ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT - Lloyds Banking Group

Lloyds Banking Group Environmental, Social and Governance Report 2020 4Being a responsible businessLetter from the Chair of the Responsible Business CommitteeThese priorities were captured in theHelping Britain Prosper Plan (HBPP),which formed the backbone of the workwithin the Bank to ensure we deliveredon the public commitments we made,whether these related to householdfinances, equality and diversity withinthe Group, tackling disadvantage in ourcommunities, including through our fourcharitable Foundations, or in supportingthe UK transition to a lower-carboneconomy.Our company’s purpose, toHelp Britain Prosper, runs throughoutour work, as we help customersachieve their goals on a daily basis.Sara Weller CBEIndependent Director 12bnof lending throughgovernment-backedlending schemes1.8mpeople have beentrained in digital skillsc.1.3mpayment holidays havebeen granted to retailcustomersLloyds Banking Group has a long historysupporting people and businesses acrossthe country, and as Britain’s largest retailand commercial bank, the Group takes itsrole in the UK economy and society veryseriously.With a very wide range of ESG issuescurrently under the spotlight, each yearthe Board, advised by its ResponsibleBusiness Committee which I chair,listens to a range of stakeholder viewsto identify the most material issuesaffecting the Group and to prioritiseareas for particular focus, where theGroup believes it can make thegreatest contribution.The HBPP has constantly evolved sinceit was first published in 2014 and hasbecome increasingly embedded intothe day-to-day work of the Group. Notonly did it make our priorities visibleto everyone, inside and outside theorganisation, but it ensured transparencyof our performance and allowedstakeholders to hold us to account onour progress.2020 has brought great change inthe way we all live and work. Ourcolleagues have worked to support ourcustomers and communities throughthis time with extraordinary resilienceand resourcefulness. The Group hascontinued to put serving customers andsupporting colleagues at the heart of itsoperation. Over 90 per cent of branchesremained open throughout the deepestperiods of lockdown; since 2018,1.8 million people have been supportedto move online; during 2020, 1.3 millionpayment holidays have been grantedto retail customers; 12 billion was lentthrough government-backed lendingschemes; and the Group made over750,000 calls to check on the wellbeing ofour customers when isolation preventedthem from going out.2020 also saw the Group be the firstFTSE 100 business to commit to a publictarget of 3 per cent of senior roles beingtaken by Black colleagues, following onfrom our earlier public commitment towork towards 40 per cent of senior rolesbeing held by women and 10 per centbeing held by colleagues from a Black,Asian and Minority Ethnic background.Targets are not a goal in themselves, butthey are a tool through which to highlightand reinforce the changes in behavioursthat are needed to create a truly inclusiveculture that reflects the diversity of theUK today.Looking ahead into 2021, as theHBPP draws to a close, the Group willcontinue its work on these key criticalaspects of responsible business with arenewed focus of Helping Britain Recover,in alignment with our ongoing purposeof Helping Britain Prosper, and work tomake this a recovery with environmentalsustainability and social inclusivity at itsheart.There are many milestones to be reachedin 2021. We will look to increase theextent of our reporting disclosures onenvironmental measures towards fullcompliance with the recommendationsof the TCFD standards. We will work withcustomers to return them to financialstability after a year of intense disruptionfor many individuals and businesses.And we will support the country’s aimto recover sustainably by providingincreased green finance to businessesto help them prepare for, and takeadvantage of the opportunities createdby the transition to lower-carbon growth,in areas such as housing, real estate andvehicles.As I approach the end of my nineyear term on the Board, I reflect onhow far we have travelled, in puttingresponsible business, and our HelpingBritain Prosper Plan, at the heart of ourbusiness. Achieving external recognitionfor this, through organisations such asShareAction or the Bloomberg GenderEquality Index is satisfying, but muchmore important is the way the businessnow places responsible business firmly atthe heart of its words and actions.As one of the UK’s largest businesses,Lloyds Banking Group will focus onthe substantial contribution it canmake to many of today’s most pressingchallenges: accelerating the transitionto a low-carbon economy; expandingthe availability of affordable and qualityhomes; helping to rebuild households’financial health and wellbeing;supporting businesses to recover, adaptand grow; and building an inclusivesociety and organisation. Our focus ofHelping Britain Recover will allow theGroup to play our part in rebuilding theeconomy and society with commitmentsthat will support a recovery that issustainable and includes all the nationsand regions in our society.I would like to welcome Amanda Mackenzie,who will be taking on the role as Chairof the Responsible Business Committeefollowing my retirement from the Board in2021. Amanda has been a Non-ExecutiveDirector since October 2018, and is acurrent member of the ResponsibleBusiness Committee. I am confidentshe will continue to support the Group’sprogress in delivering our purpose.We hope our successes to date, andambitions in achieving a positive societalimpact, are reflected and demonstratedin this report.

Lloyds Banking Group Environmental, Social and Governance Report 2020 5 Being a responsible businessOur long-term ESG focus is supported by our awards and ratingsRECOGNITION OF OUR ACTIVITYLloyds Banking Group received the following accolades in 2020.OUR PERFORMANCE ON ESG INDICESWe continue to review our scores, enhance our disclosures and actively engage with ratingagencies and ESG indices to address the information needs of our stakeholders in this space.CategoryAward detailEthnicity Investing in Ethnicity Awards 2020: Outstanding EmployerESG index and scoring201820192020MSCIScale: AAA to CCC, AAA as a best possible scoreBBBBBBAAGender equality ecognised for leading the way towards an equal and moreRinclusive workforceSustainalyticsScale: 0–100, 0 as a best possible score2724.423.3ISS-ESG Corporate ratingScale: D- to A , A as a best possible scoreCCCS&P Global CSA/DJSIScale: Ranking of companies, 100 as a best possible score474543FTSE4GoodScale: 0–5, 5 as a best possible score4.24.44.6Bloomberg ESG DisclosureScale: 0–100, with 100 as a best possible score575858N/A83%83%AAA-ShareAction – Banking on a Low Carbon Future IIRated 16th in 2017Scale: Ranking of 20 banks, 1st being the bestranking scoreN/A2ndN/AResponsibility100 Index (Tortoise)Lloyds Banking Group provide an annualsubmission in March 2020Scale: Ranking of 100 FTSE listed companies,1st being the best ranking scoreN/A17th8thWorkforce Disclosure InitiativeScale: Number of questions with a meaningful responseexpressed as a percentage, 100% as a best possible score83%75%85%Women in businessWorking families/agilityFeatured in The Times Top 50 Employers for WomenRecognised for the sixth consecutive year as a Top 10 Employer forWorking FamiliesBloomberg Gender-Equality IndexScale: 0%–100%, with 100% as a best possible scoreCultureCOVID-19 responsein our facilitiesYour Best, our employee career development and performancemanagement approach, has been successful in nine awards so farincluding the Best Large Organisation for Culture in the BusinessCulture Awards, the Learning and Development award fromInvestors in People, and the Best Change Management Initiativefrom the Personnel Today AwardsMitie and Lloyds Banking Group jointly won an Institute ofWorkplace and Facilities Management Impact Award for ourCOVID-19 response: Keeping Good Work Going AwardCDP (formerly Carbon Disclosure Project)Scale: A to F, with A as a best possible scoreN/A indicates a year that we did not participate in the index.

Lloyds Banking Group Environmental, Social and Governance Report 2020 6Our purposeOur purpose is to Help BritainProsper. This is central toour strategy and underpinseverything we do. Our HelpingBritain Prosper Plan wasintroduced to address someof the social, economic andenvironmental challengesfacing the UK and hasunderpinned our ESG priorities.For more than 320 years, with our uniquefamily of brands, we have supportedBritain through the good times and thebad: this time is no different. We have andwill continue to support our customersand colleagues to get through theseextraordinary times.In 2014, the Group launched the HelpingBritain Prosper Plan to address some ofthe social, economic and environmentalchallenges facing the UK. This was aunique undertaking at the time as thePlan took us beyond business as usual,uniting the Group behind an inspiringset of objectives.We have an important role to play inBritain’s recovery, working with others tohelp build an inclusive, greener and moreresilient economy for the whole of the UK.We aim to help our customers, clients,colleagues and communities get throughthe crisis and back on their feet, whiledelivering long-term sustainable successfor shareholders.Further information related to our purposeis on page 12 of the Lloyds Banking GroupAnnual Report and Accounts 2020.Additional linksL loyds Banking Group HomepageL loyds Banking Group AnnualReport and Accounts 2020

Lloyds Banking Group Environmental, Social and Governance Report 2020 7Our approach to responsible businessand ESG performanceOUR ESG APPROACH IS GUIDED BY OUR PURPOSEWith the Group’s uniqueposition at the heart of theBritish economy, we embraceour responsibility to helpaddress some of the economic,social and environmentalchallenges that the UK faces.Our success is inextricablylinked to the health and successof the UK.At Lloyds Banking Group, being aresponsible business means operatingethically and inclusively, meeting ourlegal and regulatory requirements, andalways considering the impact on ouremployees, the community, society andthe environment.Our ESG approach is fully aligned toour strategy and the interests of ourstakeholders. The ESG aspects of ourperformance play an integral part in thedelivery of the Lloyds Banking Grouppurpose and strategy and, without them,it would not be possible to make progressand achieve our societal goals.As a large listed company, the Group is increasingly confrontedwith environmental and social factors such as climate change,colleague safety, diversity of workforce and relationships withregulators and the communities in which we operate.The recognition and management of ESG issues allows us todeliver a business model that provides broader societal support,generates sustainable returns for shareholders, and attracts andretains best-in-class employees.Through our societal commitmentspublished externally and wider ESG andresponsible business activities, we areactively supporting the UN’s sustainabledevelopment agenda, and supporting theUK in working towards the UN SustainableDevelopment Goals.This will continue to be the case withthe updated focus on Helping BritainRecover and our Helping BritainRecover commitments. Read more about our Helping BritainProsper PlanMemberships which supportour activities:U nited Nations EnvironmentProgramme Finance Initiative(UNEP FI) Principles forResponsible BankingU nited Nations Global CompactB usiness in the CommunityP rinciples for ResponsibleInvestmentU NEP FI Principles for SustainableInsuranceT ask Force on Climate-relatedFinancial Disclosures

Lloyds Banking Group Environmental, Social and Governance Report 2020 8 Our approach to responsible businessand ESG performanceResponsiblebusinessgovernance andaccountabilityCreating and sustaining avalues-led culture withgood governance is crucialto ensuring that our colleaguesremain engaged, well informedand able to effectively deliverour strategy.Our internal governance and controls,comprising numerous policies andstandards, aim to treat all stakeholdersfairly while minimising risk.Our Board-level Responsible BusinessCommittee (RBC) oversees the Group’sperformance as a responsible businessand delivery of our sustainability strategy.Both the Board and RBC are supportedby the Group Executive Committee,which is in turn supported by a dedicatedSustainability Committee.Committee changesSara Weller will have served nine years asa Non-Executive Director in February2021, and accordingly plans to retire asChair of the RBC and a Non-ExecutiveDirector at the AGM in May 2021. AmandaMackenzie, a Non-Executive Directorsince October 2018, will take on therole as Chair of the RBC following Sara’sretirement from the Board.LLOYDS BANKING GROUP BOARDResponsible Business CommitteeSarah Legg, a Non-Executive Directorsince December 2019 and Chair ofthe Audit Committee, has beenappointed as a member of the RBCwith effect from 1 February 2021.“We established the Board-level RBC in2015 as a further demonstration of ourcommitment to sustainability and to putcustomers and communities at the heartof everything we do. I would like to thankSara for her leadership and commitmentin chairing the Committee since then.The Board will miss Sara’s contributionand counsel. Amanda’s customer focushas been a major asset to the RBC, andI am very pleased Amanda has agreedto take on the role of Chair of thisCommittee. I am also grateful to Sarah fortaking on this important additional role.”Robin BudenburgGroup ChairRobin BudenburgChair of the BoardSara WellerNon-Executive Director, ChairAlan DickinsonNon-Executive DirectorAmanda MackenzieNon-Executive DirectorLord LuptonNon-Executive DirectorStuart SinclairNon-Executive DirectorPurpose of the Committee: Challenge on those activities which impact on the Oversight of and support for Lloyds Banking Group’sstrategy and plans for delivering the organisations’aspirations to be a trusted, sustainable and inclusiveresponsible business, aligned to our purpose ofHelping Britain ProsperGroup’s behaviour and reputation as a trusted,sustainable and inclusive responsible business Recommend to the Board for approval of the ESGReport, the Helping Britain Prosper Plan and HelpingBritain Recover commitmentsGroup Executive Committee Our Responsible Business Committee Report can be found on page 110 of the 2020 Annual Report and Accounts

Lloyds Banking Group Environmental, Social and Governance Report 2020 9 Our approach to responsible businessand ESG performanceOUR 2020 STAKEHOLDERS AND MATERIAL ESG ISSUESUnderstanding theissues that matter toour stakeholdersOur 2020 materiality analysis identified a number of critical themes which we have addressed through this report:Our stakeholdersHow we engageEngaging and responding to stakeholdersis fundamental to being a responsiblebusiness.Colleagues ESG investor presentationsInvestors and shareholders ESG reportingEach year we gather a wide range of viewsthrough our formal materiality assessmentwith our stakeholders, which guides bothour strategy and reporting.ClientsESG index responsesESG ratings agencies Annual reportingWe engage with stakeholders in manydifferent ways during our regular businessactivities, in face-to-face meetings aboutspecific issues such as regulation orfinancial performance, and increasinglythrough social media, such as digitalbroadcasts. We conduct a dedicatedresponsible business materialityassessment every year to help us shapeour corporate reporting and inform ourstrategic thinking.CommunitiesESG analystsNon-governmental organisations (NGOs)Regulators and governmentsIndustry bodiesSuppliers Meetings, email communicationand telephonic communicationsPress releases Communication to employeesthrough our interchange sitesClient events Engagement with industry bodiesand participation on sector workinggroups and forums Direct engagements with investors,NGOs, shareholders and clients onESG mattersThis year we used insights gathered fromstakeholders including investors, industrybodies, special interest groups and keyopinion formers.Disclosure standards such as the GRI andSASB were considered in the identificationof material issues and disclosures.Our approach to materialityOur materiality assessment comprises fourstages: issue identification, prioritisation,validation and review. Through thisprocess, a wide range of issues relatingdirectly to ESG performance and impactsrelated to the financial sector wereidentified.Material topics identified through engagementOur responseThe transition to a low-carboneconomyPage 19Environmental risks in lendingPage 36Race action and inclusionPage 40Supporting for vulnerable customersand vulnerable groupsPage 44Support for businesses and small ormedium-sized businesses (SMEs)Page 45Financial resiliencePage 50Access to skillsPage 46Financial educationPage 50Adaptation to ways of working due tothe pandemicPage 57Health and wellbeing of colleaguesPage 57Colleague trainingPage 59Impact of the COVID-19 pandemicon the GroupPage 32 of the 2020 Annual Reportand AccountsPages 44–64Customer data securityPage 63Key decisions taken by the Board to reflect the needs of our stakeholders can be found on page 46 of the Lloyds Banking Group Annual Report and Accounts 2020.How materiality informsour reportingThe findings of the materiality assessmentwere discussed and validated internally.Our Group Sustainable Business team andour external advisers reviewed the processand its outcomes, and our reporting wasshaped by the materiality process outputs.The categories and issues ranked as mostmaterial directly inform the content of our2020 Annual Report and Accounts, andthis report.

Lloyds Banking Group Environmental, Social and Governance Report 2020 10Our Helping Britain Prosper PlanAddressing some of the social,economic and environmentalchallenges facing the UK isthe foundation of our HelpingBritain Prosper Plan. The planhas taken us beyond businessas usual, focusing our effort onkey identified areas of societalbenefit in the UK economy.In 2014, the Group announced its clearand focused purpose to Help BritainProsper, and we were the first bank tolaunch a plan setting out how we intendedto help address some of the economicand social challenges the UK faces.In 2018, as part of its inclusion in theGroup Balanced Scorecard, we setspecific targets across six areas of focusaligned to our three-year strategy,including environmental sustainability.Originally tracking our progress againstnumerous metrics, over the years as a resultof reviews of our context, the economy, ourstrengths as an organisation and stakeholderengagements, we have continually refined andre-focused our plan and our metrics on thethings that we think matter most.Being a responsible business:The Helping BritainProsper Plan journey2014The Group was the first FTSE 100company to set a public goal ongender diversity.2015The Helping Britain Prosper Plan wasreviewed to ensure its continued relevanceto our business and our stakeholders.2018We developed a renewed Helping BritainProsper Plan for the 2018–2020 periodreflecting our new strategy.We were the first FTSE 100 company totarget an increase in the proportionof Black, Asian and Minority Ethniccolleagues at both an overall and seniormanagement level.2019We introduced a new area of focus:helping the transition to a sustainablelow-carbon economy, increasing thenumber of our key priority areas.

Lloyds Banking Group Environmental, Social and Governance Report 2020 11 Our Helping Britain Prosper PlanSASB indicator:FN-CB-240a.1FN-CB-240a.2Our Helping Britain Prosper prioritiesHelping the transition to asustainable low-carbon economyTackling social disadvantageacross BritainHelping people savefor the futureAverage number of homes that couldbe powered as a result of our supportof UK renewable energy projectsNumber of charities we supported in 2020as a result of our 100 million commitmentto the Group’s independent charitableFoundationsGrowth in assets that we hold on behalfof customers in retirement and investmentproducts10.1m Target: 5m2020Our final year of implementationof our Helping Britain ProsperPlan 2018–2020.Helping Britain get a homeAmount of lending committed to help peoplebuy their first home 39.7bn Target: 30bn Our full performance from2018 to 2020 can be found onpage 73 of this report.I ndicator is subject to limited ISAE3000 (revised)assurance by Deloitte LLP for the 2020 AnnualResponsible Business Reporting. Deloitte’s2020 assurance statement and the 2020Reporting Criteria are available online 87 Target: 2,500 45.6bn Target: 50bnBuilding capabilityand digital skillsSupporting businessesto start up and growNumber of individuals, SMEs and charitiestrained in digital skills, including internetbankingIncreased amount of net lending to start-up,SME and Mid Market businesses1.8mTarget: 1.8m 6bn Target: 6bnChampioning Britain’s diversityPercentage of senior roles held by womenin 2020Percentage of roles held by Black, Asianand Minority Ethnic colleagues in 2020Percentage of senior roles held by Black,Asian and Minority Ethnic colleagues in 202037% Target: 40%10.6% Target: 10%7.7% Target: 8%

Lloyds Banking Group Environmental, Social and Governance Report 2020 12Our COVID-19 responseSupportingcustomersDuring an extraordinarily challengingtime we are Helping Britain Recover,as part of our Group purpose ofHelping Britain Prosper.We have lent over 12 billion to helpbusinesses bounce back and grantedaround 1.3 million payment holidays tosupport customers, while increasingcustomer satisfaction, strengthenin

- Helping Britain get a home 48 - Building financial resilience 50 - Supporting our communities 54 - Supporting our colleagues 57 - Conducting our business responsibly 61 . best bank for customers by improving customer service and earning trust and loyalty from making customers central to everything we do. With our strong brands,