Universal Registration Document 2021

6.8 Information relating to the allocation of funds raised in the framework of Social Bonds issued by EDF

In May 2021, the Group issued Hybrid Social Bonds for €1.25 billion to support its responsible development.

The funds raised through the hybrid social bonds are dedicated to financing capital expenditure incurred by EDF group by placing orders with SMEs that contribute to the development or maintenance of EDF group’s generation or distribution assets in the European Union and the United Kingdom (the “Eligible Projects”). More information can be found in the EDF Social Bond Framework ⁽¹⁾. In compliance with the Social Bond Principles of the ICMA (International Capital Markets Association) ⁽²⁾, this Hybrid Social Bond issue is consistent with the Group’s CSR (Corporate Social Responsibility) commitments and strategy in terms of responsible territorial development and the development of industrial sectors.

The commitments made by EDF in the context of these two bond issues follow the four Social Bond Principles guiding (i) the use of proceeds, (ii) existing processes for evaluating and selecting Eligible Projects, (iii) the management of proceeds, and (iv) reporting procedures. A detailed description of these investments can be found in the EDF Social Bond Framework of May 2021 available on the Sustainable Finance page of the Company’s website.

This section provides a summary of these commitments and how EDF has fulfilled them as at the end of 2021.

Use of proceeds

In the context of its social bond issues, EDF has undertaken to allocate the funds raised to finance investment expenditure incurred with SMEs that contribute to the development or maintenance of the EDF group’s generation and/or distribution assets in Europe (defined as the European Union and the UK).

The social objective of this investment expenditure is to support SMEs located in employment areas with high unemployment ⁽³⁾, which are a key element of EDF’s industrial fabric and which create employment opportunities in the territories where EDF operates.

EDF group has undertaken to comply with the Social Bonds Principles to “seek positive social outcomes, particularly but not exclusively for one or more target populations.” In this respect, EDF has allocated the funds from its May 2021 social bond issue solely to investments contracted with SMEs located in areas of high unemployment ⁽⁴⁾, i.e. in employment areas where the unemployment rate:

• is higher than the national average unemployment rate; or
• is falling less rapidly (or rising more rapidly) than the national average unemployment rate over the past five years.

The target population is employees and subcontractors of SMEs

EDF undertakes not to carry out any double counting. Therefore, EDF will not finance eligible projects that have already been financed by one of its Green Bonds.

The Social Bond Framework allows funds to finance eligible projects that have not yet received financing through a social bond, within a period of 2 years prior to the issue of the social bond (look-back clause).

Assessment and selection of financed eligible projects

Eligible Projects are subject to a specific evaluation and selection process:

• under the coordination of the EDF group Finance Department, each EDF Division is responsible for identifying Eligible Project proposals that meet the criteria for the use of funds;
• each EDF Division has undertaken to comply with EDF group policies and procedures, including those relating to ethical purchasing and contracting with SMEs;
• each relevant Division will document the process of evaluating projects within its scope.

Only projects that meet these criteria are eligible for financing from the social hybrid bond issue.

Within this process, eligible expenditure is identified in three different stages:

• receipt and validation of data:
  • identification of the data on CAPEX purchases made from SMEs by the EDF group in 2019 and 2020 and the first quarter of 2021 on a scope of generation and marketing ⁽⁵⁾ activities and regulated activities ⁽⁶⁾,
  • comparison of the data received with the data collected to carry out the EDF group’s employment footprint (2019/2020 and 1st quarter of 2021 purchase data and type of suppliers) in order to validate the amounts received. Each purchase amount corresponds to the SIRET number of the place of business that received this payment,
  • validation of the data received with the respective departments of EDF and Enedis;
• data processing:
  • data reprocessing,
  • extraction of official information on places of business from the two Sirene^® databases (source 5.4): status of places of business (SME/intermediate-sized enterprises/large enterprises) as well as internal classification number (NIC), postal code and business subsector ID number (NAF) data,
  • verification of the SME status of suppliers using Insee data obtained via the Sirene^® database,
  • exclusion of SMEs owned by a larger company (e. intermediate-sized or large enterprises);
• employment area associations and business sectors:
  • location of each purchase in one of the 306 employment areas in France, as defined by INSEE ⁽⁷⁾,
  • correspondence of business sector codifications.

Management of proceeds

Proceeds raised are managed according to a strict ring-fencing principle in order to ensure that their use is exclusively and effectively reserved for financing Eligible Projects.

The proceeds from each bond issue are invested and tracked in a dedicated sub- portfolio of treasury assets until allocated to Eligible Projects. Proceeds are invested in priority in treasury assets identified as Socially Responsible Investments (SRI). The  amounts available in the dedicated sub-portfolios of treasury assets are adjusted according to the actual use of the funds.

Compliance with these criteria is certified by KPMG (auditor) in accordance with the requirements of the Social Bond Framework. On this basis, the Finance Departments of the Group entities in question designate the Eligible Projects that are financed.

(1) https://www.edf.fr/sites/default/files/contrib/groupe-edf/espaces-dedies/espace-finance-en/investors-analysts/bonds/social-bonds/edf-social-bond-framework-may-19-2021.pdf

(2) The Social Bond Principles are voluntary guidelines for the issuance of “Social Bonds” that recommend transparency and disclosure in order to support the development of the Social Bond market with integrity. For more information: https://www.icmagroup.org/sustainable-finance/the-principles-guidelines-and-handbooks/social-bond-principles-sbp/

(3) SMEs located in employment areas where the unemployment rate is higher than the national average unemployment rate OR is decreasing less rapidly (or increasing more rapidly) than the national average unemployment rate over the last five years.

(4) More details are available on the EDF group website dedicated to sustainable finance: https://www.edf.fr/en/the-edf-group/dedicated-sections/investors-shareholders/bonds/green-bonds. A detailed Note relating to this methodology is available on demand.

(5) Limited to the Nuclear and Thermal Generation Department (DPNT) and the New Nuclear Engineering and Projects Department (DIPNN).

(6) Limited to Enedis and Island Energy Systems (SEI).

(7) According to INSEE, an employment area is “a geographical area within which most of the working population resides and works” (https://www.insee.fr/en/metadonnees/definition/c1361).