Al Rajhi Banking and Investment : AlRajhi Bank Allocation Impact Report 2024

Allocation and Impact report 2024

Table of Contents

1.	Introduction	03
2.	Sustainable Finance Framework	07
3.	Sustainable Finance Instruments	10
4.	Allocation of Proceeds	13
5.	Our Sustainable Finance Working Group	15
6.	Impact Assessment Methodology Note	17
7.	Summary of Impacts	19
8.	Case Studies	23

Introduction

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Al Rajhi Bank | Allocation & Impact Report 2024

Impact Report by AI Rajhi Bank

This document marks the first Allocation and Impact Report issued by Al Rajhi Bank ("Al Rajhi" or "the Bank") under our Sustainable Finance Framework ("the Framework"), which was published in February 2022.

In September 2022, Al Rajhi Bank successfully concluded a US$1.165 billion 3-yeardual-tranche Sustainable Commodity Murabaha facility, the first transaction completed under our Sustainable Finance Framework.

In April 2023, Al Rajhi Bank closed a US$1 billion 5-year US Dollar-denominated Sustainable Sukuk, marking the Bank's first issuance in the US Dollar international capital markets, confirms its position as the leading financial institution committed to providing innovative and Sharia-compliant banking solutions globally. The orderbook for the Sukuk peaked over $3.75 billion, indicating significant momentum and interest from global and regional investors in Al Rajhi's credit.

Most recently, in August 2023, Al Rajhi Bank closed our first Sustainable transaction, a US$ 1.43 billion senior secured syndicated loan facility.

The report provides details regarding the allocation of the proceeds of sustainable financing instruments issued under the Framework and the impact of projects benefitting from these allocations.

Introduction

Overview of Al Rajhi Bank

Our Approach to ESG

Overview of Al Rajhi Bank

Founded in 1957, Al Rajhi Bank is one of the largest banks in the world by market cap and the largest in the Middle East and Saudi Arabia, with total assets of SAR 801 billion, a paid-up capital of SAR 40 billion (US$ 10.66 billion), and an employee base of around 20,000+ associates.

With over 60 years of experience in banking and trading activities, the various individual establishments under the Al Rajhi name were merged into the umbrella 'Al Rajhi Trading and Exchange Corporation' in 1978 and it was in 1988 that the bank was established as a Saudi Joint Stock Company under the name of Al Rajhi Banking and Investment Corporation, which later in 2006 was named as Al Rajhi Bank.

Al Rajhi Bank has a well-established base in Saudi Arabia through a wide network that includes more than 511 branches, more than 4,603 ATMs, more than 585,000 points of sale with merchants, and the largest customer base of any bank in Saudi Arabia, in addition to 159 remittance centers throughout the country.

Our Approach to ESG

Al Rajhi Bank is deeply committed to providing state-of-the-artSharia-compliant banking services, while staying true to its ESG values.

Islamic banking has historically been compatible with 21st century sensibilities surrounding ESG ideals and the broader objectives of sustainable finance. Consequently, in over 50 years of strictly Sharia-compliant operations, ESG has become an integral part of Al Rajhi Bank's DNA, protecting the Bank from investments that are at "high risk" of failing to meet ESG criteria.

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Introduction

Overview of Al Rajhi Bank

Our Approach to ESG

Through Sharia guidelines, the Bank performs a culturally distinct form of ethical investing, choosing not to participate in any investments that fail to meet the guidelines, including alcohol, gambling, and tobacco products.

Complementing its Sharia-based ESG orientation, Al Rajhi Bank has adopted a sustainable model which has helped it to grow its reputation as the world's leading Islamic bank, delivering a well-managed, disciplined financial institution, which exercises sound governance practices.

Our ESG Vision of realizing a sustainable future by pioneering a responsible financial ecosystem for customers, employees, society, and the environment, is built on a desire to help bring about a more prosperous,

socially and environmentally responsible society within Saudi Arabia. The Bank aims to be a leader in ESG innovation, creating a responsible financial ecosystem with transparency and integrity at its heart, while also demonstrating the Bank's commitment to tackling climate change and minimizing its environmental impact.

Our ultimate goal is to satisfy the needs of all stakeholder groups including customers, employees, society and the environment through four ESG pillars:

Supporting

Vision 2023 & KSA Net Zero

Private Sector Contribution to GDP

Corporate Loans

Market Share

Saudi Home Ownership

Mortgage Market Share

SME Contribution to GDP

SME as % of Corporate Portfolio

KSA Net Zero by 2060

Sustainable Financing and Funding

Move to Cashless Society POS Terminal Market Share

Creating

A Digital Future

Financial Inclusion through Digital

New Account Opening

Online

Digital Leader for Customer Insight

Active Digital Customers

Digital Execution and

Offering

End-to-End Digital Personal Financing

Digital Core Banking

Platform

Digital to Manual Ratio

Modernize our Technology % of Application Modernized

Conducting

Responsible Business with Good Governance

Sharia Compliant

Number of Sharia

Resolutions

Board Independence

Number of Independent

Board Members

Customer Experience

Net Promotor Score

Corporate Governance Number of Policy and Procedure reviewed

Regulatory Compliance

Fines % of Total Operating Income

Fostering

Ties with Communities

Employer of Choice

Employee Engagement

Employee Learning

Total Employee Learning

Hours

Employment Opportunities

Female Employee Ratio

Support Local Content

Spending on Local Suppliers

Denotation and Social Initiatives

Total Spending on

Social Activities

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Introduction

Overview of Al Rajhi Bank

Our Approach to ESG

The first pillar signifies Al Rajhi Bank's continued commitment as a leader in the financial sector to realize Saudi Arabia's Vision 2030 objectives by supporting the development and diversification of the Saudi economy. This includes the Bank's increased focus on the private sector and SMEs to improve their contribution to the GDP and its expanding product and service portfolio to increase Saudi home ownership, among other Vision 2030 targets.

The Bank's focus on financing both public and private sector investments in Sustainable energy projects to achieve the Saudi Arabia's net zero objectives, alongside its own investments in renewable energy and resource conservation, is also highlighted as an element of this pillar. The Bank's continued investments in creating a digital future supported by the best-in-class technology and infrastructure is emphasized via the Bank's second ESG pillar. In Al Rajhi Bank's drive towards financial inclusion through digital transformation, the Bank has achieved an unrivalled industry standing as a digital leader in customer insight as well as in nurturing future ready digital talent.

As a Sharia-compliant financial institution, Al Rajhi Bank demonstrates exemplary financial conduct and good

governance, which is reflected through the third ESG pillar. The Bank's unrelenting efforts to deliver the best customer experience in Saudi Arabia coupled with fair treatment and the utmost safety and security falls under this pillar, supported by benchmarked good governance practices. The Bank's wide-ranging social development initiatives fall under the fourth ESG pillar - fostering ties with communities. Al Rajhi Bank continues to earn its social license to operate across Saudi Arabia by enabling financial access, volunteering and giving back to the community, and empowering underserved segments - with special focus on female empowerment - through employment opportunities and financial independence.

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Sustainable Finance Framework

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Al Rajhi Bank | Allocation & Impact Report 2024

Sustainable Finance Framework

Eligible Sustainable Projects

Sustainable Finance Framework

Al Rajhi Bank published its Sustainable Finance Framework in February 2022 as the basis to issue Sustainable, Social, or Sustainability Bonds, Sukuk, Loans, and other debt instruments ("Sustainable Financing Instruments"), which will fund eligible sustainable projects that conform with:

• The International Capital Market Association
  ("ICMA") Sustainable Bond Principles ("GBPs") 2021, Social Bond Principles ("SBPs") 2021, and Sustainable Bond Guidelines ("SBGs") 2021 and/or;
• The Loan Market Association ("LMA") Sustainable Loan Principles ("GLPs") 2021 and Social Loan Principles ("SLPs") 2021.

The GBPs, SBPs, SBGs, GLPs, and SLPs may be referred to collectively throughout the remainder of this document as

"the Principles".

In conforming with the Principles, the Framework is aligned to their four core components:

Use of Proceeds: Al Rajhi Bank will allocate an amount at least equivalent to the net proceeds of the Sustainable Financing Instruments issued under this Framework to finance and/or re-finance, in whole or in part, sustainable projects which meet the eligibility criteria of the eligible sustainable project categories defined in the Framework ("Eligible Sustainable Projects").

1. maximum 3-yearlook-back period would apply for refinanced projects and Al Rajhi Bank expects each issuance under this framework to be fully allocated within 2 years from the date of issuance.

Process for Project Evaluation and Selection: The Project Evaluation and Selection Process will ensure that the proceeds of any Sustainable Financing Instrument are allocated to finance or refinance Eligible Sustainable Projects.

Management of Proceeds: The proceeds of each Al Rajhi Bank's Sustainable Financing Instrument will be deposited in Al Rajhi Bank's general funding accounts and earmarked

for allocation towards the Eligible Sustainable Projects using the Sustainable Finance Register.

Any proceeds temporarily unallocated will be invested according to the Bank's standard liquidity policy in cash or cash equivalents.

Reporting: On an annual basis, Al Rajhi Bank will publish an allocation report and an impact report on its Eligible Sustainable Projects. This reporting will be updated annually until full allocation of the net proceeds of any Sustainable Financing Instrument issued, or until the Sustainable Financing Instrument is no longer outstanding.

Additionally, in alignment with the recommendations of the Principles, the Bank intends to engage a third-party reviewer to provide an annual assessment on the alignment of the allocation of funds with the Framework's criteria.

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Sustainable Finance Framework

Eligible Sustainable Projects

Eligible Sustainable Project Categories

Eligible Sustainable Categories:

• Renewable Energy
• Energy Efficiency
• Sustainable Water Management
• Pollution Prevention and Control
• Environmentally Sustainable Management of Living Natural Resources and Land Use
• Clean Transportation
• Sustainable Buildings

Eligible Social Categories:

• Employment Generation and Programs Designed to Prevent and/or Alleviate Unemployment Stemming from Socio-economic Crises
• Affordable Housing
• Access to Essential Services

Exclusion List:

The proceeds of any Sustainable Financing Instruments will not be allocated to projects where the majority of revenues are derived from fossil fuels, nuclear power generation, conflict minerals, weapons, gambling, vaping, tobacco, alcohol, mining and/or oil and gas.

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Sustainable Financing Instruments

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Al Rajhi Bank | Allocation & Impact Report 2024