Sun Life Financial Inc.

Type of Engagement: Annual Review

Date: 24 April 2023

Engagement Team:

Akshay Chandrakapure,akshay.chandrakapure@morningstar.com

Nachiket Goli,nachiket.goli@morningstar.com

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

Use of Proceeds

Eligibility Criteria

Key Performance

Category

Indicators5

Investments in facilities and equipment dedicated to

generation, transmission and distribution of energy from

renewable sources, including:

i.

Wind

ii.

Solar

Renewable energy

iii.

Geothermal

Renewable Energy

capacity installed

(MW)

iv.

Hydro (run of river, small scale <25MW,

upgrades of existing facilities or other hydro

facilities subject to an ESG assessment)6

v.

Biomass (waste or other non-food feedstock

that does not deplete existing terrestrial carbon

pools)

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.

Investments in facilities and equipment that reduce

energy consumption or improve the efficiency of

resources, including:

i.

Tonnes of

i.

Installation of energy efficient heating,

greenhouse

ventilation, air conditioning, refrigeration,

gas (GHG)

lighting and electrical equipment

emissions

ii.

Systems for capture and recycling of waste

reduced/avoi

ded annually

Energy Efficiency

heat such as district heating and heat recovery

(measured in

iii.

Projects that improve efficiency in the delivery

tonnes of CO2

equivalent)

of bulk energy services such as energy storage,

smart grids, demand response

ii.

Annual

iv.

Projects that enable monitoring and

energy

savings

optimization of the amount and timing of

(MBtu)

energy consumption such as smart meters,

load control systems, sensors or building

information systems

Investments in new or existing commercial or residential

buildings that have received, or expect to receive based

on its design, construction and operational plans,

certification according to third party verified green

Green Building

Green Buildings

building standards, or energy ratings such as:

Certifications

i.

LEED: Platinum or Gold

ii.

Other equivalent certification schemes, such as

BOMA BEST, ENERGY STAR

Investments in sustainable and efficient transit

infrastructure including:

Clean

i.

Rolling stock, infrastructure and vehicles for

Expected

fully electric or non-motorized public transport

vehicles/year

Transportation

ii.

Infrastructure dedicated to mass public

transportation

Investments in facilities and equipment that enhance

i.

Number of

care beds

access to public, not-for-profit, free or subsidized

added

essential services including:

i.

Infrastructure for hospitals, laboratories,

ii.

Number of

Access to Essential

shelter

clinics, healthcare, childcare and elder care

apartments

Services

centers

added

ii.

Infrastructure for the provision of child, youth

iii.

Number of

or adult education and vocational training

shelter beds

services

added

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.

2

Annual Review

Sun Life Financial Inc.

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

Framework

Procedure Performed

Factual Findings

Error or

Requirements

Exceptions

Identified

Use of

Verification of the Nominated Projects to

All projects reviewed

determine alignment with the use of

complied with the use

None

Proceeds

proceeds criteria outlined in the

of proceeds criteria.

Criteria

Framework.

Verification of the Nominated Projects to

All projects reviewed

Reporting

reported on at least

determine if impact was reported in line

None

one KPI per use of

Criteria

with the KPIs outlined in the Framework.

proceeds category.

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.

3

Annual Review

Sun Life Financial Inc.

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

Net

Percentage

Use of

Proceeds

Reported Impact

Reported

of Net

Proceeds

Project Description

Allocation

Metric

Impact

Proceeds

Category

(CAD

Allocated

million)

Renewable

Financing a wind farm

Renewable energy

53 MW

133

18%

Energy

located in Quebec

capacity installed

Energy improvements to

Annual energy

168,443

a major public library

70

9%

savings

MBtu

building in the US

Energy

Efficiency

Energy efficiency

Annual GHG

emissions

9,470

improvement for public

18

2%

reduced or

t/CO2e

school systems in US

avoided

Investment in office

Green buidling

LEED Gold

308

41%

Green

tower located in Canada

certification

Buildings

Investment in office

Green buidling

LEED

139

19%

development in Canada

certification

Platinum

Financing the

construction of

Available patient

128

69

9%

behavioral health center

beds

Access to

in New York city.

Essential

Services

Providing temporary

emergency shelter for

Available shelter

37

13

2%

families experiencing

apartments

homelessness

Total Net Proceeds Allocated (CAD million)

750

100

4

Annual Review

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

Net

Percentage

Use of

Proceeds

Reported

Reported

of Net

Proceeds

Project Description

Allocation

Impact Metric

Impact8

Proceeds

Category

(CAD

Allocated

million)

Wind farm

Renewable

22

4%

Renewable

energy

Hydroelectric facility

41 MW

31

6%

Energy

capacity

Hydroelectric facility

installed

26

5%

Installation of energy

conservation

Annual energy

13,957 MMBtu*

26

5%

measures at U.S EPA

savings

Energy

lab.

Efficiency

Installation of energy

Annual GHG

conservation

emissions

1,079 t/CO2e*

27

5%

measures at U.S

reduced or

agency headquarters.

avoided

Investment in

Green buidling

industrial building in

LEED Gold*

35

7%

Green

certification

Canada.

Buildings

Investment in retail

Green buidling

BOMA Best

73

15%

Mall in Canada

certification

Platinum

Clean

Investment in transit

Passenger

project for a new

Transportati

vehicles off the

78 per year*

61

12%

subway line in

on

road

Canada

Financing a 256-bed

Long-term care

long-term care home

203*

87

18%

beds

in Canada

Providing financing

Available

Access to

for a family

shelter

30

14

3%

Essential

emergency shelter.

apartments

Services

Financing a 200-bed

intake shelter for

Available

single women and a

227*

98

20%

shelter beds

200-bed shelter for

homeless in US

Total Net Proceeds Allocated (CAD million)

500

100%

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

5

Annual Review

Sun Life Financial Inc.

Disclaimer

Copyright ©2024 Sustainalytics, a Morningstar company. All rights reserved.

The information, methodologies, data and opinions contained or reflected herein are proprietary of Sustainalytics and/or content providers, and may be made available to third parties only in the form and format disclosed by Sustainalytics. They are not directed to, or intended for distribution to or use by India- based clients or users and their distribution to Indian resident individuals or entities is not permitted.

They are provided for informational purposes only and (1) shall not be considered as being a statement, representation, warranty or argument either in favor or against the truthfulness, reliability or completeness of any facts or statements that the issuer has made available to Sustainalytics for the purpose of this deliverable, in light of the circumstances under which such facts or statements have been presented; (2) do not constitute an endorsement of any product , project, investment strategy or consideration of any particular environmental, social or governance related issues as part of any investment strategy; (3) do not constitute investment advice, financial advice, or a prospectus, nor represent an "expert opinion" or "negative assurance letter" as these terms are commonly understood or defined by any applicable legislation; (4) are not part of any offering and do not constitute an offer or indication to buy or sell securities, to select a project or make any kind of business transactions; (5) do not represent an assessment of the issuer's economic performance, financial obligations nor of its creditworthiness; (6) are not a substitute for professional advice; (7) past performance is no guarantee of future results; (8) have not been submitted to, nor received approval from, any relevant regulatory body; (9) have not and cannot be incorporated into any offering disclosure, unless otherwise agreed in writing.

These are based on information made available by the issuer and therefore are not warranted as to their merchantability, completeness, accuracy, up-to-datedness or fitness for a particular purpose Sustainalytics has not independently verified any such information or data. The deliverables are provided "as is" and reflect Sustainalytics' opinion at the date of their elaboration and publication. Sustainalytics does not undertake any obligation to update or revise any of the statements in the deliverable to reflect events, circumstances, changes in expectations which may occur after the date of the opinion or any statements included in the opinion. Neither Sustainalytics/Morningstar nor their content providers accept any liability from the use of the information, data or opinions contained herein or for actions of third parties in respect to this information, in any manner whatsoever, except where explicitly required by law. Sustainalytics does not assume any responsibility shall the bond default. Any reference to content providers' names is for appropriate acknowledgement of their ownership and does not constitute a sponsorship or endorsement by such owner. A list of our content providers and their respective terms of use is available on our website. For more information, visit http://www.sustainalytics.com/legal-disclaimers.

Sustainalytics may receive compensation for its ratings, opinions and other deliverables, from, among others, issuers, insurers, guarantors and/or underwriters of debt securities, or investors, via different business units. Sustainalytics believes it has put in place appropriate measures designed to safeguard the objectivity and independence of its opinions. For more information, visit Governance Documents or contact compliance@sustainalytics.com.

This deliverable, in particular the images, text and graphics contained therein, and the layout and company logo of Sustainalytics are protected under copyright and trademark law. Any use thereof shall require express prior written consent. Use shall be deemed to refer in particular to the copying or duplication of the opinion wholly or in part, the distribution of the opinion, either free of charge or against payment, or the exploitation of this opinion in any other conceivable manner.

The issuer is fully responsible for certifying and ensuring compliance with its commitments, for their implementation and monitoring.

6

Annual Review

Sun Life Financial Inc.

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.

For more information, visit www.sustainalytics.com

Or contact uscontact@sustainalytics.com

7

Attachments

  • Original Link
  • Original Document
  • Permalink

Disclaimer

Sun Life Financial Inc. published this content on 03 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 03 May 2024 19:58:08 UTC.