IMPORTANT TOPICS, MATERIALITY ANALYSIS 2016

IMPORTANT TOPICS, MATERIALITY ANALYSIS 2016

In accordance with GRI 4, the topics that are not regarded as material, are omitted from the annual report. DNB nevertheless wishes to clarify to its stakeholders what the Group is doing to follow up these topics.

The topics are in alphabetical order:

■ Contribute to local communities■ Ensure eco-efficient operations■ Financial inclusion ■ Prevent financial crime■ Responsible supplier chain■ Secure the financial infrastructure

CONTRIBUTE TO LOCAL COMMUNITIES

As Norway's largest bank, having a local presence has been essential to for DNB. This is why the bank has maintained, over many years, bank branches, ATMs and branch offices. This has made DNB an important supporter of local business communities. DNB Eiendom has also had a local presence across the country through its real estate offices. The sponsor-ship of various cultural and sporting events is also important, where the aim is to establish agreements that engage a wide cross-section of the population and offer customers positive DNB experiences, both regionally and nationally.

Everyday banking is becoming increasingly digitalised and "being there for the customers" means much more than having a physical presence. During the first half of 2016, the bank closed down half of its branch offices because customers’ use of digital self-service solutions is escalating. It was an important part of the process that customers received updated infor-mation about what the closures would mean for them. Therefore, in the first quarter of 2016, Personal Banking Retail cal-led 145 000 customers to ensure that their needs were taken care of even if their local branch office was closed down. DNB also held courses in digital banking services for the least digital customers, particularly for those who lived in the vicinity of a branch office which was going to be closed down. Relatively speaking, the bank has lost most customers in areas which have a long distance to the closest remaining branch office, but it has also gained new customers in these areas. Read more about the courses in digital banking on page 50 in the annual report.

In 2016, DNB drew up a new sponsorship strategy which entails that the Group’s sponsorship department will concen-trate on fewer, but larger agreements at a national level. However, DNB has 236 sponsorship agreements which can be characterised as local. Local sponsorship agreements are linked to local offices, and the bank has terminated agreements because there is no longer a DNB branch office in the same town or municipality. DNB also contributes to local commu-nities through large cultural and music events. OverOslo is a music festival where money was collected and donated to a local cultural initiative. The same was done during Øyafestivalen in Oslo in 2016, where DNB contributed to the opening of a cultural centre for young adults at Tøyen. Through the cooperation with Riksteateret (the Norwegian Touring Theatre) DNB annually gives 5 000 school children free theatre tickets to performances across Norway through DNB’s ticket fund.

The development of local businesses is a core part of DNB’s contribution to local communities. DNB contributes, among other things, with expertise to companies and people who wish to start their own business. For example, DNB’s start-up pilots offer SMEs expert financial advisory services, access to business templates and various check lists to make it easier to succeed as a start-up company.

Another important initiative across Norway is A Valuable Lesson. All primary schools in Norway have access to DNB’s digital learning program in personal finance, and in the course of 2016 close to 1 400 new teachers registered to use the course. By including personal finance in the school curriculum, DNB wishes to help prevent bad financial habits from being passed down from generation to generation. A Valuable Lesson is also described on page 53 in the annual report.

IMPORTANT TOPICS, MATERIALITY ANALYSIS 2016

ENSURE ECO-EFFICIENT OPERATIONS

Sound environmental management and the monitoring and reduction of emissions are also important elements in cost- effective operations. This is called for by DNB’s customers and other stakeholders in the same way as the Group requires that its suppliers meet requirements for environmentally efficient management.

DNB’s principles regarding the climate and the environment are described in DNB’s group policy for corporate social respons ibility. By signing the UN Global Compact, DNB has undertaken to support a precautionary approach to environmental issues and to promote greater environmental responsibility and encourage the development and diffusion of environmentally friendly technologies.

DNB’s main contribution to reducing its impact on the external environment is to minimise emissions from its office operations by reducing energy consumption and waste, and by improving its recycling rate. Business travel by air is one of the Group's main sources of greenhouse gas emissions. Increasing the use of electronic, video and telephone conferences is an important measure to reduce business travel.

DNB is working actively to ensure continual improvement, across the Group, of its eco-efficient operations through its strategy, action plans and reporting procedures. To gain better control of the Group's environmental impact and to achieve more eco-efficient office operations, DNB introduced an environmental management system based on the international standard ISO 14001 in 2014. The system is certified by DNV GL and the certificate encompasses all the Group's operations from 2015 onwards.

Responsibility for material environmental topics is divided among persons/functions in the Group. These establish their own targets and measures, which are followed up through annual internal and external audits. All of DNBs international offices have their own action plans which document how they can contribute to the Group's ambition to reduce its green-house gas emissions. All employees should be familiar with the work done to reduce the Group’s impact on the environ-ment to a minimum. Structured training in the environmental management system takes place, among other things, as part of the introduction programme for new employees, via information on the intranet and through HS&E work and training in the individual units. The system will help the organisation to set and follow up targets and implement relevant measures. A status report summarising the results achieved is presented once a year to the group management team for approval.

In 2016, DNB’s electricity consumption was reduced by a total of 25.3 per cent, the equivalent of 2 215 tons of CO2. The reason for the reduction is systematic energy conservation measures. One of the measures established was an energy tracking system which actively monitors electricity consumption on an hourly basis. In addition, buildings have been renovated and regular meetings have been held with the landlords of buildings leased by DNB.

The total amount of waste has been reduced, but the recycling ratio has also been reduced. In 2017, the work to improve the Group’s waste control and monitoring procedures will be continued.

In recent years, DNB has purchased guarantees of origin to ensure that the Group's consumption of electricity is from energy sources which are guaranteed to be renewable. In 2016, DNB joined the organisation RE100 and is committed to buying, within 2020, guarantees of origin for renewable energy from the local markets where the Group uses electricity to contribute towards the development of renewable energy markets.

The Group’s total flight mileage increased somewhat in 2016, and it is therefore important to continue the Group’s work to both inform employees about the alternatives to air travel and to follow up the control and monitoring routines. DNB buys CO2 quotas to offset greenhouse gas emissions from air travel, heating and car use. In 2016, the Group purchased quotas from a biomass power station in India, as well as from two projects whose aim is to increase energy efficiency from wood-fired cooking in Nepal and Ghana. Both the latter two projects are "UN Gold Standard" and also contribute through reduced CO2 emissions to improving living conditions and increasing employment in the projects’ local communities.

As a result of its environmental and climate measures and reporting procedures in 2016, DNB received a score of A- (where A is best) from the Carbon Disclosure Project (CDP) based on the answers provided for 2015. DNB was the only Norwegian financial institution that received this score (see also https://www.cdp.net/en).

IMPORTANT TOPICS, MATERIALITY ANALYSIS 2016

Targets:

■ Reduce own electricity consumption by 55 per cent by 2040 compared with 2014■ Reduce electricity consumption by 35 per cent by 2025■ Reduce electricity consumption per square metre in DNB’s operations by 10 per cent for main buildings in Norway in the period 2015-2017 ■ For other branch offices, the target is a reduction of 8 per cent per square metre

FINANCIAL INCLUSION

DNB views it as an important part of its corporate social responsibility to ensure that everyone in Norway has access to basic banking services and possesses fundamental financial literacy skills. DNB and society are best served if the personal finances of Norwegians are sound and the Norwegian population has the necessary expertise to avoid financial problems.

In general, Norwegians have a high degree of trust in the public authorities and their fellow citizens, and there are small social differences when compared with other OECD countries. It is important that DNB helps to maintain this situation and works to reduce financial inequality.

Financial inclusion entails that DNB will ensure that everyone in Norway has the same opportunities to use basic banking services. DNB will facilitate access to banking services, independent of why individuals encounter difficulties, be these due to poverty, socio-economic background, lack of integration, loneliness, or substance and alcohol abuse. Inequalities in society can prevent progress, for example by affecting access to education. According to the OECD, greater inequality results in lower economic growth.

The increase in the number of Norwegians who accumulate consumer debt is worrying. Although unsecured debt represents a modest proportion of household debt, 3 per cent, DNB is also concerned about the increase in this type of debt and the problems some consumers may incur. This is why DNB and the financial services industry plan to implement three initiatives with short-term effects: the establishment of a debt register, an industry-specific marketing standard and better invoicing routines in the financial industry. A new DNB strategy for credit cards and consumer loans is currently being drafted. In continuation of this, the bank has initiated a review of all its card products.

Entry into the housing market is becoming increasingly difficult for many people, particularly for young adults. However, it is important that the requirements to be met by those entering the housing market are strict enough. DNB is of the opinion that there should be more flexible lending practices for 10 per cent of DNB’s home mortgage customers. The flexibility mainly applies to customers below the age of 34 who do not have an adequate down payment or have insufficient liquid funds, and applies to all regions, not only the largest towns. The objective of this measure is to give more young adults the opportunity to enter the housing market and own their own home.

A Valuable Lesson is an initiative in DNB that affects a wide cross-section of the population, and which is also relevant with respect to financial inclusion. Read more about A Valuable Lesson on page 53 in the annual report.

DNB Livsforsikring provides financial support to humanitarian organisations involved in microfinance projects and has invested in the Norwegian Microfinance Initiative, NMI, which is a partnership between private and public actors which directly and indirectly invests in microfinance institutions in the form of equity, loans or guarantees. NMI’s mission is to give poor people in developing countries the opportunity to work and improve their quality of life based on a sustainable platform, and by offering financial services which are generally not available to them today. This should give a return in the form of development effects and financial yields.

DNB Livsforsikring was involved in the establishment of the initiative and has invested approximately NOK 126 million in NMI. Together with other institutional investors, this has made NMI able to invest directly in microfinance institutions which now have more than six million clients. Investments are also made indirectly through mutual funds that invest in microfinance institutions and reach a further 40 million clients. In addition to equity investments and loans to microfinance institutions, NMI has a programme to offer advisory services to institutions on how their operations can become better and more targeted, as well as have greater social effects. Women currently comprise just over 95 per cent of the clients in NMI’s microfinance institutions, and approximately 96 per cent of the loans are granted to projects to improve the borrowers’ income potential.

IMPORTANT TOPICS, MATERIALITY ANALYSIS 2016

PREVENT FINANCIAL CRIME

Increasing globalisation and digitalisation of banking services are factors which increase the risk of financial crime. DNB views its commitment to preventing financial crime as part of its corporate social responsibility.

DNB’s customers and society at large should feel assured that the Group acts correctly and is proactive in reducing the risk in this area. It is also important to prevent the bank and its infrastructure from being exploited by players who seek to use DNB’s services for illegal purposes. The Group will help to ensure that Norway is not exposed to money laundering or terrorist financing, and targeted efforts are being made by the entire Group, both in Norway and internationally.

Anti-corruption work is organised in the Group’s compliance unit. A particularly important task is to implement ongoing measures aimed at all employees in Norway and in the organisation’s international operations to ensure the right attitudes. Based on a risk-based approach, the purpose is to implement targeted initiatives in those parts of the organisation which are deemed to be most exposed to ethical challenges and corruption risk. Training and other activities are tailored to give units and employees the best possible and relevant assistance.

Anti-corruption is a key topic in the introduction programmes for new employees and new managers. In 2016, presen-tations were held at all seminars for new employees. In addition, more than 10 800 dilemma training sessions were completed through 30 courses in the Group. The dilemmas are prepared in close cooperation with the business areas and support units so that the issues and challenges raised will be relevant and recognisable for the employees. The training is mandatory, and managers are encouraged to discuss anti-corruption dilemmas with their employees.

In the period ahead, DNB will focus further on the risk of external corruption related to customers, i.e. the risk that DNB will become involved in corruption through customer relationships and transactions.

Increasingly complex international regulations, combined with a rise in financial crime, entailed that DNB established a three-year group-wide action plan in 2015 to strengthen its work to combat money laundering. The work was initiated and approved by the Board of Directors, and the objective of the plan is to ensure high quality in the entire anti-money laundering (AML) process. The AML process will at any given time reflect the risk described in the AML risk analyses and cover ongoing customer due diligence through Know-Your-Customer (KYC) processes. The work is carried out within the scope of DNB’s compliance policy, group guidelines and anti-money laundering regulations. The action plan resulted in a significant improvement in the quality of customer information in 2016. In addition, all of DNB’s business units, both in and outside Norway, prepared a risk analysis based on a new group method. This is a concrete assessment of the Group’s operations with respect to the risk of money laundering and terrorist financing. Business units in DNB are committed to implementing and maintaining risk analyses. The analyses, together with relevant legislation, provide the basis for the Know-Your-Customer (KYC) process and the risk-based AML controls, and form the basis for continuous development of risk-mitigating measures. In addition, a basic training program for employees was developed during the year that was completed by more than 90 per cent of the Group's employees. The preparation of a global internal framework for anti-money laundering, DNB’s anti-money laundering regulations, was also initiated. The regulations shall ensure that the Group complies with basic requirements and standards in this field, help ensure a consistent process throughout the Group and acts as a guide for the business areas and support units both in the preparation of procedures and processes and with respect to addressing specific issues.

The work will continue unabated in 2017. The key target is the completion of DNB’s anti-money laundering regulations and action plan. The latter includes the updating of customer data, further development of the KYC process, including improvements in the electronic monitoring system, as well as the launch of more training programmes. The ambition is that these activities should give the necessary quality enhancement in DNB to help prevent Norway and DNB from becoming exposed to money laundering and financial crime.

RESPONSIBLE SUPPLIER CHAIN

In 2016, DNB purchased goods and services for approximately NOK 10.5 billion. Important purchase categories for the bank are the development and operation of IT solutions, marketing and consulting services, as well as goods and services related to properties and office equipment.

Of DNB’s approximately 7 000 suppliers, 200 represent approximately 80 per cent of the Group's procurement costs. The suppliers are largely Norwegian or major international companies. The suppliers influence DNB’s value creation ability, and it is important that what is purchased is of good quality, delivered at a competitive price and produced in a responsible manner.

IMPORTANT TOPICS, MATERIALITY ANALYSIS 2016

In order to ensure a fair and transparent procurement process, purchases in DNB are conducted according to both the Group's procurement principles and guidelines and a defined procurement process. What DNB expects from s uppliers should be specified in the tender documents and in the contracts, which also contain the DNB Code of Responsible Business Conduct for Suppliers. The code is based on prevailing regulations and the OECD Guidelines for Multinational Enterprises, the UN Global Compact, the United Nations’ Guiding Principles on Business and Human Rights and the ILO Core Conventions. The principles set clear requirements with respect to human rights and labour standards, environmental management and ethical business conduct, as well as suppliers’ responsibility vis-à-vis sub-suppliers.

In 2016, the work to promote a responsible supplier chain consisted of three main elements: 1. Internal group guidelines: The corporate social responsibility requirements governing procurement were made

stricter and more explicitly formulated in a revised version of the procurement guidelines and related processes and tools.

2. Supplier information: The implementation of EcoVadis, the analysis and collaborative tool, continued. DNB uses EcoVadis to better follow up how its largest and/or vital suppliers, or suppliers which because of their industry, geography or past history are considered to pose a higher risk, manage risks and opportunities related to corporate social responsibility. At the end of the year, suppliers representing a total of 58 per cent of DNB’s relevant supplier expenses had been analysed using EcoVadis. The results of the analyses and possible areas for improvement are discussed in supplier meetings, with particular emphasis on suppliers with less favourable results. In addition, in 2016, DNB started to use StartBANK, a common supplier register for suppliers from the building and construction industry, where suppliers must be registered and share a minimum of information in order to be considered as a supplier.

3. Audit: Two major supplier audits were carried out in order to verify compliance with the Code of Responsible Business Conduct for Suppliers. In cooperation with the external auditor, audits were made of a canteen and cleaning supplier, and of IT services. DNB finds that the audits are important contributions towards improvements and learning both for DNB and for the suppliers.

This work will continue along the same lines as in 2016. The Code of Responsible Business Conduct for Suppliers will be revised, and work is in progress to further strengthen the integration of environmental, ethical and social considerations in the procurement process and in the follow-up of the bank's suppliers.

SECURE THE FINANCIAL INFRASTRUCTURES

Society is dependent on a well-functioning financial infrastructure. If basic functions such as payment systems stop working or are attacked during a crisis, this may result in instability. As Norway's largest bank and settlement bank for 94 Norwegian banks, it is vital for DNB to secure a stable and robust financial infrastructure with good emergency preparedness and continuity solutions.

The management of security solutions for DNB’s IT services and infrastructure is an integral part of the Group's corporate governance based on a security policy approved by the Board of Directors, together with guidelines and more detailed requirements for areas such as information security, physical security and crisis management.

One of the most serious threats against the financial infrastructure is the different types of computer attacks. A constant risk of being connected to the Internet is so-called denial of service attacks, whereby digital services are sabotaged and thus stop working. In the course of 2016, there were several serious attacks targeting international banks. DNB has a number of technical safeguards to prevent such large and small-scale attacks. If the services stop functioning as a result of an attack or for another reason, DNB has alternative solutions which can take over.

Another emergency preparedness and continuity measure is DNB’s participation in the Financial Infrastructure Crisis Preparedness Committee, which is headed by Finanstilsynet. The committee coordinates emergency response in the financial sector and will coordinate the preparation and implementation of notification plans and emergency response measures in connection with security policy crises and war.

In addition, DNB cooperates well with the police, the Norwegian National Security Authority, FinansCERT and other institutions to ensure a good overview of the threat scenario and coordinate efforts in connection with serious events. These are important partners to secure the financial infrastructure.

DNB is subject to monitoring and supervision by government bodies, such as Norges Bank, Finanstilsynet and the Nor-wegian Data Protection Authority.

IMPORTANT TOPICS, MATERIALITY ANALYSIS 2016

In 2014, DNB’s settlement systems were reviewed by Norges Bank based on international principles (CPMI-IOSCO) for securing the financial infrastructure. According to the conclusion in Norges Bank’s "Financial Infrastructure Report 2016", all the systems in DNB are compliant with all relevant principles.

Some of the challenges and opportunities in the period ahead will be related to changes in the threat scenario, new forms of payment and potential decentralised financial infrastructures. DNB is working to meet these changes in a good way to always be able to deliver good customer experiences, while ensuring that critically important financial services are secured.