Annual report 2019 REPORT OF THE REPORT OF THE REMUNERATION CORPORATE FINANCIAL OTHER SUPPLEMENTARY FACTS AND FIGURES ORGANISATION MANAGING BOARD SUPERVISORY BOARD REPORT GOVERNANCE STATEMENTS INFORMATION INFORMATION CONTENTS - Stakeholder dialogue 41 - Materiality analysis 44 1 ■ The sustainable water bank: results and activities in 2019 46 FACTS AND FIGURES 6 - Five strategic themes 46 - Theme 1: Bank of and for the ■ NWB Bank 2019 at a glance 8 public water sector 50 ■ Key figures 8 - NWB Fund 54 - Theme 2: Key player in financing the Dutch public sector 56 - Theme 3: Financing partner to 2 enhance sustainability in the Netherlands 62 ORGANISATION 12 - Theme 4: Sustainable, efficient and socially committed ■ NWB Bank's profile 12 organisation 66 ■ Managing Board/Executive - Theme 5: Responsible and Committee 13 social return 72 ■ Management team 15 - Dilemmas in 2019 73 ■ Supervisory Board 16 ■ Risk management 75 ■ Outlook 2020 76 3 ■ Reporting standards 77 REPORT OF THE MANAGING BOARD 22 4 REPORT OF THE ■ Interview with Lidwin van Velden 22 SUPERVISORY BOARD 80 ■ NWB Bank in 2019 26 - Lending 26 ■ Interview met Age Bakker 80 - Funding 27 ■ Supervision 83 - Financial results 28 ■ Committee reports 85 ■ Trends and developments in 2019 32 ■ Internal organisation 87 ■ Strategy and value creation 34 ■ Supervision of quality assurance 88 - Strategy 34 ■ Other matters 89 - Value creation 36 - Sustainable Development Goals 38 - Management approach 41 2 ANNUAL REPORT 2019 | REPORT OF THE REPORT OF THE REMUNERATION CORPORATE FINANCIAL OTHER SUPPLEMENTARY FACTS AND FIGURES ORGANISATION MANAGING BOARD SUPERVISORY BOARD REPORT GOVERNANCE STATEMENTS INFORMATION INFORMATION 5 7 REMUNERATION REPORT 92 FINANCIAL STATEMENTS 110 ■ Managing Board remuneration ■ Statement of income 112 policy 92 ■ Balance sheet 113 ■ Managing Board Remuneration 93 ■ Statement of comprehensive ■ Employee remuneration policy 95 income 114 ■ Supervisory Board remuneration 96 ■ Statement of changes in equity 115 ■ Statement of cash flows 116 ■ Notes to the financial statements117 6 CORPORATE GOVERNANCE 100 8 ■ Dutch Corporate Governance OTHER INFORMATION 172 Code 100 ■ Supervisory Board 101 ■ Independent auditor's report 172 ■ Executive Committee 102 ■ Assurance report of the ■ Conflicts of interest 103 independent auditor 180 ■ Future-Oriented Banking 103 ■ Articles of Association provisions ■ Dutch Banking Code 103 governing profit appropriation 183 ■ Rules of conduct and the banker's ■ Proposed profit appropriation 184 oath 103 ■ Notes on other focus areas 104 ■ Internal audit 106 ■ External auditor 106 9 ■ Other corporate governance aspects 106 SUPPLEMENTARY INFORMATION 188 Chapters 2, 3 and 6 together form the management report as referred to in Section 2:391 of the Dutch Civil Code. 3 ANNUAL REPORT 2019 | 4 ANNUAL REPORT 2019 | 1 FACTS AND FIGURES 5 ANNUAL REPORT 2019 | REPORT OF THE REPORT OF THE REMUNERATION CORPORATE FINANCIAL OTHER SUPPLEMENTARY FACTS AND FIGURES ORGANISATION MANAGING BOARD SUPERVISORY BOARD REPORT GOVERNANCE STATEMENTS INFORMATION INFORMATION NWB BANK 2019 AT A GLANCE NET PROFIT FUNDING € 94.5 MILLION € 9.9 BILLION OF FUNDING RAISED, OF WHICH € 2.5 BILLION (26%) WITH GREEN BONDS AND SOCIAL BONDS GREEN BONDS: € 519 MILLION SOCIAL BONDS: € 2,019 MILLION LENDING € 10.2 BILLION TO THE DUTCH PUBLIC SECTOR PUBLIC PRIVATE WATER AUTHORITIES PARTNERSHIPS 2% 8% 12% OTHER DRINKING WATER 3% COMPANIES 2% HEALTHCARE SOCIAL HOUSING 14% 3% RENEWABLE ENERGY 56% MUNICIPALITIES 6 ANNUAL REPORT 2019 | REPORT OF THE REPORT OF THE REMUNERATION CORPORATE FINANCIAL OTHER SUPPLEMENTARY FACTS AND FIGURES ORGANISATION MANAGING BOARD SUPERVISORY BOARD REPORT GOVERNANCE STATEMENTS INFORMATION INFORMATION CAPITAL RATIO (CET1 RATIO) TOTAL ASSETS € 96 BILLION 51.6% 12.75% minimum NWB Bank requirement COST/INCOME RATIO 15.5 % LEVERAGE RATIO LEVERAGE RATIO LEVERAGE RATIO NOT ADJUSTED FOR PROMOTIONAL ASSETS 2018 15.4% 2.4% CHARTING THE CO2 EMISSIONS OF CLIMATE IMPACT LOAN PORTFOLIO 93% LOAN PORTFOLIO 2,636 KT 7 ANNUAL REPORT 2019 | REPORT OF THE REPORT OF THE REMUNERATION CORPORATE FINANCIAL OTHER SUPPLEMENTARY FACTS AND FIGURES ORGANISATION MANAGING BOARD SUPERVISORY BOARD REPORT GOVERNANCE STATEMENTS INFORMATION INFORMATION KEY FIGURES (in millions of euros) 2019 2018 2017 2016 2015 Balance sheet Long-term loans and advances (nominal value)1) 49,436 47,644 47,840 48,669 49,134 Equity2) 1,741 1,706 1,628 1,507 1,399 Tier 1 capital2) 2,050 2,018 1,942 1,824 1,594 Total assets 96,205 83,715 87,123 94,414 91,314 Risk-weighted assets 3,277 2,627 2,680 2,979 1,998 Results Net interest income 213 234 276 219 177 Results from financial transactions -39 -48 -58 -25 -6 Operating income 174 186 218 193 171 Operating expenses3) 27 22 20 19 18 Extraordinary income 114) - - - - Income tax 41 37 47 42 37 Bank tax and resolution levy 22 27 28 25 21 Net profit 95 100 123 107 95 Dividend Dividend distribution 55.0 20.0 - - - Dividend (in euros per share) 932.4 339.0 - - - 1) loans including interest-bearing securities, provided to regional authorities 2) including profit for the financial year less dividend 3) excluding bank tax and resolution levy 4) Extraordinary income as a result of a change in the pension scheme 8 ANNUAL REPORT 2019 | REPORT OF THE REPORT OF THE REMUNERATION CORPORATE FINANCIAL OTHER SUPPLEMENTARY FACTS AND FIGURES ORGANISATION MANAGING BOARD SUPERVISORY BOARD REPORT GOVERNANCE STATEMENTS INFORMATION INFORMATION (in millions of euros) 2019 2018 2017 2016 2015 Ratios (in %) Tier 1 ratio1) 62.62) 76.82) 72.5 61.2 79.8 CET 1 ratio1) 52.83) 64.63) 60.5 50.5 69.8 Cost/income ratio4) 15.5 11.8 9.2 9.7 10.5 Dividend pay-out ratio 58.2 20.1 - - - Leverage ratio5) 15.4 - - - - Leverage ratio (not adjusted for promotional assets)6) 2.4 2.6 2.5 2.3 2.1 Liquidity Coverage Ratio 204 222 179 146 134 Net Stable Funding Ratio 118 129 126 123 117 CSR Volume of sustainable Bond issuance 2,538 2,744 3,480 1,110 1,000 CO2 emissions from operating activities p.p. (in tonnes) 2.8 3.7 3.9 4.1 4.0 CO2 emissions PCAF portfolio coverage (in %) 93 - - - - 7) CO2 emissions loan portfolio (in kton) 2,636 - - - - 1) including profit for the financial year less dividend 2) 61.4 excluding profit for the year (2018: 73.8) 3) 51.6 excluding profit for the year (2018: 61.6) 4) excluding bank tax and resolution levy 5) including profit for the financial year less dividend, taking into account the calculation for promotional banks according to CRR II as of 27 June 2019 6) including profit for the financial year less dividend, not taking into account the calculation for promotional banks 7) based on 93% of the loan portfolio 9 ANNUAL REPORT 2019 | 10 ANNUAL REPORT 2019 | 2 ORGANISATION 11 ANNUAL REPORT 2019 | REPORT OF THE REPORT OF THE REMUNERATION CORPORATE FINANCIAL OTHER SUPPLEMENTARY FACTS AND FIGURES ORGANISATION MANAGING BOARD SUPERVISORY BOARD REPORT GOVERNANCE STATEMENTS INFORMATION INFORMATION 2. ORGANISATION NWB BANK'S PROFILE must be recouped. The bank is perfectly equipped to provide this type of long-term financing. NWB Bank's Nederlandse Waterschapsbank N.V. (hereinafter referred significant size, efficient business model and excellent to as NWB Bank) is a bank of and for the public sector with creditworthiness means it is able to keep financing costs a special focus on water and sustainability. NWB Bank is low for its clients. a national promotional bank. Through its activities, the bank helps public entities achieve their policy goals. The bulk of the bank’s loan portfolio comprises loans to NWB Bank was founded in 1954 by the water authorities. local authorities or institutions guaranteed by local or Soon after its establishment, the bank also started to regional governments. This is one of the reasons why the provide financing to the wider Dutch public sector. Our bank has the highest credit ratings: AAA/Aaa. NWB Bank clients include water authorities, municipalities, housing ranks sixth on the list of the world’s safest banks. Its high associations, healthcare institutions and drinking water credit ratings, financial expertise and efficient operations companies. For several years now, the bank has also been mean that NWB Bank can always respond actively to the actively involved in financing Public-Private Partnerships financing needs of the Dutch public sector. (PPP), renewable energy projects and government- backed export financing. The funds that NWB Bank lends to its clients are raised on the international capital market. As far as possible, the As a bank of and for the public sector, NWB Bank’s bank tries to raise funds by issuing sustainable bonds. For interests and values differ from strictly commercial instance, it finances the water authorities’ activities with banks. The bank does not pursue profit maximisation. In so-called Water Bonds (Green Bonds). To finance social addition to ensuring a strong financial position and housing, the bank issues SDG (Sustainable Development efficient business operations, NWB Bank expressly Goals) Housing Bonds, and in the past it issued Affordable focuses on creating long-term social value. It is dedicated Housing Bonds. The experience and expertise that the to a stable and sustainable financial sector, which in turn bank acquired from these activities in recent years, contributes to an economy that serves mankind whilst combined with the large financing volume, means that the causing the least possible harm to the environment. bank is a prominent player in the international field of SRI NWB Bank provides appropriate financing to its clients on (Socially Responsible Investing) bonds. In the the most favourable terms possible. This enables the bank Netherlands, NWB Bank is even the largest issuer of to keep the burden on citizens as low as possible and work sustainable bonds. towards implementing affordable sustainable practices in the Netherlands. As a significant bank, NWB Bank is supervised directly by the European Central Bank.