R E P O R T. Carbon Footprint Greenhouse Gas Emissions Management System and the Montepaschi Group s performance. In collaboration with:

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1 R E P O R T Carbon Footprint Greenhouse Gas Emissions Management System and the Montepaschi Group s performance In collaboration with: 1

2 Table of contents 3 WHY THIS REPORT 4 IN BRIEF 7 CLIMATE CHANGE POLICY 9 GREENHOUSE GAS EMISSIONS MANAGEMENT SYSTEM METHODOLOGICAL NOTE 11 PROPERTY AND FACILITY MANAGEMENT 13 BUSINESS TRAVEL 15 PROCUREMENT OF GOODS AND SERVICES 17 OTHER ACTIVITIES: EMPLOYEE COMMUTING OBJECTIVES 20 NOTES 2

3 Why this report Why this report This is the first Report prepared by the Montepaschi Group to present its strategy for the management and control of greenhouse gas (GHG) emissions that are either caused by its operations directly or that are partly related to them. More specifically, the Report contains a summary of GHG indicators (the so-called Carbon Footprint) for internal operating processes managed through the regular update of an ad-hoc monitoring and reporting system which was developed between December 2010 and April 2011 with the support of PricewaterhouseCoopers. The decision to adopt this system addresses the need for additional non-financial metrics of suitable quality to be used in business processes and corporate reporting. Indeed, the System constitutes first and foremost an internal and objective point of reference that ensures the practical implementation of the Group s environmental policy and is an additional parameter against which to assess overall business efficiency in operating areas such as real estate management, employee commuting and business travel, the procurement of goods and services: to this end, GHG indicators can complete the traditional analysis of Management Control and the Incentive Scheme according to a logic of value management. Furthermore, the System provides an important information basis when it comes to preparing the Group s Annual and Half-year Social Responsibility Reports, completing the Carbon Disclosure Project questionnaires and, in particular, responding to requests from sustainable finance drivers (specialized rating agencies, socially responsible investors, etc.). This Report is available to all interested parties on our regularly updated website 3

4 In brief In brief Through our new monitoring and reporting system 44,646 tonnes of e are kept track of. Compared to industrial enterprises, banks are able to ensure the continuity of their service without having to rely heavily on the use of fossil fuels. Average e emissions (thousand tonnes) Finance IT Healthcare Telecommunications Consumables Industries Materials Energy Utilities However, opportunities for reduction of GHG emissions directly generated from operating processes (though in some situations limited by business needs as may occur, for instance, with business travel) do exist and are such as to favour the implementation of specific ecoefficiency projects that will also have an impact on operating costs. Furthermore, banks may seize interesting market opportunities through appropriate green finance solutions aimed at supporting investments that have a positive impact on the environment and climate equilibrium. 4 For these reasons, in continuity with its Environmental Policy, the Montepaschi Group has begun to implement a climate-change strategy that has been developed on a number of fronts In marketing, for example, with research and financial products tailored to support the development of renewable energy sources (1 billion euro worth of loans were granted in 2010; +172% on the previous year). These activities are not analysed in this Report. For further information on this please consult our website In real estate management, through the gradual alignment with eco-sustainability parameters for the workplace, technical equipment and IT facilities leading to a 5.7% reduction in energy consumption; and through the extensive use of renewable energy sources for electricity which reached 97% at the end of 2010.

5 In brief In business travel, by streamlining business trips and optimising - from an environmental standpoint also - the mix of vehicles used. In procedures for the procurement of goods and services needed for operations, with everincreasing control of environmental impact during their lifecycle (200 vendors, on which 50% of spending is concentrated, are collaborating on this goal). A System was thus developed to monitor and report GHG emissions relating to the above activities, in compliance with the standards set out in the GHG Protocol (1) and ISO which, on an international level, regulate the procedures to be followed in measuring a company s Carbon Footprint. This led to a calculation of total GHG emissions for 2010 equal to 44,646 tonnes of e (2) ; a non-negligible figure considering that 1 tonne of e is, for example, the quantity originating from the production of one thousand reams of paper or from air travel emissions attributable per passenger to a flight from New York to San Francisco. e emissions by area of activity % 51% - Property and Facility Management 51% 36% - Business travel 36% 13% - Procurement of goods and services A substantial part of the Carbon Footprint 2010 (25,766 tonnes, equivalent to 58% of the total) involved sources on which the Group can, in general, exercise greater control: on the one hand, heating systems and company cars and, on the other, the quantity and diversified mix of energies used in the supply of electricity, corresponding to Scopes 1 and 2 of the GHG Protocol respectively. The Group has introduced strong containment measures with regard to these Carbon Footprint standards, achieving a very positive result (-31.5 % as compared to 2009). 5

6 In brief e emissions - Scope 1 and 2 (tonnes) Scope 1 Scope ,000 20,000 30,000 40,000 Other emissions produced (GHG Protocol Scope 3) were 53% due to business travel carried out using means other than company cars; the remainder are related to external production processes of some of the most significant supplies purchased/rented by the Group, such as fuel for company cars, fuel supply for heating systems, paper, desktop and laptop computers. e emissions Scope 3 by source % 15% 8% 2% 1% 30% 32% 32% - Procurement of goods and services 30% - Employee cars 15% - Production of fuels 12% - Cars - STR (Short-term rental) 8% - Airplanes 2% -Long-distance trains 1% - Other (LPT, taxis, regional trains) Moreover, GHG emissions from employee commuting were estimated for a total of 48,383 tonnes. The following chapters provide a more detailed analysis of GHG emissions relating to each of the aforementioned activities as well as a description of the main measures implemented to reduce the Group s Carbon Footprint. The Report concludes with an overview of the next steps in the Group s strategy on climate change. 6

7 Climate change policy Climate change policy The Group focuses attentively on energy management issues and is committed to taking responsibility for countering climate change. In line with its Environmental Policy - which as of 2002 has seen the Group s commitment to optimising its management of activities that may have significant impacts on the environment - a specific Policy on Energy and Climate Change was set out. The Policy is implemented through a systematic approach that includes supervision of operations, monitoring systems, skills development and disclosure to stakeholders. 7 As far as banking activities are concerned, this primarily translates into specialised products and services to support customers in objectives of environmental efficiency and compatibility of their investments.

8 Climate change policy In terms of internal operational environments, objectives are being pursued to reduce GHG emissions, with particular regard for those that are under the direct control of the Group. Specifically for this purpose, a GHG emissions monitoring and reporting system has been in place as of 2010, collating all relevant data sources in a single database and offering the opportunity to review preset goals and detect further scope for improvement on both a strategic and operational level. ENERGY AND CLIMATE CHANGE POLICY The Montepaschi Group pays close attention to developments in problem areas associated with the production and use of energy. The dynamics affecting the availability and price of fossil fuels, pollution and the effects of climate change raise increasingly urgent and widespread concerns for governments, industries and people, both globally and in local contexts. Even the financial sector has a major role to play in managing these problems. The Montepaschi Group is aware of this and intends to do its part. That is why it is committed to: - better understanding energy aspects that matter to its own business; - limiting its own energy consumption and increasing its use of energy from renewable sources by keeping track of the emissions produced annually; - developing credit and investment policies that reward processes and products with a positive impact on the environment and on society, and also making other companies aware that they should do the same; - assisting customers in energy management through specific products and services; - supporting and promoting investments in renewable energy and in the development of lowemission technologies; - contributing, in cooperation with civil institutions and organisations, to informing people and businesses and raising awareness on the topic. In order to make good these commitments, we have established a Group office that coordinates the development of the Bank s efforts and its communication on this topic; there is also a specific focus on programmes to rationalise the use of energy for internal purposes, the Energy Manager. Information on application of this policy is available to all those interested. Chief Executive Officer (25 February 2009) 8

9 Greenhouse gas emissions management system Greenhouse gas emissions management system The monitoring and reporting system for greenhouse gas (GHG) emissions was developed between December 2010 and April 2011 with the support of PricewaterhouseCoopers. 9 In accordance with GHG Protocol standards and ISO 14064, the system: through application of the comprehensive approach, covers all Group companies included in the Consolidated Financial Statements, except for those whose environmental impact is not considered significant owing to size of operations and type of activity carried out (3). The organisational scope of the system corresponds to 98% of the Group s staff.

10 Greenhouse gas emissions management system Classifies GHG emissions on the basis of operational areas from which they originate: real estate management, employee commuting and business travel, procurement of goods and services. Distinguishes the various components of direct and indirect emission with reference to Scopes 1, 2 and 3 of the GHG Protocol (1) for each of the operational areas above and their related sources of emission. Registers all main GHG emissions regulated by the Kyoto Protocol, such as: carbon dioxide( ), nitrous oxide (N 2 O) and methane (CH 4 ) originating from business activities, in addition to Halocarbons (SF 6, HFC and PFC, etc.) present in any leakages from air conditioning systems. Quantifies GHG emissions on the basis of consumption data through the use of appropriate calculation ratios (4). Basic data comes from internal accounting systems or specific reports produced by vendors. Expresses data in terms of equivalent ( e): a homogeneous unit of measurement which takes account of the different potential effects of each type of GHG emission on the climate. Manages all the above information in an IT database used by the Group s CSR Function. MANAGEMENT SYSTEM - OPERATIONAL BOUNDARY Operational areas Emissions sources Scope 1 (direct) Scope 2 (indirect) Real estate management Electricity x Methane x x Scope 3 (indirect) Fuel x x Air-conditioning x Business travel Company cars - LTR(Long-term rental) x x Company cars - owned x x Procurement of goods and services Cars as fringe benefit x x Cars - STR (Short-term rental) x Employee cars x Long-distance trains x Regional trains x Airplanes x Taxis x LPT - Local Public Transport x Paper IT equipment x x The system also includes the monitoring of GHG emissions produced by employee commuting. Emissions are calculated according to findings from specific sample surveys carried out on a non-regular basis. The quality of this data, therefore, does not currently allow for comparisons and combinations with other system data. 10 This report analyses the data on GHG emissions recorded by the system in 2010 and 2009 and audited by KPMG Spa as part of its review of the Montepaschi Group s Social Responsibility Report 2010.

11 Property and facility management Property and facility management In 2010 total emissions came to 22,638 tonnes of e. Compared to the previous year, a reduction of 37% was registered. A signifcant part of the Group s Carbon Footprint (approx. 50%) is accounted for by GHG emissions relating to workplace operations. These emissions come directly from fuel consumption in heating systems (especially, methane and diesel) and, indirectly, from the process of supplying electricity for various internal uses (lighting systems, heat pumps, data processing centres, servers and IT equipment, etc.). It also includes any gas leaks from airconditioning systems, which is generally zero or negligible. e emissions by source % 11% 76% - Methane 13% - Electricity 11% - Fuel 76% In 2010 total emissions came to 22,638 tonnes of e. Compared to the previous year, a reduction of 37% was registered, largely owing to the sharp rise in the share of electricity from renewable sources. No gas leaks were noted for the main air-conditioning systems monitored, such as those in operation at the data processing centres in Siena, Florence and Mantua. 11

12 Property and facility management e emissions by source vs (tonnes)) Fuel Electricity Methane 0 5,000 10,000 15,000 20,000 e EMISSIONS 2010 (tonnes) Scope 1 Scope 2 Scope 3 Total Electricity 2,928 2,928 Methane 15,629 1,517 17,146 Fuel 2, ,564 Air-conditioning 0 0 Total 17,784 2,928 1,926 22, Main initiatives contributing to this result include: The extention of contracts for the supply of electricity with the Consorzio Idroenergia for almost all Banca Antonveneta locations. All electricity supplied by the Consorzio Idroenergia is produced by zero-emission hydroelectric plant. As a consequence, the share of electricity from renewable sources has risen in one year from 87% to 97%. The ongoing implementation of the ideal performance conceptual model for branches (both new and to be renovated), which, among other things, ensures the highest standards of energy efficiency in the choice of structural components, fixtures, heating and lighting systems. The optimisation of systems in use, for example through the: - installation of 26 high-efficiency condensing boilers and the conversion of a diesel boiler into another type that is more efficient, runs on methane and has a condensing system; - installation and/or replacement of 87 high-efficiency heat pumps for air-conditioning; - installation of 20 refrigerator groups and/or multi-split systems with variable flow of refrigerant; - replacement of 46 air treatment units with heat recovery units. The purchase of new servers and the latest data-storage systems (estimated savings of approx. 520 thousand kwh per year). The setup of an observatory that monitors absorbed power and the proper positioning of servers so as to facilitate cooling, thus lowering energy consumption.

13 Business travel Business travel Approximately 16 thousand tonnes of e were released in 2010 against a total of almost 85 million kilometres travelled. GHG emissions linked to the use of transport by employees in their business-related travel are calculated on the basis of different data sources depending on the means of transport in question: The number of transfers and kilometres travelled, extracted from the electronic system used to register expenses relating to employee cars, taxis, local public transport and regional trains. The consumption of petrol and diesel reported by service providers through fuel expense sheets relating to privately-owned and long-term rental cars. The emission data reported by short-term car rental companies and for long-distance rail and air transport by companies in charge of travel management services. e emissions by source vs (tonnes) Employee cars Cars as fringe benefit Cars - STR (Short-term rental)** Airplanes* Company cars - LTR (Long-term rental) Company cars - owned Long-distance trains* Other (LPT, taxis, regional trains)** 0 1,000 2,000 3,000 4,000 5,000 6,000 7, * 2009 data is underestimated. ** Data was not collected in 2009

14 Business travel Specific coefficients are then applied to calculate the resulting quantities of e, both for direct (scope 1) and indirect emissions (scope 3). Basic data and data on e emissions are managed by the system so as to allow the analyses necessary to optimise the different business travel alternatives from an environmental perspective and achieve a better balance in the operational phase. e EMISSIONS (tonnes) Scope 1 Scope 2 Scope 3 Total Company cars - LTR (Long-term rental) 1, ,287 Company cars - owned ,099 Cars as fringe benefit 3, ,624 Cars - STR (Short-term rental) 2,228 2,228 Employee cars 5,755 5,755 Long-distance trains Regional trains Airplanes 1,445 1,445 Taxis LPT - Local Public Transport Total 5,054 10,924 15,978 The objectives are to: Improve the environmental performance of the company car fleet. Reduce fuel consumption. Reduce e emissions. Approximately 16 thousand tonnes of e were released in 2010 against a total of almost 85 million kilometres travelled. As a whole, this figure cannot be compared with that of In 2010 it was possible to detect components of GHG emissions which, in the past, were only partly tracked?. 14 Main initiatives during the year included: The use - whenever it was deemed appropriate and technically feasible - of remote communication systems to carry out business meetings and training courses. The set up and running of a company car fleet for locations in Siena, Florence and Mantua, which has been equipped with high-quality, high-efficiency vehicles in terms of fuel consumption and e emissions. Internal regulations on business travel underline their use as a first alternative to public transport. Collaboration with car rental companies to monitor and minimise the environmental impact of company cars. The introduction of environmental sustainability criteria in the evaluation and selection of partner hotels for employee business trips. The criteria includes the distance of the hotel from the specific area in question (city centre, railway stations, underground and bus stops, etc.), and the estimation of e impact. This criterion carries a weight of 18% on the overall evaluation.

15 Procurement of goods and services Procurement of goods and services e emissions for 2010 have been estimated at 6,031 tonnes. The main products used by the Group for its operational needs - and whose implementation gives rise to significant quantities of GHG - include paper and IT equipment (desktop and laptop computers). Based on data collected by the System so far, e emissions for 2010 have been estimated at 6,031 tonnes. Breakdown of e emissions by product % 88% - IT equipment 12% - Paper 88% 15

16 Procurement of goods and services The figure includes e emissions originating from the production cycle of new IT equipment purchased/rented during the year (450 laptop computers, 4,000 desktop computers and their monitors) and paper for internal use (around half of all paper consumption). It does not include emissions linked to paper used in customer correspondence or for other external purposes. e EMISSIONS (tonnes) Scope 1 Scope 2 Scope 3 Total Paper IT equipment 5,282 5,282 Total 6,031 6,031 On these types of emissions, the Group is committed to seeking solutions for improvement both by pursuing goals to reduce paper consumption and more attentively monitoring the environmental sustainability requirements of products purchased. In this latter regard, a specific policy was implemented for 2010 as part of the comprehensive management of supply chain sustainability and sees the active participation of all major providers: as of year-end a catalogue of approx. 200 environmentally-certified products has been made available and 45 environmental performance improvement plans have been shared with providers. 16

17 Other activities: employee commuting Other activities: employee commuting An estimated 48,383 tonnes of e were calculated, two thirds of which are related to the use of cars. GHG emissions produced in the transport of employees to and from work are calculated on the basis of findings from specific sample surveys which, in 2010, involved a total of 9,300 resources working in the offices/branches of some of the major Italian cities where the Group is more prevalent (Siena, Rome, Florence, Padua, Milan, Lecce). 17

18 Other activities: employee commuting e emissions by transport mode % 41% - Diesel car 8% 26% - Combination of means 22% 22% - Petrol car 41% 8% - TPL 3% - Alternative fuel car 26% In 2010 an estimated 48,383 tonnes of e were calculated, two thirds of which are related to the use of cars: indeed, it is important to note that 60% of journeys were made exclusively by car, 9% by public transport, while just 6 cases out of 100 employees went to work on foot or by bicycle. No data is available for the previous year. Among the main initiatives carried out in the course of the year - with the coordination of the Banca MPS s Mobility Manager - and designed to promote more environmentallysustainable transportation choices by employees, are: The introduction of a shuttle bus (with 7 daily departures) connecting the Headquarters of Banca MPS, in Via Pedicino in Rome, with specific local public transport stops. The installation of 6 electric car charging points providing electricity free of charge in the parking lot of the company Headquarters in Via Aldo Moro in Siena. The signing of an agreement - through the corporate recreational facilities for employees known as CRAL - with the local public transport company in Florence, which includes a 10% discount on annual passes. 18

19 objectives objectives The fundamental objectives of our Policy on Climate Change for the next two years are to: Build on the positive developments registered in 2010 for energy consumption and GHG emissions. Consolidate and broaden the operational scope of the GHG emissions monitoring system to expand the areas of internal use. These objectives will be pursued through the following course of actions: Reduce e emissions relating to Scope 2 to zero, with the use of offsetting measures if necessary. Continue with the energy efficiency plan in the workplace and for technical equipment, including disposal of 76 diesel boilers still in use. Further improve the average rate of emission on company cars, where feasible through the use of electrically powered vehicles. Reduce IT energy consumption, checking with vendors on potential areas of optimisation when it comes to GHG emissions in the equipment production processes. Reduce paper consumption through the implementation of specific dematerialisation projects for internal and external communications. Promote and support a gradual restriction on the use of cars by employees in their business travel and work commute. Use appropriate GHG indicators in the corporate performance evaluation system. Updates in this regard will be published in the future yearly editions of this Report. 19

20 Notes Carbon Footprint Notes (1) The GreenHouse Gas Protocol (GHG Protocol) is the most widely used international accounting tool for the quantification and reporting of GHG emissions, and is jointly published by the World Business Council for Sustainable Development and the World Resource Institute. The GHG Protocol classifies GHG emissions according to the following 3 Scopes: Scope 1: direct GHG emissions originating from sources owned or controlled by the company, e.g. emissions from combustion in boilers, vehicles, etc. Scope 2: indirect GHG emissions associated with the generation of electricity consumed/purchased by the company. These emissions physically occur in the plant in which electricity is generated. Scope 3: other indirect GHG emissions. This is an optional category of measurement and reporting and includes emissions that are a possible consequence of the activities of a company, but which originate from sources not owned or controlled by the company (e.g. emissions linked to the production and transport of purchased materials, businessrelated travel with non-owned vehicles, etc.). (2) Equivalent ( e) indicates, for a given mix/amount of greenhouse gases, the quantity of with the same climate shift potential in a given period of time (a.k.a GWP - Global Warming Potential). The e of a gas is measured by multiplying the mass of the gas in question by its GWP. All quantities of greenhouse gases contained in this Report are expressed in e based on the specific conversion factors cited in the IPCC Fourth Assessment Report : for example, the GWP of methane (CH 4 ) is 21 times the GWP of, while the GWP of nitrous oxide (N 2 O) is 310 times the GWP of. (3) Companies included in the scope of this report are: the parent company Banca Monte dei Paschi di Siena S.p.a. (exclusive of foreign branches); Banca Antonveneta S.p.a.; Biverbanca Cassa di Risparmio di Biella e Vercelli S.p.a.; Consorzio Operativo Gruppo MPS; Consum.it S.p.a.; Monte Paschi Fiduciaria S.p.a.; MPS Capital Services Banca per le Imprese S.p.a.; MPS Commerciale Leasing S.p.a.; MPS Gestione Crediti S.p.a.; MPS Immobiliare S.p.a.; MPS Investments S.p.a. (merged into the parent company at the end of 2010); MPS Leasing &Factoring S.p.a.; MPS Venture SGR S.p.a.; Paschi Gestioni Immobiliari S.p.a. (merged into the parent company at the end of 2010). (4) COEFFICIENTS FOR CALCULATION OF e 20 Methodological references Terna statistics ( Defra Guidelines / DECC s GHG Conversion Factors for Company Reporting ( Ecoinvent ( Environmental Report 13-inch MacBook Pro ( Environmental Report Mac Pro e EPA Desktop Computer Displays A Life-Cycle Assessment ( Source of emission Electricity Heating oil and methane Diesel and petrol for transport Public transport and regional trains Air conditioning gases Production of paper Production of Laptop computers (notebooks) Production of desktop computers (desktops and monitors)

21 A new quality indicator to create sustainable value C O N T A C T S Banca Monte dei Paschi di Siena Communications Area csr@banca.mps.it T. (+39) /6 21