2023 Sustainability Bond Second Party Review Report

Sun Life Financial Inc.

Type of Engagement: Annual Review

Date: 24 April 2023

Engagement Team:

Akshay Chandrakapure,[email protected]

Nachiket Goli,[email protected]

Introduction

In 2019 and 2023, Sun Life Financial Inc. ("Sun Life") issued two sustainability bonds (the "2019 Sustainability Bond") and (the "2023 Sustainability Bond"), collectively (the "Sustainability Bonds") to finance or refinance a variety of green and socially impactful projects. In 2024, Sun Life engaged Sustainalytics to review the projects financed with proceeds from the Sustainability Bonds (the "Nominated Projects"), and provide an assessment as to whether the projects meet the use of proceeds criteria and the reporting commitments outlined in the Sun Life Sustainability Bond Framework (the "Framework").1 Sustainalytics provided a Second-Party Opinion on the Framework in March 2019.2 This is Sustainalytics' fifth annual review of allocation and reporting of the instruments issued under the Framework, following a previous review in March 2020, March 2021, March 2022,3 and March 2023.4

Evaluation Criteria

Sustainalytics evaluated the Nominated Projects based on whether they:

1. Meet the use of proceeds and eligibility criteria defined in the Framework; and
2. Reported on at least one key performance indicator (KPI) for each use of proceeds category defined in the Framework.

Table 1: Use of Proceeds Categories, Eligibility Criteria and Associated KPIs

1 Sun Life, "Sustainability Bond Framework", (2019), at:

https://cdn.sunlife.com/static/Global/Investors/Sun_Life_Sustainability_Bond_Framework_March_2019_FINAL-s.pdf

1. Sustainalytics, "Second-Party Opinion, Sun Life", (2019), at: https://mstar-sustops-cdn-mainwebsite-s3.s3.amazonaws.com/docs/default-source/spos/sun-life-financial-sustainability-bond-second-party-opinion-03272019.pdf?sfvrsn=cfb16074_3
2. Sustainalytics, "Annual Review", (2022), at:https://www.sunlife.com/content/dam/sunlife/regional/global-marketing/documents/com/sustainability-bond-second-party-review-report-2021-e.pdf
3. Sustainalytics, "Annual Review", (2023), at:https://mstar-sustops-cdn-mainwebsite-s3.s3.amazonaws.com/docs/default-source/spos/sun-life-financial-inc.-sustainability-bond-annual-review-2023.pdf?sfvrsn=f2162a8e_1
4. Sustainalytics notes that the choice of environmental and social impact metrics was guided by the Harmonized Framework for Impact Reporting published by the International Capital Market Association.
5. To determine if other hydroelectricity facilities > 25 MW constitute an Eligible Asset, Sun Life will assess the investment relative to Sun Life's Environmental, Social and Governance ("ESG") framework. This ESG assessment will include the location, size and any other relevant environmental and social risk factors related to the hydroelectricity facility. Sun Life's ESG assessment will be subject to review by a qualified third party.

© Sustainalytics 2024

Annual Review

Sun Life Financial Inc.

Issuer's Responsibility

Sun Life is responsible for providing accurate information and documentation relating to the details of the funded projects, including descriptions of projects, amounts allocated and project impact.

Independence and Quality Control

Sustainalytics, a leading provider of ESG research and ratings, conducted the verification of the use of proceeds from the Sustainability Bonds. The work undertaken as part of this engagement included collection of documentation from Sun Life and review of said documentation to assess conformance with the Framework.

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Sustainalytics relied on the information and the facts presented by Sun Life. Sustainalytics is not responsible nor shall it be held liable for any inaccuracies in the opinions, findings or conclusions herein due to incorrect or incomplete data provided by Sun Life.

Sustainalytics made all efforts to ensure the highest quality and rigor during its assessment process and enlisted its Sustainability Bonds Review Committee to provide oversight of the review.

Conclusion

Based on the limited assurance procedures conducted,7 nothing has come to Sustainalytics' attention that causes us to believe that, in all material respects, the reviewed projects do not conform with the use of proceeds criteria and reporting commitments in the Framework. Sun Life has disclosed to Sustainalytics that the proceeds from the Sustainability Bonds were fully allocated as of December 2023.

Detailed Findings

Table 2: Detailed Findings

7 Sustainalytics' limited assurance process includes reviewing documentation relating to details of projects, as provided by the issuing entity, which is responsible for providing accurate information. These may include descriptions of projects, estimated and realized costs, and reported impact. Sustainalytics has not conducted on-site visits to projects.

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Appendix

In 2019, Sun Life issued the 2019 Sustainability Bond and raised CAD 750 million, of which 61% of the proceeds were used to refinance existing projects and 39% to finance new projects.

Table 3: Allocation and Reported Impact from the 2019 Sustainability Bond

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Sun Life Financial Inc.

In 2023, Sun Life issued the 2023 Sustainability Bond and raised CAD 500 million, of which 33% of the proceeds were used to refinance existing projects and 67% to finance new projects.

Table 4: Allocation and Reported Impact from the 2023 Sustainability Bond

8 Projects with an * denote those that are under development and thus the impact is projected.

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About Sustainalytics, a Morningstar Company

Sustainalytics, a Morningstar Company, is a leading ESG research, ratings and data firm that supports investors around the world with the development and implementation of responsible investment strategies. For more than 30 years, the firm has been at the forefront of developing high-quality, innovative solutions to meet the evolving needs of global investors. Today, Sustainalytics works with hundreds of the world's leading asset managers and pension funds who incorporate ESG and corporate governance information and assessments into their investment processes. Sustainalytics also works with hundreds of companies and their financial intermediaries to help them consider sustainability in policies, practices and capital projects. With 17 offices globally, Sustainalytics has more than 1500 staff members, including more than 500 analysts with varied multidisciplinary expertise across more than 40 industry groups.

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