LHV Group

The role of the administrative, management and supervisory bodies

Composition

Supervisory Board

The Supervisory Board comprises seven members elected for three years, with maximum consecutive term of 12 years. As of 31 December 2024, the Supervisory Board consists of:

• Rain Lõhmus (Chairman, term until 22 March 2026)
• Tiina Mõis (term until 20 March 2029)
• Andres Viisemann (term until 31 March 2027)
• Heldur Meerits (term until 31 March 2026)
• Raivo Hein (term until 31 March 2027)
• Tauno Tats (term until 22 March 2026)
• Liisi Znatokov (term until 20 March 2029)

Gender diversity in management and supervisory bodies:

Independence: At present, the Supervisory Board includes one independent member (Liisi Znatokov) in accordance with the features set out in the 'Requirements of independence' annex to the Corporate Governance Recommendations (CGR). Two of the seven members have significant ownership interests: Rain Lõhmus and related persons hold 21.18% of share capital and Andres Viisemann and related persons hold 11.04% of share capital.

Management Board

As of 18 November 2024, the Management Board consists of four members:

• Madis Toomsalu (Chairman, CEO, term expires 31 March 2026)
• Meelis Paakspuu (CFO, term expires 31 March 2027)
• Kadri Haldre (CRO, term expires 18 November 2029)
• Jüri Heero (CIO, term expires 31 March 2027)

Members are appointed for terms of up to five years. The Supervisory Board appoints the chairman of the Management Board when there are more than two members.

Sustainability oversight and expertise

Sustainability governance structure

The administrative body function regarding sustainability matters in LHV is assigned to Management Board members responsible for specific environmental, social and governance topics.

LHV Group ESG Governance structure:

• Group Supervisory Board: Approves ESG policy, endorses and oversees sustainability strategy
• Group Management Board: Defines ESG strategy and oversees everyday implementation
  • Group CEO: Ultimate supervisory of ESG
  • Group CRO: ESG and climate risk identification, assessment, and mitigation. Deciding stress testing content
  • Group CFO: ESG management and ESG integration into financial decision-making and reporting functions. Sustainability disclosures

Each subsidiary head of Management Board is responsible for overseeing ESG-related matters and activities within their respective entities. Specific responsibility owners, who are well positioned to understand sustainability risks, opportunities, and performance metrics, report regularly and as needed to the board on key ESG topics.

Management Board responsibilities:

• CEO: Responsible for Business Development, Segment and Sales Management, Client Service Standards, Brand, Communication, and Human Relations
• CRO: Oversees Credit Risk Management, Risk Analytics, Market and Liquidity Risks, Stress Testing, Non-Financial Risks, AML Compliance, Compliance, and Regulatory Relations
• CFO: Manages Treasury, Accounting, Analysis and Planning, Regulatory Reporting, Data Warehouse, Data Governance, Group Legal Affairs, and ESG management initiatives
• CIO: Focuses on IT Governance and Operations, Information Security, Technology, and Architecture

Expertise and training

The Management Board members possess a diverse set of skills and experience, ensuring effective governance and leadership in business conduct matters. They combine strong expertise in banking and investments with extensive management experience and a deep understanding of credit institutions. They bring a global perspective and strengths in IT, financial outcomes, and risk management, including anti-money laundering and anti-financial crime, cybersecurity, ESG, compliance, and operational continuity.

Regular training sessions are organized to equip members with the knowledge necessary to address the challenges of a constantly evolving business environment. Sustainability-related training is part of the overall training plan approved by the Management Board. Over the years this process has ensured that various departments including risk management, internal audit and supervisory board have received needed knowledge in the field.

Before appointment, the suitability of persons for positions is assessed in accordance with LHV's Rules of Suitability Assessment of Management Body Members, Management Bodies and Key Function Holders and the suitability assessment guidelines of the European Central Bank (ECB) and the joint ESMA and EBA Guidelines.

The expertise of the Management Board is assessed as both sufficient and up to date, reflecting its commitment to continuous professional development, as evaluated through a suitability assessment conducted by LHV in compliance with applicable legal requirements.

Furthermore, management bodies have access to external advisors as needed, as well as training and consultancy.

The development of in-house ESG competencies in the past few years has resulted in focused positions across several departments: Financial Management, Retail Banking, Compliance, Credit, HR, Risk (Financial and Non-Financial) and Asset Management Departments.

Sustainability-specific committees

Audit Committee

The Audit Committee includes oversight of sustainability reporting. In 2024, climate risk management has been a primary focus for LHV, driven by both supervisory and internal expectations. Regular updates on climate risk management progress have been provided to the Risk and Capital Committee and Audit Committee. These committees have also discussed and analysed sustainability reporting, leading to the development of practical solutions tailored for LHV, which were approved by the Management Board.

Members: Verner Uibo (Chairman), Raivo Hein, Tauno Tats

Meetings in 2024: The Audit Committee met 11 times in 2024.

Risk and Capital Committee

The Risk and Capital Committee is responsible for reviewing LHV's sustainable strategy and exercising supervision over the implementation of the risk management policy and the capital management policy on the LHV Group consolidated level. The committee is responsible for the review of the reports prepared by the risk management department and the review and approval of all the risk limits, including the review of the company's internal liquidity adequacy assessment process (ILAAP), the internal capital adequacy assessment process (ICAAP), the recovery plan (RCP) and crisis resolution plan (RRP), and other significant risk related policies.

Members: Liisi Znatokov (Chairman), Rain Lõhmus, Heldur Meerits, Andres Viisemann

Meetings in 2024: Nine meetings were held in 2024, and one written resolution was adopted.

Key focus areas in 2024:

• Risk Appetite Framework (RAF) updates
• ICAAP/ILAAP processes and scenarios
• Updates to key risk policies (Risk Management Policy, Compliance Policy, Policy on Prevention of Financial Crime)
• Climate risk management
• Recovery plan indicators
• ESG and climate risk considerations

Frequency of sustainability discussions

The Supervisory and Management Board integrate sustainability-related impacts, risks and opportunities into strategic planning, major transactions, and risk management processes.

Regular reporting:

• Monthly risk reports to Management Board covering all main risk types
• Quarterly compliance overviews to Management Board
• Monthly anti-financial crime overviews
• Regular updates on climate risk management progress to the Risk and Capital Committee and Audit Committee

In 2024, climate risk management has been a primary focus for LHV. Regular updates on climate risk management progress were provided to the Risk and Capital Committee and Audit Committee. The sustainability reporting has also been discussed and analysed and for LHV, the most practical solutions have been developed in the Management Board and Audit Committee.

The Management Board regularly reviews both short-, medium and long-term risks associated with regulatory changes, extreme weather, and market shifts. The Supervisory Board oversees these efforts to ensure alignment with strategic sustainability targets.

Integration of sustainability in remuneration

Sustainability goals are embedded into LHV's governance and remuneration frameworks. LHV Group implements a long-term performance-based compensation program.

The remuneration principles for members of the Management Board are linked to the KPIs across various strategic areas and business lines. Sustainability considerations, including climate change mitigation targets, are integrated into this framework as part of the broader commitment to aligning incentives with sustainable business practices.

For management board members actively engaged in climate-related areas, specific climate-related objectives and targets are incorporated into their remuneration with equal weight.

The performance criteria developed must not stimulate excessive risk-taking. The criteria must be adjusted for risk-based indicators (e.g., capital adequacy, liquidity). Examples of qualitative criteria include achievement of strategic objectives, customer satisfaction, adherence to the risk management policy, compliance with internal and external regulations, management skills, teamwork, creativity, motivation and cooperation.

LHV applies a long-term incentive plan (LTI plan), i.e., an option programme, for management and key personnel.

Independence and effectiveness arrangements

Independence

Persons elected to the Supervisory Board and Management Board must have sufficient knowledge and experience and meet requirements arising from LHV's Articles of Association, Terms of Reference and other internal regulations, and legislation.

The Supervisory Board includes one independent member (Liisi Znatokov) in accordance with the features set out in the 'Requirements of independence' annex to the CGR. Due to the continuous active development and growth stage, LHV has so far preferred people with long-term management and banking experience as members of the Supervisory Board. Most of the current Supervisory Board members are also the largest shareholders of LHV.

LHV believes that in their capacity as members of the Supervisory Board, the largest shareholders are best motivated to contribute to the management and long-term development of LHV. No member of the Supervisory Board has the power to appoint the majority of members of the Management Board or Supervisory Board or to control LHV in some other manner.

The principles of remuneration of the members of the Management Board engaged in internal control and risk management must ensure their independence and objectivity in the performance of their risk management / internal control duties. The remuneration of those people must not depend on the results of the areas under their supervision.

Effectiveness arrangements

Suitability assessments: Before appointment, the suitability of persons for positions is assessed in accordance with LHV's Rules of Suitability Assessment of Management Body Members, Management Bodies and Key Function Holders and the suitability assessment guidelines of the European Central Bank (ECB) and the joint ESMA and EBA Guidelines on the assessment of the suitability of members of the management body and key function holders.

Conflicts of interest: The Management Board and Supervisory Board submit declarations of economic interests once a year. There have been no conflicts of interest in 2024 and accordingly, no corrective measures have been applied.

Committees: Four committees have been formed at the Supervisory Board level:

• Audit Committee
• Remuneration Committee
• Nominating Committee
• Risk and Capital Committee

Diversity: LHV has established and implemented a Diversity Policy. The quality of decision-making improves by incorporating diversity and inclusion into policies and practices related to recruitment, remuneration, career development, and the composition of management and supervisory bodies.

Training and development: Regular training sessions are organized, equipping members with the knowledge necessary to address the challenges of a constantly evolving business environment. Sustainability-related training is part of the overall training plan which is approved by the Management Board.

Risk management framework: LHV has established a risk management policy which sets the risk management framework. The objectives of risk management within LHV are to identify, correctly quantify and manage risks. LHV's risk management is based on a strong risk culture and follows the principle of three lines of defence:

• First line: business lines and support functions responsible for risk-taking and daily risk management
• Second line: risk management function and compliance function responsible for ownership, continuous review, and implementation of risk management framework
• Third line: independent internal audit function exercising supervision over the entire organisation

Internal control: The Management Board ensures that LHV has risk management and internal control systems appropriate for its operations and business area. LHV's internal control system covers all activities carried out by LHV's Supervisory Board, management, and employees to ensure efficiency of operations, adequate risk management, reliability and accuracy of internal and external reporting and unconditional compliance with all laws and regulations.

Corporate culture and ethical governance

LHV's corporate culture embodies its mission to improve access to financial services and capital, and its vision to inspire individuals and businesses to think ambitiously, explore innovative ideas, and take bold actions to achieve their goals. Anchored in its core values—simple, supportive, and effective—LHV establishes and nurtures its corporate culture through clear value-driven strategies and policies.

The governing bodies are responsible for establishing policies, including the Code of Ethics, which are mandatory for all employees. These policies are reviewed yearly, and if necessary, discussions are held to ensure they remain relevant and effective in promoting a strong corporate culture.

All managers (and employees) of LHV must behave ethically and responsibly and following the Code of Ethics is mandatory. LHV's Code of Ethics is the foundation of LHV's various internal regulations.

LHV ensures transparency and integrity through detailed gift acceptance rules and established policies that uphold ethical behaviour, prevent conflicts of interest, and ensure the responsible use of LHV's resources.

The whistleblowing mechanism enables the reporting of any suspected incidents (including corruption and bribery), ensuring a structured process for identifying such cases.

None of the members of LHV's administrative, management, or supervisory bodies appointed during the reporting period held comparable positions in public administration (including regulators) in the 2 years preceding their appointment.

Integration of sustainability-related performance in incentive schemes

Roles covered

Sustainability objectives are integrated into remuneration frameworks for Management Board members. For Management Board members, individually also considered as an administrative body, sustainability objectives carry equal weight (16-20%) compared to other 4-5 performance considerations.

The remuneration principles also cover specified groups of employees identified through self-assessment who affect or may significantly affect the risk profile of the Group companies, including:

• Senior management
• Staff performing control functions
• Employees with significant impact on the credit risk position (the nominal value of transactions made by the employee is at least 0.5% of LHV Tier 1 own funds and amounts to at least EUR 5 million)

Sustainability KPIs and weighting

For Management Board members, sustainability objectives carry equal weight (16-20%) compared to other 4-5 performance considerations.

In 2024, climate risk management has been a primary focus for LHV. Regular updates on climate risk management progress have been provided to the Risk and Capital Committee and Audit Committee.

Type of incentive scheme

Management Board members are entitled to both:

• Base salary
• Annual performance bonus, the amount or issuance of which depends on the fulfilment or non-fulfilment of individual and LHV Group objectives
• Long-term performance-based compensation program (share option program), approved by the shareholders' general meeting

Variable to fixed ratio

The maximum ratio between the variable and fixed components is 200%, as approved by the shareholders' general meeting.

The lower limit of the performance bonus is 0 euros.

Basic and variable remuneration ratios by employee group (2024)

Performance criteria and structure

The performance criteria established must:

• Keep in mind the long-term interests of the Group companies and not stimulate excessive risk-taking or the sale of unsuitable products
• Not merely contain performance efficiency indicators (e.g., profit, revenue, profitability, expenditure, and volume indicators) or market-based indicators (e.g., stock price or bond yield) but must also be adjusted with risk-based indicators (e.g., capital adequacy, liquidity)
• Be as closely as possible related to the decisions of the staff member whose results are being appraised
• Use a good balance of both quantitative and qualitative as well as absolute and relative criteria
• Quantitative criteria must cover a sufficient period to allow consideration of the risks taken by the staff members or business units and must be risk-adjusted and contain economic efficiency indicators
• Examples of qualitative criteria include achievement of strategic objectives, customer satisfaction, adherence to the risk management policy, adherence to internal or external rules of procedure, management skills, creativity, motivation and cooperation with other business units and the internal control function

Share option program

In 2020 LHV shareholders approved the result-based share option programme for the Management Boards and equivalent staff as well as key employees of LHV and the group companies to be implemented from 2020 until 2024. In 2024 the recipients and amounts of share options to be granted for the results for 2023 were determined.

Identified employees during the self-assessment are required, within a period of one calendar year after exercising the options, to maintain ownership of the relevant LHV shares, and not to transfer or encumber (including pledge) them in any form.

Clawback and malus provisions

Employees should not transfer the downside risks, including malus and clawback, to a third party by any means, e.g. hedging and insurance.

Options may be withheld or reduced if:

• The Management Board member agreement or the employment relationship of the person entitled to receive options has ceased at the initiative of the person entitled to receive options or pursuant to § 88 of the Employment Contracts Act (however, based on the decision of the Supervisory Board it is possible to make exceptions)
• The financial results of LHV or its relevant subsidiary have substantially deteriorated compared to the previous period
• The person entitled to receive options no longer meets the performance criteria or does not meet the [text continues but is cut off in excerpt]

Governance and oversight

Self-assessment is carried out once a year at the beginning of the financial year. The assessment covers the past period (including financial results, risk analysis) and considers the forthcoming financial year.

The self-assessment is initiated by the Human Resources Department, the compliance of the process and results are assessed by the Compliance Control Department. The Remuneration Committee reviews annually the qualitative and quantitative criteria related to the employee and the self-assessment process. The results of the self-assessment are independently reviewed by the Internal Audit Department. The results are summarised and presented to the supervisory boards of the relevant Group companies.

Detailed remuneration principles are included under the section Corporate governance report and Remuneration report under the management report.

Link to sustainability strategy

LHV's ambition to contribute to the fulfilment of the aims of the Paris Agreement and support of the aim of the Estonian state to make the economy climate-neutral by 2050 informs its long-term sustainable strategy. The Management Board regularly reviews both short-, medium and long-term risks associated with regulatory changes, extreme weather, and market shifts. The Supervisory Board oversees these efforts to ensure alignment with strategic sustainability targets.

In the decisions concerning the remuneration policy, the financial situation and sustainability of the capital base of the Group companies are considered.

At LHV, we have developed due diligence framework to assess and address sustainability risks, such as physical risks (e.g., relative sea level rise, coastal flooding) and transition risks (e.g., policy changes such as greenhouse gas reduction mechanisms, including CBAM and ETS) within our credit risk process. This process includes thorough client identification and monitoring to ensure compliance with both internal policies, EU standards and other applicable regulations. For high-risk clients, we apply additional due diligence, with continuous monitoring, to address potential sustainability-related risks. Sustainability due diligence is integrated into our broader risk management framework and is described under section ESG risks in Credit risk in consolidated financial statements.

At LHV, sustainability reporting follows the same process as financial and operational reporting, addressing mainly compliance risk. We have established internal controls to ensure the accuracy, completeness, and reliability of all sustainability-related disclosures. Our data governance structure ensures that sustainability data is captured, validated, and reported with the same precision as financial data, in line with our internal processes and regulations. By aligning our sustainability reporting with the same internal control procedures as financial reporting, we ensure consistency, transparency, and accountability, reinforcing our commitment to responsible banking and regulatory compliance.

We leverage the three lines of defence to oversee the sustainability reporting process (including double materiality assessment and impacts, risks and opportunities (IROs) identification processes). Business units are responsible for collecting and managing sustainability-related data. The risk management and compliance teams ensure the robustness of data collection processes and address any risks impacting the quality of reporting. Internal audit conducts independent reviews to confirm that ESG risk management and reporting processes are effective, and compliant with regulatory requirements.

LHV is the largest domestically owned finance group and capital provider in Estonia. The main subsidiaries of AS LHV Group are AS LHV Pank, LHV Bank Ltd, AS LHV Varahaldus, AS LHV Kindlustus and AS LHV Paytech. LHV was established in 1999 by people with extensive experience in investing and entrepreneurship. LHV's customer service offices in Estonia are in Tallinn, Tartu and Pärnu. LHV expanded into UK market in 2018. There are three offices in the UK: London, Leeds and Manchester.

LHV has over 1,200 employees and serves a customer base exceeding 612 thousand.

A more detailed overview of the Group's subsidiaries and their business activities can be found under Note 5 Subsidiaries and goodwill in consolidated annual report.

Incorporating sustainability considerations throughout the value chain requires LHV to tailor its products and services to meet the expectations of both individual and corporate clients. The main activities of LHV Group are structured into the following segments: retail banking, corporate banking, asset management, hire-purchase and consumer finance, financial intermediaries, and insurance, see more under Note 4 Operating Segments in consolidated annual report. Our clients, who utilize these products and services, play a critical role in our value chain and are central to our business operations.

Value chain

LHV's primary input is financial capital, sourced from deposits, investments, and other funding streams, which are efficiently allocated to various financial products and services. Our approach to securing inputs includes a robust governance framework that ensures transparent decision-making and effective risk management.

The outputs of LHV's business model include a wide range of financial products and services aimed at creating value for our customers, investors, and other stakeholders. We prioritize responsible banking practices by fostering positive relationships with our clients, respecting their unique backgrounds and needs, and aligning our operations with principles of sustainability and ethical conduct, by offering sustainable financial products and supporting economic growth without growing CO2 emissions.

Our business model centres on sustainable value creation by integrating ESG factors into our operations. Our key business areas—banking, asset management, and insurance—contribute to both financial performance and positive societal impact.

In LHV, we make sure to engage our stakeholders and external experts to ensure that we maximize the impact of our efforts within sustainability. Our stakeholders are the groups and individuals that LHV affects through its activities, and who, in turn, may affect LHV`s operations in the short, medium or long run. We hold a regular dialogue with the stakeholders with whom we have the most direct relations and with whom LHV could collaborate for better impact on the society. At the same time, we also keep in touch with the stakeholder groups that are part of shaping the trends and setting requirements for the financial market.

Material impacts, risks and opportunities and their interaction with strategy and business model

Phase-in provision applied

LHV has applied the phase-in provision under ESRS 1 for this reporting period:

ESRS 2 SBM-3: Material impacts, risks and opportunities and their interaction with strategy and business model - Anticipated financial effects are phased in.

List of material impacts, risks and opportunities

Based on LHV's double materiality assessment, the following sustainability topics were identified as material:

• Climate change (ESRS E1)
• Resource use and circular economy (ESRS E5)
• Own workforce (ESRS S1)
• Consumers and end-users (ESRS S4)
• Business conduct (ESRS G1)

LHV's most significant impacts, risks, and opportunities come from its core banking activities, particularly in financing sectors with high environmental and social exposure. LHV Pank accounted for 90.9% of total assets and 80.2% of net income in 2024.

Impact materiality - Material impact areas

Through impact analysis using the UNEP FI Portfolio Impact Analysis Tool, LHV identified the following material impact areas in Estonia:

Climate and environment (country scores on 4-point scale, 4 being highest):

Social and governance:

LHV's impact analyses concluded that LHV has the most material impacts on climate change, circular economy and inclusive, healthy economies.

Financial materiality - Risks and opportunities

Time horizons:

• Short-term: less than 3 years
• Medium-term: 3-10 years
• Long-term: 10-30 years

Risks in short-, medium- and long-term horizon

Opportunities in short-, medium- and long-term horizon

Business and Corporate loans: By offering sustainable loans, LHV can facilitate existing clients' shift toward more sustainable business practices, that are more energy efficient and relay less on fossil fuels. Concurrently, LHV is positioned to steer new clients towards environmental sustainability from the start, with specialized loan products crafted to encourage the adoption of sustainable practices.

Loans to households: LHV is positioned to navigate new clients towards more sustainable living through its targeted financial products. These include loans crafted to encourage the purchase of more energy efficient homes and low emission vehicles.

These opportunities apply across short-term (<3 years), medium-term (3-10 years), and long-term (10-30 years) time horizons.

Interaction with strategy and business model

Value chain location

LHV's primary impact stems from its downstream value chain - the credit portfolio financing a large proportion of the Estonian economy, including high climate impact sectors. The company also impacts the upstream value chain from a circular economy perspective.

Upstream activities: Procurement of resources (consulting services, IT equipment and services, furniture and catering)

Own operations: Sales and marketing of banking products, personnel management, financial management, risk management, technology development

Downstream activities: Customers who use LHV's products and services are an important part of the value chain

Integration into business model

LHV's business model centres on sustainable value creation by integrating ESG factors into operations. Key business areas are:

• Banking
• Asset management
• Insurance

Given LHV Pank's substantial influence (90.9% of total assets), the analysis of sustainability risks and opportunities focuses primarily on LHV Pank's business activities in Estonia.

The most material impacts are concentrated where business activities, particularly in corporate and retail banking, significantly influence environmental and social outcomes, including:

• Climate
• Resource efficiency and security
• Employment
• Inclusive, healthy economies
• Good governance practices

Strategic alignment

LHV's sustainability strategy is specified in the ESG policy which sets goals, ambitions, and approaches for sustainability efforts. Through a double materiality assessment, LHV identified the most important sustainability issues that impact operations and stakeholders, as well as areas where the business has the greatest impact.

Core strategic long-term objectives prioritize:

• Being the top financial service provider in terms of customer service excellence
• Being an attractive employer that fosters high satisfaction and growth opportunities
• Maintaining best management practices
• Creating positive social impacts
• Advancing climate objectives

Resilience assessment

LHV regularly reviews both short-, medium and long-term risks associated with regulatory changes, extreme weather, and market shifts. Opportunities are actively pursued by tailoring sustainable financial products and services to mitigate risks and create value.

LHV has conducted resilience assessments for both physical and transition risks using stress tests:

Physical risks: Flood risk assessment showed negligible impact to LHV's portfolio, primarily due to Estonia's land uplift and geographical distribution of clients.

Transition risks: Medium-term transition risks related to EU Emissions Trading System (ETS) and Carbon Border Adjustment Mechanism (CBAM) were identified as material. However, stress tests demonstrated these pose only a limited level of risk to LHV's portfolio.

These analyses confirm that identified factors do not pose significant challenges to LHV's strategy or business model within the assessed time horizons.

Credit portfolio and ESG risk management

ESG risks are integrated into credit processes through:

• Exclusion list: Restricting credit to customers engaged in activities with clear evidence of human rights violations and serious environmental harm
• ESG questionnaire: Sent to customers to assess ESG practices and promote sustainable business models
• ESG rating model (E-rating): Calculating sector risk levels and client-specific ratings. High E-rating clients must submit transition plans or risk mitigation plans
• Enhanced due diligence: For corporate loan applications over EUR 500,000, detailed ESG risk analysis is conducted

LHV will refrain from knowingly offering credit products to customers whose operations relate to restricted fields of activity including:

• Illegal logging
• Trading in endangered species
• Production/distribution of prohibited weapons
• Coal and oil shale mining
• Asbestos production
• Ecologically unsustainable fishing methods
• Financing new diesel-powered passenger cars in 2030 or later

Changes from previous period

There have been no significant changes in material impacts, risks, and opportunities compared to the previous reporting period. However, continuous refinements in integrating sustainability into LHV's strategy are planned for the next reporting cycle.

Forward-looking statement

LHV will continue to refine the double materiality assessment process as guidance develops and market practice becomes more evident. In 2025, LHV aims to conduct a second double materiality assessment combining impact materiality and financial materiality to provide a more advanced coherent substantive analysis.

Anticipated financial effects of climate-related transition and physical risks, such as regulatory shifts and extreme weather events, are expected to become more pronounced in the medium to long term (3-10 years and beyond).

Description of the process to identify and assess material impacts, risks and opportunities

Overall methodology

LHV's sustainability approach is rooted in the principle of double materiality, assessing the impacts of our operations on society and the environment (inside-out) and how external sustainability risk factors and opportunities affect our business (outside-in). A sustainability issue is considered material if it holds significance either in terms of its impact or its financial materiality, or both.

As there are currently no financial sector specific guidelines for how to carry out the analysis, we have developed our own methodology based on the widely recognized practices applied within the financial sector, as well as the requirements and expectations of the supervisory authorities for carrying out this type of analyses.

The analysis focuses primarily on LHV Pank's business activities in Estonia, given its substantial influence (in 2024 accounting for 90.9% of total assets and 80.2% of net income). All LHV subsidiaries operate under a unified framework, sharing the same strategic values, goals, stakeholders, and value chain. Regarding LHV Bank Ltd UK, we have concluded that the impact assessed does not differentiate from the banking operations in Estonia.

Impact materiality assessment process

A sustainability matter is material from an impact perspective when it relates to LHV's material impacts on people or on the environment, i.e., our downstream value chain. This is how the impacts are rightfully determined for the financial institutions.

Our most material impact areas have been identified through a comprehensive impact analysis process, which was built based on the UNEP FI Portfolio Impact Analysis Tool.

Step-by-step methodology

The process of the analysis included the following steps:

1. The main business areas (i.e., corporate banking, and retail banking) in its primary location were considered in the scope of the analysis

2. Based on the portfolio allocation the most significant industries were identified based on where LHV has the major impact through its services (based on the cartography the share of different industries in the portfolio)

3. The most relevant societal, economic, and environmental challenges related to sustainable development were defined in Estonia

4. The outcome of the analysis was discussed, validated, and elaborated with external experts (representatives from universities, public sector and science organisations) and stakeholders, including the expectations of clients and partners ensuring well-informed feedback. There were in total two panels around environmental and social aspects

5. Opinions of internal interest groups (LHV management, key persons, and employees) were also considered

Inputs to the assessment

The sources for "country needs" included:

• Major global data sources provided by the UNEP FI tool (e.g. UN, OECD, WHO, ILO, FAO, World Bank, etc)
• Location-specific data mapped in cooperation with leading local scientists (where global data was insufficient for local practice)
• External experts (representatives from universities, public sector and science organisations)
• Stakeholder feedback (clients and partners)
• Internal interest groups (LHV management, key persons, and employees)

Scoring criteria

In total, 22 environmental, social, and economic aspects got country scores on a 4-point scale, 1 being the lowest impact and 4 highest, that expressed the urgency to tackle the issues and risks related to the aspects within the country.

The impact analysis itself was conducted by an independent external sustainability advisor.

Material impact areas identified

The following material impact areas were identified for Estonia (scope):

Climate and environment:

Social and governance:

Financial materiality assessment process

ESG risk management process, coordinated by the ESG Risk Manager, combines internal data and external sources to identify and assess material risks. These include physical risks, such as floods, and transition risks, like regulatory changes. Significant risks are prioritized through workshops with internal stakeholders and scored based on financial impact to ensure focus on critical hazards. The results are reviewed by management and supervisory boards, aligning risk management with LHV's strategic objectives.

LHV applies short- (less than 3 years), medium- (3-10 years), and long-term (10-30 years) time horizons for assessing risks, consistent with European Central Bank guidance. This framework supports proactive monitoring and resilience planning as new risks emerge or existing risks evolve.

In 2024, the primary focus has been on climate risk management, as part of both supervisory and internal expectations. Regular updates on climate risk management progress were provided to the Risk and Capital Committee and Audit Committee. The sustainability reporting has also been discussed and analysed and for LHV, the most practical solutions have been developed in our Management Board and Audit Committee.

Governance of the process

We leverage the three lines of defence to oversee the sustainability reporting process (including double materiality assessment and impacts, risks and opportunities (IROs) identification processes):

• Business units are responsible for collecting and managing sustainability-related data
• The risk management and compliance teams ensure the robustness of data collection processes and address any risks impacting the quality of reporting
• Internal audit conducts independent reviews to confirm that ESG risk management and reporting processes are effective, and compliant with regulatory requirements

Governance bodies including the Management Board, Supervisory Board, Risk and Capital Committee, Remuneration Committee, and Audit Committee play a critical role in ensuring that sustainability impacts, risks and opportunities are effectively integrated into our strategic decision-making processes within their respective areas of responsibility.

Value chain mapping

LHV integrates sustainability into its operations and value chain, addressing impacts both upstream and downstream. The assessment and disclosure of value chain impacts are based on materiality and aligned with double materiality principles. LHV discloses data for both upstream and downstream value chains when material impacts are identified.

For upstream activities, the focus is on direct partners, including suppliers and service providers, while downstream efforts extend to financed activities within the immediate customer base. While LHV evaluates impacts and risks throughout the entire value chain as part of its materiality assessment, the disclosed data primarily pertains to its own operations and direct counterparties. In the downstream scope, LHV includes direct customer activities influenced by its financial products and services, such as financed emissions from loan portfolios. Where detailed downstream data is unavailable, sectoral benchmarks and proxies are utilized to estimate impacts.

Material topics identified

Based on our double materiality assessments, the following sustainability topics were identified as material and serve as the basis for the current sustainability statement:

• Climate change (ESRS E1)
• Resource use and circular economy (ESRS E5)
• Own workforce (ESRS S1)
• Consumers and end-users (ESRS S4)
• Business conduct (ESRS G1)

These impact areas reflect LHV's role in supporting sustainable economic activities, addressing environmental challenges, fostering social well-being and good governance practices, particularly within Estonia's unique context and needs.

Frequency and review

Prior to conducting the double materiality assessment required for sustainability reporting in 2024, LHV as a group had already established core strategic long-term objectives.

As for our forward-looking statement, we will continue to refine our double materiality assessment process as guidance develops and market practice becomes more evident. In 2025, we aim to conduct our second double materiality assessment as a combination of impact materiality and financial materiality to content a more advanced coherent substantive analysis.

There have been no material changes in the identified list of material impacts, risks, and opportunities compared to the previous reporting period. However, continuous refinements in integrating sustainability into LHV's strategy, including improvements in the double materiality assessment methodology and expanding practical knowledge, are planned for the next reporting cycle.

Transition plan for climate change mitigation

Plan Status and Scope

While we do not have a standalone written transition plan for 2024, the key elements, such as setting climate change mitigation targets, of our transition strategy are already integrated into our broader corporate governance, risk and decision-making framework. We will formulate a dedicated transition plan for the next reporting period.

LHV itself is not active in a high climate impact sector.

Governance and Integration

The ESG policy, which outlines high-level principles for achieving sustainability objectives, including our support for the transition to a low-carbon economy, is reviewed and approved annually by the Supervisory Board. Based on that, the Management Board plays an active role in the development and implementation of these principles through their engagement in long term strategic planning, yearly action planning and overseeing of operational execution.

This integrated approach ensures that our transition objectives and targets are not only aspirational but are actively incorporated into decision-making, operational activities, and risk management processes, with governance structures in place to ensure accountability and regular progress review.

Policy Framework

Our ESG Risk Management Policy defines risk management framework, i.e. main principles, governance and risk appetite for the ESG risks LHV is facing to mitigate the potential financial risks resulting from climate change. Our Green Office Principles guide our efforts to manage office operations sustainably, i.e. mitigate climate change on operational level. These include areas such as employee engagement, resource efficiency, use of renewable energy, waste management, and sustainable transport. By setting focus in areas such as energy efficiency, waste reduction, sustainable transport, and employee engagement, LHV ensures that its office operations contribute to reducing environmental impacts.

Climate Change Mitigation vs Adaptation

In the context of Estonia, the impacts of climate change are assessed as not currently significant enough to warrant prioritizing climate change adaptation measures. Furthermore, adaptation-related activities are more challenging to finance transparently, making mitigation the primary objective of our climate strategy. This approach ensures that our efforts align with measurable and actionable strategy and goals.

Key Decarbonization Levers

Products and Services

Implementation of our sustainability strategy is related to our products and services, governance, and operations. We are incorporating climate and sustainability considerations into strategic planning, business development, customer selection processes, risk management and credit assessments. To mitigate our impact on climate change, we develop and offer sustainable financing solutions in addition to enhancing our customer engagement processes regarding sustainable business practices.

These loan products are home loan for A and B energy class homes, car leasing for zero or low carbon emission vehicles, and investment loan for supporting companies' sustainable development.

Credit Granting Process

In LHV credit granting process we take ESG considerations into account by implementing LHV exclusion list which identifies industries and activities that are generally not eligible for financing due to their high environmental, social, or governance impacts and risks, applied to all our business customers.

Climate-related risks are also considered during loan reviews based on the size of the loan and the customer's field of activity. The ESG risk assessment process at LHV is applied to business customers with a credit exposure exceeding EUR 500,000. The objective of the ESG risk assessment is to ensure a comprehensive evaluation of customer's sustainability, considering both the potential environmental and social risks that may impact the customers' business operations, as well as the customers' impact on the environment and society. Based on their exposure to ESG risk factors, mitigation measures, loan conditions, and pricing may be applied accordingly.

Employee Engagement

We are committed to not only that, but also to foster a shift in employees' behaviours and mindset, encouraging them to adopt sustainable practices both within the organization and in their personal lives.

Climate Risk Assessment

Based on our assessment, while we have identified certain climate-related risks factors, such as flooding as a significant short-to medium-term concern, these risks are not material to our overall operations. Our field of activity and the integration of ESG risks into our comprehensive risk management framework provide resilience under a range of possible climate scenarios.

In assessing physical risk factors, we utilized methodologies incorporating future projections from the Intergovernmental Panel on Climate Change (IPCC), focusing on Representative Concentration Pathways (RCPs) and Shared Socioeconomic Pathways (SSPs). These scenarios model future climate outcomes.

EU Taxonomy and Future Commitments

LHV recognizes the EU sustainable finance taxonomy as a guiding framework for steering its own activities and supporting customers in transitioning toward sustainable economic practices. LHV is actively monitoring the ongoing regulatory developments related to the Taxonomy Regulation and exploring opportunities to further align operations, particularly in the areas of sustainable loans and mortgages. This adaptive approach enables us to adapt to the evolving requirements of sustainable finance while improving operational processes and compliance to the regulations.

Policies related to climate change mitigation and adaptation

LHV has integrated climate change mitigation policies into its broader corporate governance framework. While the company does not have a standalone written transition plan for 2024, key elements of its transition strategy are already integrated into corporate governance, risk, and decision-making processes. The company commits to formulating a dedicated transition plan for the next reporting period.

ESG Policy

The ESG policy outlines high-level principles for achieving sustainability objectives, including support for the transition to a low-carbon economy.

• Governance: The policy is reviewed and approved annually by the Supervisory Board. The Management Board plays an active role in the development and implementation of these principles through engagement in long-term strategic planning, yearly action planning, and overseeing operational execution.
• Scope: The policy covers the organization's sustainability objectives, including climate change mitigation.
• Implementation monitoring: The governance structures ensure accountability and regular progress review through decision-making, operational activities, and risk management processes.

ESG Risk Management Policy

The ESG Risk Management Policy defines the risk management framework for ESG risks LHV faces to mitigate potential financial risks resulting from climate change.

• Key content: Defines main principles, governance, and risk appetite for ESG risks, including climate-related risks.
• Implementation: Climate-related risks are considered during loan reviews based on loan size and customer field of activity. ESG risk assessment is applied to business customers with credit exposure exceeding EUR 500,000. Based on exposure to ESG risk factors, mitigation measures, loan conditions, and pricing may be applied.
• Scope: Applied to business customers above certain thresholds and integrated into credit granting processes through an exclusion list identifying industries and activities not eligible for financing due to high environmental, social, or governance impacts and risks.

Green Office Principles

The Green Office Principles guide efforts to manage office operations sustainably and mitigate climate change on an operational level.

• Key content: Includes areas such as employee engagement, resource efficiency, use of renewable energy, waste management, and sustainable transport. Sets focus on energy efficiency, waste reduction, sustainable transport, and employee engagement to reduce environmental impacts.
• Scope: Covers office operations.

Product-level policies

LHV offers specific loan products that support climate change mitigation:

• Home loans for A and B energy class homes
• Car leasing for zero or low carbon emission vehicles
• Investment loans for supporting companies' sustainable development

These products are designed to support customers in transitioning toward sustainable economic practices and align with the EU sustainable finance taxonomy framework.

Actions and resources in relation to climate change policies

Resource Allocation

LHV has allocated financial, human, and technological resources across various levels of the organization as part of regular business, including the development and deployment of sustainable financial products. These resources are strategically allocated to ensure that both customers and LHV itself are contributing to the transition towards a climate-neutral economy.

Personnel:

• Dedicated personnel responsible for managing and implementing sustainability strategy
• ESG specific positions throughout LHV as described under sustainability governance structure

Financial resources:

• No specific capex/opex amounts disclosed
• Resources allocated to developing sustainable financial products

Specific Actions Linked to Climate Targets

1. Financing for renewable energy projects

• Scope: Downstream value chain (loan portfolio)
• Target: 90% renewable energy within the energy sector loan portfolio by 2030
• Time horizon: Long-term (by 2030)
• Resources: Not quantified

2. Tailored mortgage products with favourable terms

• Scope: Downstream value chain (loan portfolio)
• Target: 50% of annually signed mortgage contracts for A and B energy class homes by 2030
• Time horizon: Long-term (by 2030)
• Resources: Not quantified

3. Progressive increase in renewable electricity use

• Scope: Own operations
• Target: Maintain zero Scope 1 and 2 emissions (ca 80% renewable electricity achieved for UK premises as of reporting period)
• Time horizon: By 2030
• Resources: Not quantified

Awareness and Education Initiatives

LHV invests in raising awareness among employees, clients, and society by:

• Supporting environmental organizations such as Green Tiger and the Responsible Business Forum (knowledge sharing through seminars and conferences)
• Delivering lectures at Tallinn University of Technology, University of Tartu, and Estonian Business School
• Extended collaboration with Estonian Business School's ESG Management Program (partner since inception, offering business customers preferential terms to participate)

Operational Measures - Green Office Principles

Scope: Own operations

Based on carbon footprint measurement of office operations (business travel, energy consumption, paper, etc.), LHV introduces new activities according to Green Office Principles to reduce operational footprint.

2024 Performance:

• Total operational GHG emissions: 2,382 tonnes CO2e
• Intensity: 2.12 tons per employee
• Scope 3 calculated using primary data: 27.6%

Data Quality and Methodology Improvements

Action: Enhancement of financed emissions calculation accuracy

• Scope: Downstream value chain (loan portfolio)
• Activities:
  • Refining calculation models
  • Reallocation of asset class scopes for more accurate contract assessments
  • Assessment of insurance-associated emissions for motor vehicle insurance
  • Active engagement with customers to collect necessary data
  • Updated ESG questionnaire to gather information from customers
• Resources: External consultancy provider Sustinere engaged for GHG footprint calculations
• Time horizon: Ongoing

Methodology:

• GHG Protocol Corporate Accounting and Reporting Standard
• PCAF methodology for financed emissions
• Estonian national GHG footprint calculation model (Ministry of Climate) 2024
• UK Conversion Factors 2024

Targets related to climate change mitigation and adaptation

LHV has set climate change mitigation targets focusing on reducing the climate impact of its loan portfolio and operational emissions.

Loan Portfolio Targets

Operational Targets

Following the guidance of SBTi, LHV set two targets focused on operational level:

Progress to date (2024):

• Use of renewable electricity in Estonian offices: ca 80% as of end of 2023 (UK data unavailable for reporting period)
• Total operational GHG emissions (2024): 2,382 tonnes CO2e (2.12 tons per employee)

Implementation Measures

To achieve these goals, LHV has implemented specific measures:

• Financing for renewable energy projects
• Tailored mortgage products with favourable terms for A and B energy class homes
• Progressively increasing the use of renewable electricity in operations

Energy consumption and mix

Scope and methodology
LHV reports energy consumption for its office operations in Estonia (Tallinn City Plaza, Tallinn Rävala, Tartu, Pärnu) and the United Kingdom (London, Manchester). Electricity from City Plaza (Tallinn) is sourced from renewable energy; all other sites use non-renewable electricity and heating. The calculation is based on primary data for electricity and heating consumption in MWh.

Energy consumption by source and type (MWh)

Energy intensity
Not disclosed.

Notes
• UK data for 2023 not available.
• The table reflects ESRS E1-7 (formerly E1-5) disaggregation.
• No fuel consumption from coal, crude oil, natural gas, or other fossil sources is reported; fossil consumption is exclusively purchased electricity and heating.
• No nuclear energy consumption is reported.
• Cooling impact is included within electricity consumption.

Gross Scopes 1, 2, 3 and Total GHG emissions

Emissions from own operations

LHV calculates its carbon footprint based on the GHG Protocol Corporate Accounting and Reporting Standard and associated Corporate Value Chain (Scope 3) Standard. Calculations of operational greenhouse gas emissions were performed by external consultancy provider Sustinere using Estonian national GHG footprint calculation model (Ministry of Climate, 2024) and UK Conversion Factors, 2024, and emission factors. Where available, emission factors directly from suppliers were used (e.g., from heating providers). Results are expressed in CO2 equivalents (CO2e). Scope 3 calculated using primary data 27.6%. The impact of cooling has been included in the calculation of electricity consumption.

In 2024, LHV office activity had a greenhouse gas emission footprint of 2,382 tonnes of CO2-equivalent, which was 2.12 tons per employee and 0.0 tons per net revenue. Net revenue used to calculate GHG intensity for 2024 is EUR 338,300 thousand which reconciles to Net income from the Consolidated financial statement of profit or loss and other comprehensive income.

GHG intensity (market-based):

• 2.12 tCO2eq per employee
• 0.0 tCO2eq per EUR thousand net revenue

Financed emissions (Scope 3 Category 15)

Since 2022, LHV assesses financed emissions under Scope 3 Category 15 (Investments) using the PCAF methodology. Total financed emissions were 631,322 tCO2e in 2024, reflecting improvements in methodology and reallocation of asset class scopes.

Financed Emissions, tCO2e:

Financed emissions by asset class (2024):

*Scope 1+2
**Emissions from passenger cars, buses, and trucks; other vehicles are not covered in PCAF Financed Emissions Standard

Financed emissions – Business loans by EMTAK sector (2024):

Insurance-Associated Emissions (2024)

LHV Kindlustus assessed personal motor vehicle insurance emissions using the PCAF methodology.

Avoided emissions from renewable power projects (2024)

LHV conducted its first assessment of avoided emissions, covering large corporate customers' renewable energy projects.

Energy consumption (2024)

*UK data for 2023 is not available

Methodology notes

• LHV has not established a base year for operational GHG emissions due to ongoing improvements in calculation processes and data availability limitations.
• For operational emissions, the analysis covered activities in LHV Tallinn, Pärnu, Tartu offices and UK premises in London and Manchester.
• Employee commuting emissions: In Estonia 35% and in UK 32% of employees responded to a web survey; results were extrapolated to total employees.
• Financed emissions: Assessment uses PCAF methodology across six asset classes for LHV Pank (business loans, commercial real estate, mortgages, motor vehicle loans, sovereign debt, listed equity & corporate bonds) and one asset class for LHV Bank Limited (commercial real estate). 100% of loans in scope have been assessed except motor vehicle loans (70.4% assessed).
• Data quality scores range from 1 (most accurate, customer-specific data) to 5 (least accurate, sector averages/proxies). Emissions are estimated using indirect sources (sector averages, PCAF databases, Estonian Building Register) where direct customer data is unavailable.
• Uncertainties remain, as sectoral average emission factors are used for value chain emissions where direct data is unavailable.
• As of end-2023, renewable electricity use in Estonian offices was ca 80%; UK data unavailable for this reporting period.
• Corporate insurance represents only a marginal share of the insurance portfolio and was not assessed for insurance-associated emissions.

Anticipated financial effects from material physical and transition risks and potential climate-related opportunities

Time horizons

LHV defines the following time horizons for climate-related risks and opportunities:

• Short term: <3 years
• Medium term: 3-10 years
• Long term: 10-30 years

Risks in short-, medium- and long-term horizon

Opportunities in short-, medium- and long-term horizon

Quantified financial effects

No quantified financial effects (€) are disclosed for physical risks, transition risks, or opportunities.

Methodology

In 2024, a comprehensive and granular climate and environmental risk materiality assessment was carried out. Internal data sources included:

• Client financial information
• Financed emissions data (calculated using the PCAF framework)
• Sectoral exposure assessments

External data sources encompassed:

• Climate data from the Intergovernmental Panel on Climate Change (IPCC)
• European Environment Agency insights
• National climate scenarios
• Regulatory updates

The outcomes of these assessments support LHV's climate and environmental rating system (E-rating) and have guided the design and approval of various Key Risk Indicators (KRIs) for ongoing monitoring and risk mitigation.

LHV expanded its existing stress-testing framework to specifically assess climate and environmental risks in 2024.

Assets and business lines flagged for transition risk

The process paid particular attention to sectors and geographies with the highest exposure to climate and environmental risks, including:

• Energy-intensive industries
• Regions prone to flooding

Integration into credit risk assessment

LHV takes into account ESG factors when assessing a client's credit risk. For example:

• Potential future costs related to CO2 emissions could impact the client's business risk or financial risk score
• The possible impact of floods could be relevant when assessing collateral values

Forward-looking statement

LHV emphasizes that all forward-looking disclosures should be considered subject to uncertainties. Forward-looking estimates depend on future regulatory developments, customer behaviours, and market conditions, which introduce inherent uncertainty.

LHV is actively developing and refining structured processes to collect more comprehensive information on material impacts, risks, and opportunities related to its operations. This will enable LHV to identify the financial effects and better understand how the information from the required disclosures and data points influences business performance.

Policies related to resource use and circular economy

The disclosure requirement table indicates that E5-1 (Policies related to resource use and circular economy) is addressed in the "Circular economy" section of the report. However, the provided excerpts do not contain the actual content from that section. The excerpts only show the index/table mapping ESRS requirements to report sections.

Without access to the "Circular economy" section referenced in the disclosure table, the specific policies related to resource use and circular economy cannot be extracted.

Waste

Waste Management Approach

LHV prioritizes responsible waste utilization within its offices. The company has developed an organized waste sorting process, described in its Green Office Principles. In cooperation with Nutriloop, LHV recycles biowaste, which is used to grow plants on office building balconies and donated to local farmers and gardeners. Employees are actively encouraged to recycle both at work and at home through various initiatives. Offices are equipped with systematic recycling bins designed to separate different types of waste effectively. The company runs constant reminders and educational materials on internal TV screens, showcasing the importance of recycling and how to do it properly, further embedding a culture of sustainability among employees.

Waste Generated (2024)

*LHV's hazardous waste consists of electronical waste – IT equipment that is not suitable for reuse, batteries, electronic cables etc. Data available for Tallinn (City Plaza) office.

Policies related to own workforce

LHV Group's consolidated sustainability statement acknowledges the disclosure requirement S1-1 (Policies related to own workforce) in its reporting index and cross-references to specific sections. However, the provided excerpts do not contain the actual policy disclosure content for S1-1.

The reporting index indicates that S1-1 disclosures are addressed in sections titled "Own workforce; Policies, measures and targets" (referenced on page 50 of the index table). The excerpts provided include portions of the methodology statement, governance overview, and cross-cutting references but do not include the substantive S1-1 policy disclosure itself.

The excerpts confirm that LHV references compliance with SFDR requirements related to workplace accident prevention policy (paragraph 23), human rights policy commitments (paragraph 20), and processes for preventing trafficking in human beings (paragraph 22) as part of S1-1, but the actual policy content is not included in the provided text.

ESG Policy

The only policy explicitly named in the excerpts is the ESG policy, mentioned in section 1.2 Sustainability strategy:

• Scope: All subsidiaries of LHV
• Key content: Sets goals, ambitions, and approaches for sustainability efforts across all subsidiaries
• Governance: Business strategy, including sustainability strategy, is overseen by LHV's Supervisory Board, Risk and Capital Committee, Remuneration Committee, and Audit Committee

No additional workforce-specific policies (such as codes of conduct, diversity policies, health and safety policies, or training policies) are named or described in the provided excerpts.

Characteristics of the undertaking's employees

Total headcount and employment types

Total employees (change from 2023)

Data reported in head count at the end of the reporting period (31 December 2024)

Additional employee metrics

Turnover rate is calculated as a 12-month rolling sum

Breakdown by age and gender

All employees by age and gender (head count at end of reporting period)

Gender distribution at top management level

Data reported in head count at the end of the reporting period (31 December 2024)

Remuneration and pay equity

Gender pay gap

The adjusted gender pay gap is calculated by comparing average salaries of men and women at each job level within similar positions

Employee remuneration ratio (by quartile)

Ratio calculated at the end of the reporting period

Health and safety

No incidents or complaints occurred; therefore no fines, penalties, or compensation have been paid. No severe human rights incidents connected to the undertaking workforce occurred.

Business segment employee numbers

Additional context from the report:

• AS LHV Pank: 925 employees (FTE including inactive and part-time staff, plus 19 employees of LHV Finance) - increase of 99 from 2023
• 159 middle-level managers in Estonian subsidiaries, of which 83 are women
• 12 Management Board members including 5 women across Estonian subsidiaries

Characteristics of non-employees in the undertaking's own workforce

LHV mentions that it partners with suppliers for various services including software development, legal and financial services, IT equipment and services, facility management, human resources, banking services, and marketing and communications. However, no quantitative data on the number, type, or characteristics of non-employee workers in LHV's own workforce is disclosed.

The company states it evaluates and selects suppliers and contractors based on financial and ESG criteria as per LHV Purchasing rules, but this does not constitute disclosure of characteristics of non-employees in its own workforce as required by ESRS S1-7.

No metrics on:

• Number of non-employee workers (headcount or FTE)
• Breakdown by type (contractor, agency, self-employed)
• Multi-year comparisons

are provided in the sustainability statement.

Diversity metrics

Total workforce by gender and age band distribution

*in head count at the end of the reporting period

Gender distribution at top management level

*in head count at the end of the reporting period

Adequate wages

LHV Group's disclosure on adequate wages (ESRS S1-10) focuses on compliance with statutory minimum wage requirements rather than a living wage benchmark.

Benchmark used

Minimum wage / legal compliance only

LHV states:

"By adhering to the Employment Contracts Act and the Government's Minimum Wage Regulations in Estonia, and the National Minimum Wage Act 1998 and National Minimum Wage Regulations 2015 in the UK, LHV aims to ensure that all employees receive compensation that meets or exceeds the legal requirements. This commitment reflects our dedication to upholding labour laws and promoting fair pay practices in all the regions where we operate."

The company explicitly notes that collective bargaining agreements are not common in the financial sector in Estonia and the UK, and no living wage benchmark (e.g., Fair Wage Network, WageIndicator, or other third-party living wage standard) is referenced.

Market benchmarking

LHV uses market salary surveys to ensure competitive remuneration:

• In Estonia: references to "Figure's salary survey" to ensure competitive market remuneration
• In UK: systematic benchmarking against UK market standards for fair and competitive compensation

However, market competitiveness is distinct from living wage adequacy as defined under ESRS S1-10.

Coverage and scope

No specific coverage percentage or proportion of workforce assessed against a living wage benchmark is disclosed. The legal minimum wage compliance applies to all employees in Estonia and the UK (LHV's operating regions).

Pay gap and remuneration data

The company discloses:

• Unadjusted gender pay gap (2024): Estonia 28.27%, UK 17.42%
• Highest-paid to median ratio: Estonia 14.96, UK 6.06

Targets and commitments

No forward-looking targets or commitments related to living wage benchmarks are disclosed.

Methodology

No living wage calculation methodology is provided. The remuneration system is based on:

• Job evaluation using job levels and families
• 13 grades based on expertise, complexity, scope, and impact
• Market salary surveys for competitiveness

No mention of living wage reassessment, contractor wage inclusion, or family living needs assessment.

Health and safety metrics

Coverage: 100% of employees (1,281 employees) are covered by LHV's health and safety management system.

Methodology notes:

• No incidents or complaints have occurred; therefore, no fines, penalties, or compensation have been paid.
• No severe human rights incidents connected to the undertaking workforce have occurred; therefore, no fines, penalties, or compensations have been paid.
• LHV has workplace accident prevention policies including Occupational Safety and Working Environment Guidelines (for Estonian offices) and Health and Safety Policy (for UK offices).

Phase-in: The disclosure notes that for this reporting period, LHV has disclosed the data points on cases of work-related ill-health and on number of days lost to injuries, accidents, fatalities and work-related ill health (referenced in ESRS S1-14), but these specific metrics are not provided in the table. Health and safety metrics on non-employees are not disclosed.

Compensation metrics

Pay gap

LHV actively monitors its gender pay gap. The unadjusted gender pay gap for Estonia in 2024 was 28.27% and in the UK 17.42%.

The adjusted gender pay gap accounts for job roles, levels, and experience, comparing salaries within similar positions. In Estonia, the adjusted gender pay gap is currently 4.49%, while in the UK it is 1.46%. This number is calculated by comparing the average salaries of men and women at each job level, ensuring that similar positions are compared for a fair assessment of pay equity across comparable roles.

LHV has set a group-wide employee-related target of achieving pay equality of 95:105 by 2029. An action plan will be created and implemented to ensure that the pay ratio between different employee groups reaches a balance where no group is paid more than 5% above or below another group's pay level by 2029.

Remuneration ratio

The total annual remuneration ratio of the highest-paid individual to the median annual total remuneration for all employees was 14.96 for Estonia and 6.06 for the UK.

Methodology

LHV uses an analytical job evaluation method created and developed by Fontes/Figure, based on the method recommended by the International Labour Organization. The remuneration system has two main parts: job evaluation and salary ranges. Job evaluation uses job levels and families to measure and compare role complexity across the organization, classifying roles into 13 grades based on expertise, complexity, scope, and impact.

In the UK, LHV systematically benchmarks remuneration against the UK market to ensure fair and competitive compensation.

LHV employees are not covered by a collective agreement. By adhering to the Employment Contracts Act and the Government's Minimum Wage Regulations in Estonia, and the National Minimum Wage Act 1998 and National Minimum Wage Regulations 2015 in the UK, LHV ensures that all employees receive compensation that meets or exceeds legal requirements.

Incidents, complaints and severe human rights impacts

Work-related incidents and complaints (2024)

Severe human rights impacts and fines

• No incidents or complaints have occurred; therefore, no fines, penalties, or compensation have been paid.
• No severe human rights incidents connected to the undertaking workforce have occurred: therefore, no fines, penalties, or compensations have been paid.

Sustainability complaints

As of the end of 2024 LHV has had no identified sustainability complaints.

Policies related to consumers and end-users

The excerpts provided do not contain the actual policy content for ESRS S4-1. The sustainability statement index indicates that disclosure requirement S4-1 (Policies related to consumers and end-users) is addressed in the "Customer experience; Principles and policies" section of the report, and references:

• Indicator number 9 Table #3 of Annex 1
• Indicator number 11 Table #1 of Annex 1

Additionally, S4-1 paragraph 17 on "Non-respect of UNGPs on Business and Human Rights and OECD guidelines" references:

• Indicator number 10 Table #1 of Annex 1
• Delegated Regulation (EU) 2020/1816, Annex II
• Delegated Regulation (EU) 2020/1818, Art 12 (1)

This disclosure is marked as covered (Y) and is located in the "Social Information" section.

However, the specific policy names, scope, governance, content, public availability, links to international standards, and monitoring mechanisms are not included in the provided excerpts. The actual policy details would be found in the "Customer experience" and "Principles and policies" sections of the full report, which are not included in these excerpts.

Business conduct policies and corporate culture

LHV's corporate culture embodies its mission to improve access to financial services and capital, and its vision to inspire individuals and businesses to think ambitiously, explore innovative ideas, and take bold actions to achieve their goals. The organization establishes and nurtures its corporate culture through clear value-driven strategies and policies anchored in its core values: simple, supportive, and effective.

Code of Ethics

Scope: Mandatory for all employees and managers of LHV.

Governance: The governing bodies (Management and Supervisory Boards) are responsible for establishing the Code of Ethics. Policies are reviewed yearly to ensure they remain relevant and effective in promoting a strong corporate culture.

Key content/principles: The Code of Ethics is the foundation of LHV's various internal regulations, including the Group Governance Policy and other procedures governing adherence to ethical standards. The Code specifies principles to be followed in business with the purpose of providing guidance on conforming to legal requirements, as well as the expectations of supervisory authorities and society. Employees are contractually obligated to review and adhere to these rules, with updates promptly communicated and confirmed through a dedicated system.

Public availability: Accessible to all employees via the intranet, supported by clear banners and links. Not publicly disclosed.

Monitoring implementation: All potential cases of conflicts of interest, bribery, financial crimes, unlawful activities, and corruption are carefully and responsibly managed. The organization evaluates its corporate culture through regular employee feedback (including satisfaction surveys), performance metrics, and alignment with strategic objectives. A whistleblowing mechanism enables the reporting of legal violations, unethical conduct, or behaviour that conflicts with internal rules.

ESG Policy

Key content/principles: Clearly states and explains LHV's responsibility and commitment to social and environmental issues.

Link to international standards: LHV fulfils the reporting requirements of the UNEP FI Principles of Responsible Banking.

ESG Risk Management Policy

Key content/principles: Part of the ESG management framework covering main principles, governance and risk appetite for ESG risks LHV is facing. Climate-related risks are addressed during loan reviews based on the size of the loan and customer activities, while ESG risks are integrated into credit processes by an exclusion list and ESG rating model.

Diversity Policy

Key content/principles: Recognizes that people have different values, abilities, and skills, which affects the way they think and see things. LHV believes in meritocracy. The policy considers gender balance as one of the important dimensions of diversity and fosters a culture where everyone is treated with respect and dignity. LHV promotes equality of opportunity and does not attribute to any dimensions of diversity a predetermined value, either positive or negative.

Scope: To the extent applicable, LHV incorporates diversity and inclusion into its policies and practices related to recruitment, remuneration, career development, and the composition of management and supervisory bodies.

Human Resources Policy

Key content/principles: Plays a central role in fostering employee growth, satisfaction, and alignment with organizational goals. These initiatives emphasize professional development, recognition, and a supportive work environment. The policy includes a training policy emphasizing developing employees' competencies through planned training processes, with its scope and frequency determined by annual training plans. LHV takes a gender-neutral, non-discriminatory approach in all recruitment and promotion decisions, and bases decisions on equal, measurable qualities, such as experience, education, skills and, if necessary, requirements set by applicable regulations.

Scope: All employees.

Conflict-of-Interest Policy

Key content/principles: Ensures transparency and integrity through detailed gift acceptance rules and established policies that uphold ethical behaviour, prevent conflicts of interest, and ensure the responsible use of LHV's resources.

Governance: The policy, along with other internal policies, ensures robust oversight and governance, minimizing the potential for unethical practices across all functions.

Customers Complaints Handling Guideline

Key content/principles: Part of business conduct regarding customer experience. LHV takes every customer feedback seriously and tackles it with care.

Procedure for External Communication

Key content/principles: Part of business conduct regarding customer experience.

Personal Data Protection Guideline

Key content/principles: LHV prioritizes the protection of personal data through stringent compliance with data security and privacy regulations. By ensuring transparency in data processing and implementing robust security measures, LHV safeguards client and employee information against unauthorized access or misuse.

Personnel Policy

Key content/principles: LHV takes a gender-neutral, non-discriminatory approach in all recruitment and promotion decisions, and bases the decisions on equal, measurable qualities, such as experience, education, skills and, if necessary, requirements set by applicable regulations. Important for LHV not to discriminate against any minorities.

Purchasing Policy

Key content/principles: Supplier evaluation process considers not only conventional criteria like cost and quality but also environmental standards. The policy mandates the integration of environmental criteria into procurement decisions. The approach aims to minimize environmental impacts throughout the lifecycle of purchased goods and services, including their production, usage, and disposal. Prioritizes locally produced goods whenever feasible to further support sustainability and local economies.

Green Office Principles

Key content/principles: Guides supplier evaluation and environmental criteria into procurement decisions together with the Purchasing Policy. Implemented in line with LHV's climate related activities and efforts.

Internal Fraud Prevention Procedure

Key content/principles: A procedure has been established to prevent, detect, and resolve internal fraud. In accordance with the content of reported violations, investigations are conducted in compliance with the Internal Fraud Prevention Procedure where discovery and handling processes are clearly defined.

Monitoring implementation: Investigations are managed independently by the internal control function, a second-line compliance function that operates separately from the management chain. The outcomes of investigations, where applicable, are reported to the relevant governing bodies, ensuring transparency and accountability.

Anti-corruption and anti-bribery measures

LHV has established processes to prevent, detect, investigate, and address potential incidents of corruption or bribery, governed by mandatory internal rules accessible on the intranet. While LHV does not have a specific anti-corruption or anti-bribery training program, the relevant topics are addressed within internal policies, which are mandatory for all employees.

Link to international standards: LHV's policies have not been formally assessed against the United Nations Convention against Corruption, as there is no practical necessity for such an evaluation within the finance sector's rigorous regulatory framework, nor is there currently any plan to conduct such an assessment.

Monitoring implementation: The whistleblowing mechanism enables the reporting of any suspected incidents (including corruption and bribery), ensuring a structured process for identifying such cases. LHV ensures transparency and integrity through detailed gift acceptance rules. LHV has no confirmed incidents related to corruption or bribery.

Lobbying and political engagement

Key content/principles: LHV does not engage in lobbying activities and does not directly or indirectly support any political organization.

Alignment with governance frameworks

LHV follows the 'Corporate Governance Recommendations' developed by the EFSA and the Nasdaq Tallinn Stock Exchange to ensure a transparent management culture. The organization is committed to complying with all EU and national regulations, ensuring that the company operates ethically and avoids practices such as human trafficking, child labour, or forced labour.

Integration into remuneration

The remuneration principles for members of the management board are linked to KPIs across various strategic areas and business lines. Sustainability considerations have been integrated as part of the annual targets into the result-based share option programme for the Management Board and equivalent staff as well as key employees.

Prevention and detection of corruption and bribery

LHV does not have a specific anti-corruption or anti-bribery policy or training program. Instead, relevant topics are addressed within internal policies that are mandatory for all employees.

Conflict-of-Interest Policy

• Scope: All employees
• Key content: The policy ensures transparency and integrity through detailed gift acceptance rules and established policies that uphold ethical behaviour, prevent conflicts of interest, and ensure the responsible use of LHV's resources. New employees must review and confirm their understanding of these rules upon joining. The rules are communicated and confirmed through a dedicated system.
• Monitoring: Not disclosed
• Link to international standards: The policies have not been formally assessed against the United Nations Convention against Corruption, as there is no practical necessity for such an evaluation within the finance sector's rigorous regulatory framework, nor is there currently any plan to conduct such an assessment.

Whistleblowing mechanism

• Key content: The whistleblowing mechanism enables the reporting of any suspected incidents (including corruption and bribery), ensuring a structured process for identifying such cases.

Risk assessment

LHV has not identified areas or functions within the organization that present a risk of corruption or bribery.

Incidents of corruption or bribery

Confirmed incidents

LHV has no confirmed incidents related to corruption or bribery in the reporting period.

Convictions and fines

No convictions, legal decisions, or fines related to anti-corruption or anti-bribery violations are reported for the period.

Disciplinary actions and contract terminations

No employees were dismissed or disciplined, and no contracts with business partners were terminated due to corruption or bribery.

Investigation and speak-up procedures

Whistleblowing channel
LHV group companies have established an internal whistleblowing channel accessible through the intranet, enabling employees to confidentially report legal violations, unethical conduct, or behaviour that conflicts with internal rules, such as the Code of Ethics. The channel supports anonymous submissions, and all reports are directed to the Compliance department for impartial review and appropriate action.

The whistleblowing mechanism ensures the protection of employees who report in good faith, including anonymity if requested, and protection against discrimination and unfair treatment. Violations are handled comprehensively and objectively, with law enforcement and supervisory authorities being informed if necessary.

Investigations are managed independently by the internal control function, a second-line compliance function that operates separately from the management chain. In accordance with the content of the reported violation, investigations are also conducted in compliance with the Internal Fraud Prevention Procedure where discovery and handling processes are clearly defined.

Prevention processes
LHV has established processes to prevent, detect, investigate, and address potential incidents of corruption or bribery, governed by mandatory internal rules accessible on the intranet. Employees are contractually obligated to review and adhere to these rules.

LHV ensures transparency and integrity through detailed gift acceptance rules and established policies that uphold ethical behaviour, prevent conflicts of interest, and ensure the responsible use of LHV's resources. The Conflict-of-Interest Policy, along with other internal policies, ensures robust oversight and governance, minimizing the potential for unethical practices across all functions. Additionally, a procedure has been established to prevent, detect, and resolve internal fraud.

While LHV does not have a specific anti-corruption or anti-bribery training program, the relevant topics are addressed within internal policies, which are mandatory for all employees.

Risk assessment
LHV has not identified areas or functions within the organization that present a risk of corruption or bribery.

Political influence and lobbying activities

Political engagement approach

LHV does not engage in lobbying activities and does not directly or indirectly support any political organization.

EU Transparency Register

LHV's credit institution subsidiary, LHV Pank, is registered in the EU Transparency Register under the identification number 449511822591-64.

Political contributions

No political contributions are made by LHV Group.

Lobbying expenditure

No lobbying expenditure is incurred by LHV Group.

Public administration connections

None of the members of LHV's administrative, management, or supervisory bodies appointed during the reporting period held comparable positions in public administration (including regulators) in the 2 years preceding their appointment. Any such connections, if they arise, will be disclosed in future reports.

Payment practices

Average time to pay invoices

On average, LHV processes supplier invoices within 1 week from the date of receiving the invoice from the supplier.

Payment process and controls

LHV's accounting system is designed to process payments in accordance with the respective cooperation agreements established with suppliers. An internal practice is implemented whereby all invoices receive approval and confirmation before their due date, ensuring timely payments in line with the agreed cooperation agreements with suppliers.

Standard contractual payment terms

LHV has not conducted a calculation of typical payment terms in days by main supplier categories or the percentage of payments aligned with these terms.

Late payment legal proceedings

LHV has 0 outstanding legal proceedings related to late payments.

Treatment of suppliers by size

LHV's commitment to equitable treatment is unwavering, irrespective of whether partners are micro, small, medium-sized enterprises or larger organizations.