business Council metrics alignment 94 Provides an overview of our purpose in action and key environmental, social and governance matters including progress in 2020. Our ambition 38 Global Reporting Initiative index 95 Removing the barriers to enterprise 39 Sustainability Accounting Pillar 3 report Standards Board (SASB) index 109 Focuses on our regulatory reporting requirements and provides an explanation of our risk profile, including Championing underrepresented