SECOND PARTY OPINION 1 ON THE SUSTAINABILITY OF PAPREC S GREEN BOND 2

Transcription

1 SECOND PARTY OPINION 1 ON THE SUSTAINABILITY OF PAPREC S GREEN BOND 2 Issued in March 2017 SCOPE Vigeo Eiris was commissioned to provide an independent opinion on the sustainability credentials and management of the Green Bond (the Bond ) proposed to be issued by Paprec Holding (hereafter the Issuer or Paprec ) in the form of senior secured notes due 2022 in an aggregate amount of EUR 225 million, according to Vigeo Eiris Environmental, Social and Governance (ESG) assessment methodology and in line with the Green Bond Principles guidelines. The opinion is based on the review of the two following components: Issuer: document-based evaluation of Paprec Group s ESG performance, controversies and capacity to mitigate these risks Issuance: analysis of the coherence between the Green Bond framework and Paprec s strategy and commitments, and document-based evaluation of the initial 2015 Green Bond framework published on Paprec s website (the Green Bond framework ) and this new issuance focusing on the acquisition of Collectes Valorisation Energie Déchets (hereafter Coved ), including: analysis of the process for categorisation and selection of the targeted project, i.e. Coved s acquisition, for the use of proceeds, and the process for evaluation of its environmental and social risks and impacts assessment of reporting systems dedicated to information, monitoring and control related to fund allocation, to management and impacts of the financed project. Vigeo Eiris sources of information are gathered from our rating database of issuers, and, for specific needs of this evaluation, from the Issuer, press content providers and stakeholders. Vigeo Eiris has carried out its due diligence from the 5 th of January to the 22 nd of February 2017, complemented by interviews with involved managers, held at the Paprec s offices in Paris (France). We were able to access to all appropriate documents and to meet all sollicited people. We consider that the provided information enable us to establish our opinions with a reasonable level of assurance on their completeness, precision and reliability. VIGEO EIRIS OPINION Vigeo Eiris confirms that the bond intended to be issued by Paprec is a Green Bond with positive contribution to sustainable development, aligned with the Green Bond Principles. Vigeo Eiris reaches a reasonable 3 level of assurance on the sustainability of the bond: Paprec s overall ESG performance is robust 3, with a robust performance in the Environmental domain (see Part I). The Issuer s Green Bond framework is coherent with Paprec s main strategic priorities and is considered to be robust(see Part II): The net proceeds of the issuance will be used by Paprec to finance in whole a Recycling Project, consisting in the acquisition of Coved, which contributes to natural resources preservation, climate change mitigation and local economic development, in line with three United Nations Sustainable Development Goals. The processes for categorisation, selection and evaluation of the Eligible Project are clearly defined and robust, and would enable a documented and transparent governance of the bond. The Issuer s reporting commitments and processes are robust, covering the fund allocation and environmental benefits of the financed acquisition (outputs and impacts), reaching an overall reasonable level of assurance on its capacity to report on the Green Bond s use and impacts. 1 Second Party Opinion Green Bond Principles: This opinion is to be considered as the Second Party Opinion described by the Green Bond Principles (2016 edition in the External Review section). The Green Bond Principles include the Voluntary Process Guidelines for Issuing Green Bonds and the Guidance for Issuers of Social Bonds (see: 2 The Green Bond is to be considered as the potential forthcoming bond, which issuance is subject to market conditions. 3 Definition of Vigeo Eiris scales of assessment (as detailed on the last page of this document): Level of Performance: Advanced, Robust, Limited, Weak. Level of Assurance: Reasonable, Moderate, Weak. 1/11

2 Part I. ISSUER Level of the Issuer s sustainability performance As of February 2017, Paprec s overall approach to manage ESG related issues is robust, and has slightly improved since the previous review of the company, which took place in February 2015, in connection with Paprec s first green bond issuance. Paprec displays a rather heterogeneous approach to the three ESG pillars. The best performance is observed in the Social pillar where the company addresses all the relevant issues at stake, with a robust, almost advanced, performance. Paprec achieves a robust performance in the Environmental pillar. The performance in the Governance pillar is limited, as previously assessed. Vigeo Eiris assurance that ESG risk factors of Paprec are adequately managed ranges from reasonable for human capital and legal risks, to moderate for reputational and operational risks. Stakeholder-related ESG controversies 4 and controversial activities 5 As of February 2017, Paprec faced one allegation regarding accidental pollution, with a minor level of severity. The company is proactive as Paprec has voluntarily taken systematic remedial actions for impacted stakeholders in response to the controversy faced, as further described in Part I of Detailed Results. The Issuer has no involvement in any of the 9 controversial activities analysed by Vigeo Eiris. Part II. ISSUANCE Coherence of the issuance As a pure player of the recycling and waste management and signatory of the Global Compact, Paprec s core business is material recycling and recovery, including extraction of all recyclable materials from waste, in line with French environmental policies. Paprec focuses its investment capacity on industrial development, including both organic and external growth. Paprec s Green Bond Framework is coherent with the company s main strategic priorities, and contributes to achieve its commitments and objectives. Vigeo Eiris has a reasonable level of assurance on Paprec s willingness and capacity to align the objectives and the management of this Green Bond with relevant issues in terms of environmental responsibility. Use of proceeds In line with Paprec s sustainability priorities, the net proceeds of the Green Bond will be used to finance in whole a Recycling Project, consisting in the acquisition of Coved, a French company specialized in waste collection and recycling activities, in line with use of proceeds requirements. Coved have been evaluated by Vigeo Eiris in February 2017 based on 18 relevant ESG drivers, and its overall ESG performance is currently limited, below Paprec s performance. Paprec commits to implement within the next 18 months commitments based on ESG criteria, defined in the initial Green Bond Framework, in order to improve, or at least maintain, the overall ESG performance of the integrated Group. Vigeo Eiris estimates that the objectives and expected benefits associated with the Eligible Project are relevant, measurable, precise and visible and that the Eligible Project s contribution to sustainable development is positive, due to the expected benefits on natural resources preservation, climate change mitigation and on local economic development. In addition, Vigeo Eiris considers the Eligible Project aligns with the following UN Sustainable Development Goals: 9. Industry, innovation and Infrastructure 11. Sustainable Cities and Communities 12. Responsible Consumption and Production. 4 The opinion delivered on stakeholder-related ESG controversies is not a conclusion on the creditworthiness of Paprec or its financial obligations. 5 The 9 controversial activities analysed by Vigeo Eiris are: Alcohol, Animal maltreatment, Armament, Hazardous chemicals, Gambling, Genetically Modified Organisms in food & feed, Nuclear energy, Sex industry, Tobacco. The controversial activities research provides screening on companies to identify involvement in business activities that are subject to philosophical or moral beliefs. 2/11

3 Process for projects evaluation and selection The process for evaluation and selection of the Eligible Project is partially formalised by the Issuer, made publicly available on Paprec s website 6 through this opinion, and this process relies on relevant criteria including: Use of proceeds criteria based on the definition of the Eligible Projects category and defined in line with Paprec s strategic priorities. Additional selection criteria defined to exclude companies not demonstrating good social climate and environmental legal compliance, and integrate ESG factors in project management. Due to the current preliminary pre-acquisition stage, the issuer commits to fully implement this set of selection criteria within the next 18 months, with regular monitoring ensured by the dedicated Integration Committee. The Eligible Project that will be financed by the bond proceeds, i.e. Coved s acquisition, has been selected in line with these criteria. The Issuer s evaluation and selection process is reasonably structured in terms of governance and is based on relevant internal expertise. Vigeo Eiris considers that the process for project evaluation and selection is clearly defined, in line with Paprec s strategy. The Green Bond framework is considered to be robust in terms of transparency, governance and relevance of defined process and eligibility criteria, in line with the Green Bond Principles requirements. Beyond the Green Bond Principles requirements, in line with international standards, certain ESG factors have been integrated in the evaluation and due diligence process carried out before the acquisition and the Issuer commits to perform a post-issuance external review on the implementation of ESG criteria and on the actual performance of the integrated group. We have recommended to reinforce ESG risks management and monitoring. Management of proceeds The rules for management of proceeds are clearly defined and would enable a documented transparent allocation process. The net proceeds of the bond will be managed within a dedicated escrow account with a bank account controlled by an Escrow Agent until the acquisition date, in cash or other liquidity instruments that do not include Greenhouse Gas (GHG) intensive activities nor any controversial activity. The proceeds will be strictly used to finance the Eligible Project, in accordance with the release conditions set forth in the escrow agreement to be entered into by, inter alias, the Issuer and the Excrow Agent. The Issuer will ensure investment tracking with the dedicated escrow account, which is under the control of the Escrow Agent and trustee of the Bond. Monitoring & Reporting A dedicated Integration Committee will ensure the regular monitoring of the implementation of ESG criteria and commitments and of the performance of the Eligible Project. Paprec commits to annually and transparently report on the Green Bond, including on: Fund allocation (use of proceeds) at investment level (acquisition) for the first reporting. Sustainability benefits collected at Coved level: annual estimates and/or assessment of major environmental and social impacts disclosed at Coved level. Paprec has identified certain reporting indicators and selected calculation methodologies based on both internal and external expertise. The selected reporting indicators related to the fund allocation and the sustainability benefits are relevant for the defined Eligible Project. The process for use of proceeds and ESG data collection, consolidation and reporting has been clearly defined at issuer level, including relevant people from across the Group, and will be defined at project level (reporting conditions are part of the coming integration actions). The reporting commitments of the Issuer comply with the Green Bond Principles guidelines. Regarding monitoring and reporting on ESG management, information will be provided at least at Group level, and we have recommended to reinforce monitoring and reporting on ESG indicators at Coved level. Vigeo Eiris considers that Paprec s overall reporting commitments are robust, leading to a reasonable level of assurance on Paprec s capacity to regularly report on the Green Bond use of proceeds and environmental benefits. 6 Available on the Issuer website in the «Engagements citoyens» section 3/11

4 EXTERNAL REVIEW The Paprec s Green Bond issuance is supported by external reviews provided by: The present Vigeo Eiris review ( Second Party opinion ), as sustainability consultant, on the sustainability credentials of the Green Bond, based on pre-issuance commitments and covering all the bond aspects, i.e. issuer sustainability profile and commitments related to the issuance (use of proceeds, evaluation, selection and allocation processes and reporting). The review of the Second Party opinion, at least after 18 months, based on post-issuance findings, on the sustainability credentials of the bond, on the compliance with Paprec s pre-issuance commitments and with the Green Bond Principles and on the overall integrated group s performance. No external verification (third party ESG and/or financial audit) of the tracking of the bond proceeds and the reporting metrics is contemplated, which is an area of improvement. Paris, February 22 nd, 2017 Muriel CATON Director of Vigeo Eiris Enterprise Laurie CHESNE Senior Sustainability consultant Disclaimer Transparency on the relation between Vigeo Eiris and the Issuer: Vigeo Eiris has executed one audit mission (Paprec ESG rating and SPO on 2015 GB in February 2015) and no consultancy activity for Paprec until so far and no established relationship (financial or other) exists between Vigeo Eiris and Paprec. This opinion aims to explain investors why the Green Bond is considered sustainable and responsible, based on the information made available and analysed by Vigeo Eiris. Providing this opinion does not mean that Vigeo Eiris certifies the materiality, the excellence or the irreversibility of the projects refinanced or financed by the Green Bond. Paprec is fully responsible for attesting the compliance with its commitments defined in its policies, for their implementation and their monitoring. The opinion delivered by Vigeo Eiris neither focuses on financial performance of the Green Bond, nor on the effective allocation of funds use of proceeds. Vigeo Eiris is not liable for the induced consequences when third parties use this opinion either to make investment decisions or to make any kind of business transaction. 4/11

5 DETAILED RESULTS Part I. ISSUER Level of the Issuer s sustainability performance As of February 2017, Paprec Group s overall approach to manage ESG related issues is robust. Paprec displays rather heterogeneous performances on the three ESG pillars. Domain Comments Opinion assessment level Environment Social Paprec s environmental performance remains robust, despite a slight decrease, explained by the limited performances obtained by the company regarding to newly analysed issues, i.e. the protection of biodiversity and the protection of water resources, despite relevant measures in place. The company s performance regarding the main sustainability drivers has remained stable and most of them are advanced, i.e. environmental strategy, pollution prevention, management of landfill atmospheric emissions and waste management. Despite advanced systems in place to reduce energy use, the company s energy consumption and related GHG emissions have overall increased over the past three years. As for the management of environmental impacts from transportation, the company obtains a limited, although almost robust, performance. Relevant measures are in place, but the results are mixed: although the company s transport mix is steadily improving, the consumption of diesel fuel, normalised to the weight of waste transported, has increased over the past three years. Paprec s performance in the Social pillar is robust, almost advanced, improving since the last review. Regarding Community Involvement, Paprec's performance has increased and is now advanced. Relevant commitments and resources are dedicated to local economic and social development, such as partnerships with local enterprises and financial support provided to local authorities to finance social infrastructure. Paprec reports transparently on the taxes paid in its countries of operation. Regarding Human Rights, Paprec's performance is now advanced, with strengthened commitments regarding fundamental labour rights and the prevention of discrimination, with the release of its Business Ethics Charter. Relevant measures are in place and diversity KPIs show positive increasing trends over the past few years. Regarding Human Resources, the company s performance is robust with strengthened commitments on social issues, following the issuance of its Business Ethics Charter. The best addressed issue remains social dialogue and the performance regarding the promotion of health and safety has improved, due to good quantitative results. A robust performance is observed with regard to the responsible management of reorganisation: relevant measures are allocated to the issue and cover all affected employees. Advanced Robust Limited Weak Advanced Robust Limited Weak Governance Paprec demonstrates a limited performance in the Governance pillar, and no notable changes were noticed. A majority of the Board members are nonexecutive directors and three are independent. Moreover, the attendance rate reached 100% in 2016, and one board member has relevant skills and knowledge in CSR. Paprec has set up a specific Audit Committee which fulfils its role of overseeing internal and external controls and relevant processes dedicated to the management of CSR risks are in place. However, executives are present in all board committees and the company still does not disclose sufficient information on executive remuneration. Paprec has formalised a commitment to preventing corruption in its Business Ethics charter. However no specific policies appear to be in place to tackle the prevention of anti-competitive practices and responsible lobbying, and measures disclosed are limited. Advanced Robust Limited Weak 5/11

6 Stakeholder-related ESG controversies and controversial activities - Frequency: As of February 2017, Paprec faces an isolated allegation: the Company faces one allegation regarding accidental pollution (a fire occurred at one of Paprec's recycling plants in May 2016, destroying most of a 8,000m² storehouse and four employees suffered smoke inhalation injuries). - Severity: The severity of this event is considered minor based on the analysis of its impact on the company and stakeholders. - Responsiveness: Paprec is proactive overall: the building will be re-built with additional protections against fire risk, such as firewalls, fire-proof doors and thermal imaging cameras. In addition, new fire protection measures were also taken at group-level, including the provision of more efficient fire extinguishers and thermal cameras. As of February 2017, the Issuer has no involvement in any of the 9 controversial activities analysed by Vigeo Eiris, namely: alcohol, animal maltreatment, armament, hazardous chemicals, gambling, GMOs in food & feed, nuclear energy, sex industry, and tobacco. Part II. ISSUANCE Coherence of the issuance As a pure player in the recycling and waste management sector, and French leader of the recycling industry, Paprec s core business is based on material recycling and recovery, including extraction of all recyclable materials from waste, in line with French environmental policies. Paprec focuses its investment capacity on industrial development, with new recycling solutions and channels and cutting-edge recycling equipment and solutions, and on the quality of its geographical and local coverage. This includes both organic growth, with investments in industrial recycling assets, and external growth, with acquisitions of companies specialized in such recycling activities. The French Energy Transition for Green Growth Act (August 2015) sets objectives in terms of waste recovery, in particular achievement of 65 % of waste recycling and recovery and reduction of 50% of waste going to landfills by A first decree related to waste prevention and management measures and promotion of circular economy is applicable. As a signatory of the Global Compact, and involved in several initiatives focusing on the development of the best environmental practices, Paprec has issued a formalised commitment to environmental protection and waste recovery in its Environmental policy, covering most challenges linked to its activities. The proceeds of Paprec s Green Bond issuance will be used to finance the acquisition of Coved and will contribute to improve Paprec's recycling capacity and diversify its activities with new recycling channels. Consequently, it is likely to play a key tool to favour investments aiming at contributing to environmental protection. Consequently, Paprec s Green Bond Framework is coherent with the company s main strategic priorities, and contributes to achieve its commitments and objectives. Vigeo Eiris has a reasonable level of assurance on Paprec s capacity to integrate relevant issues in terms of environmental responsibility. Green Bond framework 6/11

7 Use of proceeds In line with Paprec s sustainability priorities, the net proceeds of the Green Bond will be used to finance in whole a Recycling Project, consisting in the acquisition of Coved. Coved is a French non-listed company specialized in waste collection, sorting, treatment, storage and recovery, as well as cleaning of public spaces. As of February 2017, the company operates 112 sites in France, among which 50 industrial waste treatment facilities. Coved has been evaluated by Vigeo Eiris in February 2017 according to 18 relevant ESG drivers, and its overall ESG performance appears to be limited, below Paprec s performance. Coved performs better in the Social pillar, with a robust performance. However, the company s performance on the Environment pillar is weak and is limited on the Governance pillar. Coved has faced two controversies linked to local pollution, on which it is reactive. This project meets the Use of Proceeds requirements and the Issuer commits to implement within the next 18 months the set of ESG criteria, defined in the Green Bond Framework, in order to improve, or at least maintain, the overall ESG performance of the integrated Group following the acquisition. Use of proceeds criteria and expected environmental benefits have been defined and evaluated in the table below: Eligible category Definition Objectives Sustainability benefits Vigeo Eiris analysis Acquisitions of recycling companies (external growth) Investment in / Refinancing of company acquisition, specialized in recycling, that contributes to the improvement of the recycling capacity : Higher recycling (industrial) capabilities (business diversification with new recycling solutions / channels), and/or Expansion of geographic marketplace / higher geographical coverage Develop recycling and collection capabilities, and reduce landfill by the improvement of recycling Natural resources preservation Recycling rate improvement (landfill reduction) Climate change mitigation GHG emissions avoidance (material recovery) Local economic development Job creation and safeguarding of local employment (local sorting and recycling) The definition is clear and the content is relevant. The Project, i.e. Coved acquisition, meets the definition of Eligible Acquisitions of recycling companies as defined in the initial Green Bond framework, contributing to higher recycling capabilities and business diversification The objectives are visible, measurable and relevant. Vigeo Eiris estimates that the overall objectives and expected benefits associated with the Eligible Project are relevant, measurable, precise and visible, and that the Eligible Project s contribution to sustainable development is positive, due to its expected environmental benefits on climate change mitigation, natural resources preservation and local economic development. In addition, Vigeo Eiris considers that the Eligible Project align with the following United Nations Sustainable Development Goals (UN SDGs): Contribution to achieving the UN SGD 9. Industry, Innovation and Infrastructure The UN SDG 9 consists in building resilient infrastructure, promote sustainable industrialization and foster innovation, with targets by 2030 on the promotion of inclusive and sustainable industrialization and significant increase of industry s share of employment and gross domestic product. By using the Green Bond proceeds to finance Coved, Paprec is contributing to the UN SDG 9, with regards to the above-mentioned targets. Contribution to achieving the UN SGD 11. Sustainable cities and communities The UN SDG 11 consists in making cities inclusive, safe, resilient and sustainable, with targets by 2030 on the reduction of the adverse per capita environmental impact of cities, including by paying special attention to air quality as well as municipal and other waste management. By using the Green Bond proceeds to finance Coved, Paprec is contributing to the UN SDG 11, with regards to the above-mentioned targets. Contribution to achieving the UN SGD 12. Responsible Consumption and Production The UN SDG 12 consists in ensuring sustainable consumption and production patterns, with targets by 2030 on the sustainable management and efficient use of natural resources; the environmentally sound management of all wastes throughout their life cycle with reduced release and minimized 7/11

8 adverse impacts on human health and the environment; and the substantial reduction of waste generation through prevention, reduction, recycling and reuse. By using the Green Bond proceeds to finance Coved, Paprec is contributing to the UN SDG 12, with regards to the above-mentioned targets. Process for projects evaluation and selection The Issuer is committed to attest the transparency and efficiency of selection process and the responsible management of the proceeds and financed projects, through defined additional selection criteria, which have been evaluated by Vigeo Eiris. The process for projects evaluation and selection is robust, regarding the transparency, governance and efficiency of the defined method, in line with the Green Bond Principles guidelines. The process is clearly defined, partially formalized by the Issuer, and publicly available, relying on relevant selection criteria. In particular, the selection process aimed to exclude companies not demonstrating good social climate and environmental legal compliance, and integrate ESG factors in project management. Based on Coved s ESG assessment, the company displays an advanced performance in social dialogue and human rights and reports that there have been no environmental incidents over the last 3 years. Due to the current preliminary pre-acquisition stage, the Issuer commits to fully implement this set of selection criteria within the next 18 months, with regular monitoring ensured by the dedicated Integration Committee. The integration process post-acquisition is formalized but we have recommended to formalize the due diligence and selection process, before acquisition. The process is reasonably structured in terms of governance and internal roles and responsibilities are welldefined with: The selection of the Eligible Project relies on a due diligence process, based on the analysis of controversies history and on-site visits performed by relevant managers in order to collect information and to evaluate the performance of the project. The evaluation and selection is managed by the top management, via a dedicated Strategic Committee ensuring the appropriate implementation of the process, with weekly meetings. Based on the opinion of the Strategic Committee, the Board of Directors have approved the project selection and acquisition, with a favorable vote of 100% of board members. The evaluation and selection process is mainly based on internal expertise, all along the evaluation process: involved people are appropriate and include employees from Directions of Human Resources, QSE, Finance, Legal, CSR and Paprec s employees, previous workers of Coved. External financial auditor and lawyers were commissioned to perform tax, legal and financial audits. We have recommended to involve employee representatives and external ESG experts in the due diligence and selection process. Beyond the Green Bond Principles requirements, in line with international standards, some ESG factors have been integrated in the evaluation and due diligence process carried out before acquisition regarding Paprec s policies and standards, including human resources, governance, industrial quality of sites and equipment, intellectual capital, and environmental compliance. The Issuer commits to perform a post-issuance external review on the implementation of ESG criteria and on the actual performance of the integrated group. We have recommended to reinforce the integration of ESG factors in the process in order to enhance the risks management and monitoring. Management of proceeds Vigeo Eiris considers that the Issuer s rules for management of proceeds are clearly defined in the Green Bond framework and would enable a documented transparent allocation process. The net proceeds of the bond will be managed within a dedicated escrow account, in cash or other liquidity instruments that do not include Greenhouse Gas (GHG) intensive activities nor any controversial activity, and controlled by the Escrow Agent. The proceeds will be strictly used to finance the Eligible Project: the use of the release of the escrowed proceeds is limited to finance the acquisition of Coved and expenditures incurred in connection with the transactions, such as defined in the terms of the Acquisition Agreement. The amount of the net proceeds is equivalent to the amount of the acquisition of Coved. Paprec will allocate the Green Bond proceeds towards the Eligible Project as the financial closing of the acquisition of Coved is notified, within around one month after the issuance of the bond, depending on market conditions and Competition Authority s process. The Issuer commits not to resell any activity of Coved and to maintain its business perimeter. 8/11

9 Paprec will track the investments of the proceeds allocated to the Eligible Project in a dedicated escrow account of its treasury, which is submitted to the control of banks involved in the bridge in place and the Escrow Agent. Monitoring & Reporting Monitoring A dedicated Integration Committee has been created, which is aimed at leading the integration process, starting with an analysis of the current situation (i.e. gap analysis and potential synergies), the definition of common targets and the implementation of the associated action plan. The objective is to implement Paprec s policies and practices within the next 18 months, including the ESG criteria and commitments defined in the Green Bond framework, and to improve, or at least maintain, the overall ESG performance of the integrated Group. This Committee is composed of the CEO, the General Manager, a Deputy CEO, the Head of Human Resources, the CFO and two project managers in charge of the operational integration. After the acquisition of Coved, the Committee will then be completed and/or supported by Coved s employees. Thematic Committees would be set up by the Integration Committee in order to focus on specific working themes. Regular monitoring is ensured by the Integration Committee through monthly meetings, with quarterly reporting to the Board of Directors. Reporting The Issuer commits in its Green Bond framework to annually and transparently report on the Green Bond, including on: Fund allocation (use of proceeds) at investment level (acquisition) for the first reporting Criteria Reporting indicators Use of proceeds Project description Amount invested (in EUR) Total allocated amount vs total amount of proceeds (in %) Sustainability benefits collected at Coved level: annual estimates and/or assessment of major environmental and social impacts disclosed at Coved level Benefits Natural resources preservation Climate change mitigation Local economic development Impact indicators % of waste recycling Tonnes of secondary raw materials GHG emissions avoided in tco2e Balance between GHG emissions generated by material recovery via recycling and emissions generated by production of equivalent virgin material Number of direct local jobs supported and/or created (when relevant) Paprec has identified certain reporting indicators and selected calculation methodologies based on both internal and external expertise. The selected reporting indicators related to the fund allocation and the sustainability benefits are relevant for the defined Eligible Project. The process for use of proceeds and ESG data collection, consolidation and reporting has been clearly defined at Issuer level, including relevant people from across the Group, and will be defined at project level (reporting conditions are part of the coming integration actions). Reporting indicators on ESG project management will be provided at least at corporate level, with some additional information at Coved level regarding the integration process, but without commitment to detailed disclosure at Coved level on ESG issues, which is an area of improvement. We have recommended to reinforce monitoring and reporting on ESG indicators at Coved level. The Issuer may select alternative quantitative or qualitative indicators, to remain relevant for the selected Eligible Project, and may integrate additional qualitative or quantitative indicators as considered appropriate to disclose relevant performances or details on project management. The Issuer is committed to perform this reporting annually and until the maturity date of the bond, through a dedicated section within Paprec s Sustainable Development Annual Report available on Paprec s website. 9/11

10 METHODOLOGY In Vigeo Eiris view, Environmental, Social and Governance (ESG) factors are intertwined and complementary. As such they cannot be separated in the assessment of ESG management in any organisation or activity, including the issuance of fund raising. In this sense, Vigeo Eiris delivers an opinion on the Issuer s sustainability performance as an organisation, and on the objectives, management and reporting of the assets & projects (re)financed by this transaction. Vigeo Eiris methodology to define and to assess corporate ESG performance is based on criteria aligned with public international standards, in compliance with the ISO guidelines, and organised in 6 domains: Environment, Human Resources, Human Rights, Community Involvement, Business Behaviour and Corporate Governance. The evaluation framework has been customised regarding material issues, based on the Waste and Water Utilities assessment framework, project specificities and emerging issues. Vigeo Eiris reviewed information provided by the Issuer, press content providers and stakeholders (access to the content of 28,500 publications worldwide from reference financial newspapers to sector-focused magasines, local publications or Non-Government Organisations). Information gathered from these sources will be considered as long as they are public, documented and traceable. In total, Vigeo Eiris has reviewed documents and websites of Paprec related to the Green Bond evaluation (SRI and climate policies, ESG risks assessment tool, clmate and CSR reporting documents, PRI reporting ) and interviewed members from several departments of the Issuer. Our research and rating procedures are subject to internal quality control at three levels (analysts, heads of cluster sectors, internal review by the audit department for opinion on bonds and publications for corporate and sovereign issuers) complemented by a final review and validation by the Direction of Methods. A right of complaint and recourse is guaranteed to all issuers under our review, including three levels: first, the team linked to the issuer, then the Direction of Methods, and finally Vigeo Eiris Scientific Council. All collaborators are signatories of Vigeo Eiris Code of Ethics. Part I. ISSUER NB : The Issuer s performance, i.e., commitments, processes, results of the Issuer, related to ESG issues have been assessed through a complete process of rating and benchmark developed by Vigeo Eiris Rating. Furthermore, this assessment has been completed based on additional information provided by the Issuer to Vigeo Eiris Enterprise using the ESG assessment methodology developed by Vigeo Eiris. Level of the Issuer s ESG performance Paprec Group has been evaluated by Vigeo Eiris in September 2015 on its social responsibility performance, based on 17 relevant ESG drivers. Paprec s ESG performance has been assessed by Vigeo Eiris on the basis of three items : - Leadership: relevance of the commitments (content, visibility and ownership). - Implementation: coherence of the implementation (process, means, control/reporting). - Results: indicators, stakeholders feedbacks and controversies. Scale for assessment of ESG performance: Advanced, Robust, Limited, Weak. Stakeholder-related ESG controversies and involvement in controversial activities A controversy is an information, a flow of information, or a contradictory opinion that is public, documented and traceable allegation against an Issuer on corporate responsibility issues. Such allegations can relate to tangible facts, be an interpretation of these facts, or constitute an allegation on unproven facts. Vigeo Eiris provides an opinion on companies controversies risks mitigation based on the analysis of three factors: - Severity: the more a controversy will relate to stakeholders fundamental interests, will prove actual corporate responsibility in its occurrence, and will have adverse impacts for stakeholders and the company, the highest its severity. Severity assigned at corporate level will reflect the highest severity of all cases faced by the company (scale: Minor, Significant, High, Critical). - Responsiveness: ability demonstrated by an Issuer to dialogue with its stakeholders in a risk management perspective and based on explanatory, preventative, remediating or corrective measures. At corporate level, this factor will reflect the overall responsiveness of the company for all cases faced (scale: Proactive, Remediate, Reactive, Non Communicative). - Frequency: reflects for each ESG challenge the number of controversies faced. At corporate level, this factor reflects on the overall number of controversies faced and scope of ESG issues impacted (scale: Isolated, Occasional, Frequent, Persistent). The impact of a controversy on a company's reputation reduces with time, depending on the severity of the event and the company's responsiveness to this event. Conventionally, Vigeo Eiris' controversy database covers any controversy with Minor or Significant severity during 24 months after the last event registered and during 48 months for High and Critical controversies. 10/11

11 In addition, 9 controversial activities have been analysed following 30 parameters to verify if the company is involved in any of them. The company's level of involvement (Major, Minor, No) in a controversial activity is based on: - An estimation of the revenues derived from controversial products or services. - The precise nature of the controversial products or services provided by the company. Part II. ISSUANCE The Green Bond framework has been evaluated by Vigeo Eiris according to the Voluntary Process Guidelines issued by the Green Bond Principles v.2016, to its alignment with the UN Sustainable Development Goals, and to international standards and sector guidelines applying in terms of ESG issues. Use of proceeds The use of proceeds requirements are defined to ensure that the funds raised are used to finance and/or refinance Eligible Assets & Projects and are traceable within the issuing organisation. Each Asset & Project endorsed shall comply with at least one of the Eligible Assets & Projects category definition in order to be considered as an Eligible Asset & Project. Vigeo Eiris evaluates the relevance, visibility, and measurability of the associated environmental and/or social objectives. The sustainability purpose of the Green Bond s associated Eligible Assets & Projects has been precisely defined, with regard to the Issuer s commitments, and assessed based on the described and estimated benefits of Eligible Assets & Projects. The contribution of Eligible Assets & Projects to sustainable development is evaluated based on the United Nations Sustainable Development Goals. Process for projects evaluation and selection The evaluation and selection process has been assessed by Vigeo Eiris regarding its transparency, governance and efficiency. The relevance and exhaustiveness of selection criteria and associated supporting elements integrated in the Green Bond framework, and the coherence of the process are analysed based on material issues considered in Vigeo Eiris methodology. Management of proceeds The rules for the management of proceeds and the allocation process have been evaluated by Vigeo Eiris regarding their transparency, coherence and efficiency. Monitoring & Reporting Monitoring processes and reporting indicators, processes and methodologies are defined by the Issuer to enable annual reporting on fund allocation, environmental benefits (output and impact indicators) and on the responsible management of Eligible Projects financed by the Green Bond proceeds, collected at project level and potentially aggregated at bond level. Vigeo Eiris has evaluated the relevance of the reporting framework according to three principles: transparency, exhaustiveness and effectiveness. Scale of assessment for processes and commitments: Weak, Limited, Robust, Advanced. Scale of level of assurance on issuer s capacity: Reasonable, Moderate, Weak. VIGEO EIRIS ASSESSMENT SCALES Performance evaluation Advanced Advanced commitment; strong evidence of command over the issues dedicated to achieving the objective of social responsibility. Reasonable level of risk management and use of innovative methods to anticipate emerging risks Robust Convincing commitment; significant and consistent evidence of command over the issues. Reasonable level of risk management Limited Commitment to the objective of social responsibility has been initiated or partially achieved; fragmentary evidence of command over the issues. Limited to weak level of risk management Weak Commitment to social responsibility is non-tangible; no evidence of command over the issues. Level of insurance of risk management is weak to very weak Level of assurance Reasonable Able to convincingly conform to the prescribed principles and objectives of the evaluation framework Moderate Weak Compatibility or partial convergence with the prescribed principles and objectives of the evaluation framework Lack or unawareness of, or incompatibility with the prescribed principles and objectives of the evaluation framework Vigeo SAS Les Mercuriales 40 rue Jean Jaurès Bagnolet France +33 (0) contact@vigeo.com Boston Brussels Casablanca London Milan Montreal Santiago Tokyo info@eiris.org contact@vigeobelgium.com contact@vigeo.com info@eiris.org italia@vigeo.com contact@vigeo.com contact@vigeo.com contact@vigeo.com