#1MuniFin investor presentation May 2021 MuniFin#2MuniFin Copyright MuniFin Agenda >>> >>> >>> MuniFin and the set-up of the Finnish public sector The Finnish economy and economic outlook Funding operations Sustainable bonds - Green and social bonds » Appendices#3MuniFin Copyright MuniFin 3 MuniFin and the set-up of the Finnish public sector#4MuniFin Copyright MuniFin MuniFin in brief The leading provider of financial services to Finland's municipal sector and non-profit housing production Credit ratings ESG ratings . Funding explicitly guaranteed by the Municipal Guarantee Board (MGB) • Ratings are in line with those of the Finnish sovereign MOODY'S • Credit institution supervised by the ECB . Credit institution of systemic importance to the Finnish financial system (O-SII) 100% Finnish public sector-owned credit institution 16% Aa1 (Stable) S&P Global Ratings AA+ (Stable) ISS ESG‣ C+ Prime Ranking Finance 11/117 SUSTAINALYTICS 11.8 Ranking Banks 29/1039 53% 31% ■Municipalities ■Keva (a local gov. pension institution) ■Republic of Finland MSCI AA Ranking n/a#5MuniFin Copyright Muni Fin 5 1 MuniFin is committed to building a better and more sustainable future with its customers MuniFin's strategy highlights 1 MuniFin's key principles for responsibility and goals Responsible products and services Goal 2024: Customer satisfaction is at a very good level We ensure the availability of financing for our customers in all market conditions. Forerunner in sustainability 2 Goal 2024: Green and social finance account for 20% of the long- term customer financing portfolio 2 We secure our strong position in the capital markets with good risk management, a low risk profile and a joint municipal funding system. Developing wellbeing at work 3 Goal 2024: Personnel satisfaction is at a good level 3 We aim to secure our profitability and operations in the long term, but do not aim to maximise our profit. Strong corporate governance 4 Goal 2024: All ESG risks associated with customers are assessed with a uniform method#66 Public sector and social housing sector Finnish public sector is split between central and local government Central government . Comprises the ministries and the national agencies operating in their administrative branches • Services provided: Police Defence Highways Social housing policy is implemented by a national agency and housing is produced by approved non- profit housing corporations Social housing sector MuniFin Copyright MuniFin Local government . Universities Judicial system Statistics and research Currently 309 municipalities* and joint municipal authorities and municipality-controlled entities Services provided: . . • • Education and day care services Cultural, youth and library services Health and social services** Fire and rescue services** Urban planning and land use Water and energy supply Waste management Environmental services The housing finance and development centre of Finland (ARA) implements social housing policy. It is a governmental agency operating under the supervision of the Ministry of the Environment. ARA supports social housing sector by providing housing finance in the form of e.g. interest subsidy loans or renovation subsidies. Interest subsidy loan is granted by a bank or other financial institution. ARA accepts the loan, gives the loan a state guarantee and pays the interest subsidy. Tenant selection criteria is specified annually by the government. Selection is based on the social appropriateness and financial need. *293 mainland municipalities ** May be transferred to future regional governments Sources: Finnish government, State treasury, Association of Finnish Local and Regional Authorities, 2019, ARA MuniFin can finance#7MuniFin Copyright MuniFin Finnish municipalities: Strong revenue base and close link to Central Government E By law, a Finnish municipality cannot be declared bankrupt • Bankruptcy Act (120/2004) Revenues (~EUR 47 billion) Other 5% Other Taxes 8% Borrowing 9% Income Tax 40% . Close link to the central government • Highly independent and have a parallel status with the Central government confirmed in the constitution dating from 1917 Central government transfers to local government 18% Large reform in the healthcare sector in process Sales of Services 20% € Strong revenue base • Municipalities have an unlimited right to levy taxes on their inhabitants (municipal tax rate) • Other revenues taxation related charges from service production Budget Control • • Ministry of Finance is responsible for monitoring the municipal sector By law municipalities have an obligation to balance their finances over a four-year time frame Expenditure (~EUR 47 billion) Financing costs 6% Other Duties 15% Education and Culture 31% Social and Healthcare 48% Source: Association of Finnish Local and Regional Authorities, 2019#8MuniFin Copyright MuniFin . 8 Municipal Guarantee Board (MGB) provides the explicit guarantee for MuniFin's senior debt AA+ Stable Aa1 (Stable)/AA+(Stable) rated MGB was established by an act passed by Finland's parliament in 1996 for the purposes of safeguarding and developing the joint funding of municipalities • Strong All Finnish mainland municipalities* are members, representing 100% of the taxation power in mainland Finland. Membership is permanent Members of the MGB are jointly liable for the explicit guarantee provided by MGB for MuniFin's funding *Due to the autonomy of the Province of Åland, its municipalities are not members of MGB and are not clients of MuniFin. More information about the Municipal Guarantee Board (MGB): kuntientakauskeskus.fi/en/ joint-funding-system-of-municipalities/ Immediately enforceable • MGB can collect from members without a court order All debt guaranteed by MGB is BIS 0% risk-weighted in the EU area#9Hart MuniFin Copyright MuniFin 9 Long-term customer financing MuniFin has a dominant role as a provider of financing and services for its customers Customers • Municipalities • Joint municipal authorities Municipality-controlled entities Non-profit housing corporations Long-term loan portfolio • Non-profit housing corporations 47% • Municipalities 35% • Municipality-controlled entities 13% • Joint municipal authorities 6% Long-term customer financing 28.0 EUR, billion Guarantee All customer financing is direct municipal risk or the financing is guaranteed by a municipality or central government (deficiency guarantee) Services Loans • Property leases • Green and social finance • Risk management • Analysis and reporting solutions • Financial advisory services All customer financing carries a BIS Goal 0% risk weighting Green and social finance account for 20% of the long-term customer financing portfolio by 2024 As of 31 December 2020#10MuniFin Copyright MuniFin EUR 44.0 bn EUR 44.0 bn 10 Financial performance 2020 COVID-19 pandemic spurred growth in long-term customer finance Total assets ■Long-term customer finance EUR Billions Balance sheet totalled to EUR 44 billion Solid capital adequacy was supported by profitability 50 50 40 40 44 39 34 35 36 290 30 21 22 22 23 28 25 23 Millions 240 190 20 20 10 10 140 90 0 2016 40 2017 2018 2019 2020 Net Interest Income Net Operating Profit (excl. unrealized changes in fair value)* LHS 1,2 1111 CET 1 Capital RHS 1,3 1,4 € 1,2 € 1,0 € 0,8 € 0,6 € 197 0,4 € 0,2 € 0,0 € 2016 2017 2018 2019 2020 As of 31 December 2020 Customer financing Funding Cost-to- Income Ratio* 0.2 0.2 0.2 0.3 0.2 Liquidity portfolio De- 4 Oth- riva- er Return on Equity* 12.5% 12.6% 10.8% 6.8% 9.4% tives Leverage Ratio 3.5% 3.8% 4.1% 4.0% 3.9%¹ De- riva- Equity tives Other CET1 Ratio 46.2%2 53.0%² 66.3%² 83.1%² 104.3%² 1 MuniFIn Group's leverage ratio was 13.4% calculated using the CRR II calculation principles, to be enforced in June 2021. 2 The CET1 Ratio is a consolidated figure for Municipality Finance Group, not the parent company. The CET1 ratio of the parent company was 107.1% at the end of December 2020 and 85.0% at the end of December 2019. * Alternative performance measure. More information on alternative performance measures can be found in the Annual Report/Board of Directors Report. Billions#11MuniFin Copyright MuniFin 11 Operations rely on low risk appetite MuniFin's risk pillars Profitability & Capital € Liquidity & Funding risks • € Credit risks Market risks Operational risks Objectives and related measures A sufficient level of earnings, profitability and capital An adequate liquidity buffer and a sustainable funding position and profile Well diversified short- and long-term funding sources • • Well-balanced, low risk liquidity portfolio with a high ratio of HQLA Sufficient liquidity to cover continued undisturbed operations without new long-term funding for at least 12 months. Liquidity metrics, LCR and NSFR, to be kept well above regulatory requirements • Secondary source of funding: Monetary policy counterparty of the Bank of Finland Sound credit risk profile appropriate for MuniFin's business model • • All customer financing is direct municipal risk, or the financing guaranteed by a municipality or central government (deficiency guarantee) All customer financing carries a 0% risk weighting in capital adequacy calculations Liquidity portfolio rating target AA (single issuer minimum rating requirement A-) Derivative counterparty minimum rating requirement A- (with minor exceptions) 0/0 threshold two-way CSAs with daily collateral management Sound market risk profile appropriate for MuniFin's business model Funding and liquidity portfolio investments are as a norm back-to-back hedged to floating rate EUR Customer financing is all in EUR and as a norm hedged to floating rate Effective operational control and compliance to support functional and responsible operations Objective is to minimize operational risks related to business and operations by carefully identifying and analyzing the impact and probability of the risks#12MuniFin Copyright MuniFin 12 Strong liquidity position Liquidity Portfolio 10.0 EUR, billion Sufficient liquidity to cover continued undisturbed operations for at least 12 months Secondary source of funding: Monetary policy counterparty of the Bank of Finland Central bank deposits 55% Cash 2% SSA 19% Not HQLA 6% HQLA Level 2a 9% Covered bonds 19% Senior financials 5% HQLA Level 1 85% Security investments in the liquidity portfolio Average rating AA+ Average maturity 2.8 years Only issuers from OECD countries ESG score 4.5% over sustainability benchmark The average ESG score of all security investments is monitored against a sustainability benchmark Separate sustainable index investment portfolio 8% of security investments target size linked to the outstanding amount of green and social bonds As of 31 December 2020#13MuniFin Copyright MuniFin 13 The Finnish economy and economic outlook#14MuniFin Copyright MuniFin 14 Highlights of the Finnish economy 5.5 million People 2.8% of GDP Above average gross domestic spending on R&D € 50 247 US$ GDP per capita By 2035 CO2 Aims to be carbon neutral Machinery, Electrical equipment, Paper and Metal products Largest manufacturing sectors • Happiest country in the world four times in a row The most stable country in the world One of the top OECD countries in education The best governance in the world #1 EU's best digital public services The water richest country in the world The most forests in Europe Finns drink most coffee per person in the world Sources: Statistics Finland; OECD; Ministry of the Environment; The United Nations annual World Happiness Report, 2021, 2020, 2019, 2018; The Fund for Peace Fragile States Index 2018; OECD, Better Life Index: Education; Legatum Institute, The Legatum Prosperity Index 2018: Finland; European Commission, The Digital Economy and Society Index (DESI) 2018: Finland; Keele University, The Water Poverty Index: an International Comparison; FAO, Global Forest Resources Assessment; International Coffee Organization, Coffee Trade Statistics#15MuniFin Copyright MuniFin 15 Economic outlook of Finland . Due to the Covid-19 outbreak, the Finnish GDP declined by 2.8% in 2020. Early containment measures, increased public spending and diversified industrial base mitigated the economic impact of the epidemic ⚫ GDP growth will resume this year driven by private consumption and is projected to be 2.3 % • Unemployment has risen relatively moderately as firms have benefitted from temporary lay-offs to protect their long-term productive capacity • Comparably low debt/GDP - even after the unavoidable rise in debt due to the Covid-19 crisis Sources: MuniFin, Ministry of Finance: Economic Survey Spring 2021, Statistics Finland 1.3 1.3 GDP Change (%) 2018 2019 -2.8 2020 3.0 2.3 2021F 2022F Source: Statistics Finland and MuniFin Unemployment rate (%) -Inflation (%) 8.2 7.8 7.8 7.4 6.7 1.5 1.7 1.1 1.0 0.3 2018 2019 2020 2021F 2022F Source: Statistics Finland and MuniFin General Gov Debt / GDP (%) General Gov Deficit / GDP (%) 5.4 4.7 2.9 0.9 1.0 69.2 71.6 72.4 59.7 59.5 2018 2019 2020 2021F 2022F Source: Statistics Finland and Ministry of Finance#16MuniFin Finnish GDP by Sector 2019 Other Services 24% Manufacturing & Mining 17% 16 Copyright MuniFin The Finnish Economy Know-how intensive production base • Services account for ca. 70 % of GDP Trade oriented open economy - export-to-GDP ca. 42 % • • • Exports largely made up of investment goods and intermediate products Services' share of total exports doubled since 2007-2008 Bridge between the East and the West: Over 40 % of exports outside the EU, largest trading partners being Germany, Sweden, USA, Netherlands, China and Russia Agriculture, Forestry & Fishing 3% Defence & Public Administration 6% ICT & Media 6% Imports 42 Exports 42 GDP 100 Aggregate Supply Investment 23 Public Cons. 25 Private consumpti on 52 Aggregate Demand Source: Statistics Finland, MuniFin Finland Supply and Demand 2020 GDP=100 Social and Health Services, Education 14% Trade and Transportation 13% Construction 7% Professional, Scientific & Technical Services 9% Source: Statistics Finland, Macrobond, MuniFin Finnish Exports 2020 Machinery, Electronics and Equipment 15% Paper, Pulp and Paper Products 9% Services 33% Metals and Metalliferous Ore 9% Vehicles and Transport Equipment 6% Plastics, Chemicals and Chemical Other Goods 19% Petroleum and Petroleum Products 5% Products 4% Source: Statistics Finland, Finnish Customs, Macrobond, MuniFin#17MuniFin Copyright MuniFin 17 Environmental Finance Bond Awards 2021 Winner Green bond of the year -local authority/ municipality 2021 Best Uridashi Issuer MuniFin cmdportal Funding operations 2021 Best Structured Note Issuer MuniFin cmdportal mtn-i awards 2020 mtn-i awards 2018 WINNER SSA Structured Notes Issuer of the Year 2019 Best Uridashi Bond Issuer MuniFin MUNICIPALITY FINANCE cmdportal WINNER Issuer of the Year Environmental Finance Green Bond Awards 2018 Winner Municipality Finance Green bond of the Year - Sub-sovereign, supranational and agency (SSA) and Biggest issuer - Local authority 2018 Best Structured Note Issuer MuniFin MUNICIPALITY FINANCE cmdportal#18MuniFin Copyright MuniFin 18 Funding strategy Strategic benchmark markets EUR and USD benchmarks Green and Social bonds Tactical funding markets Other public markets Euro commercial paper ECP (short-term) * Forecast as of May 2021 Billions Private placements 4 € Retail 12 € Long-term funding program 10 € 8 € 6 € 2 € dull 0 € 2016 2017 2018 2019 ■Total (2016-2018) ■Strategic funding 2020 ■Tactical funding 2021* BIS 0% risk-weighted LCR HQLA Level 1 asset in the EU area and Switzerland#19MuniFin Copyright MuniFin 19 Funding breakdown 2020 Funding by investor type Insurance and Corporations Pension funds 1 % 9% Retail 11 % Asset Managers 12% As of 31 December 2020 Banks 19% Funding by region Africa and the Middle Americas East 7% Central Banks and Official institutions Asia Pacific 15% 48 % Nordics 23 % 4 % Funding by currency Other currencies NOK 4 % 5 % JPY 11 % Europe excl. Nordics EUR 51 % USD 64 % 16%#20MuniFin Copyright MuniFin 20 Successful public market strategy Strategic benchmark markets EUR FIXED BENCHMARKS 12.6 bn Oct 2021, Mar 2024, Nov 2024, April 2025, Nov 2026, Sep 20271, April 2028, Sep 20291, Oct 20301, March 2031, Feb 2033, Sep 20352 USD FIXED BENCHMARKS 8.25 bn June 2021, Sep 20211, Mar 2022, Sept 2022, Mar 2023, Sep 2023, Nov 2023, Mar 2026 Tactical other public markets + NOK 24.9 bn Jan 2022, April 2022, Oct 2022, Feb 2023, July 2023, Sept 2023, Sept 2024, Jan 2025, Jan 2026 CHF 1.1 bn April 2022, Feb 2023, Sept 2024, March 2026, June 2027, March 2030, Aug 2038 GBP 840 m Tactical retail 11% Tactical private placements& TLTRO 30% 2020 Tactical other public markets 6% Tactical other public markets 17% 2019 Tactical private placements 6% Dec 2022, Dec 2025 AUD 900 m Mar 2024, Feb 2026, Jul 2027, Aug 2029 NZD 150 m June 2023 1 Green bond issuance 2 Social bond issuance Tactical retail 17% Strategic benchmarks 60% Strategic benchmarks 53%#21MuniFin Jan-18 Mar-18 May-18 Jul-18 Sep-18 Copyright MuniFin 21 KUNTA 11/15/2024 KUNTA 03/07/2024 - KUNTA 11/26/2026 -KUNTA 10/14/2030 KUNTA 09/07/2027 -KUNTA 09/06/2029 KUNTA 03/02/2031 KUNTA 02/23/2033 Mid ASW spreads of selected MuniFin USD Benchmarks 3222405050 -5 -10 15 10 www Nov-18 KUNTA 09/21/2021 KUNTA 11/15/2023 Source: Bloomberg 3 May 2021 KUNTA 09/12/2022 KUNTA 03/20/2026 Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Secondary market of strategic benchmarks Mid ASW spreads of selected MuniFin EUR Benchmarks Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 -25 -20 NAGOGO -5 -10 -15 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 May-21 • • MuniFin incentivizes dealer banks to maintain good liquidity in its benchmarks in the secondary market Secondary market data is collected every quarter from the dealer bank group The data is also used to assess each dealer bank's performance 2 500 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 May-21 KUNTA 03/07/2023 2 000 Volume in respective bond's currency Millions 500 1.000 1 500 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2018 2018 2018 2018 2019 2019 2019 2019 2020 2020 2020 2020 2021 Source: MuniFin 2021. This data is based on quarterly secondary turnover data received from the dealer banks. USD ■ EUR#22MuniFin Copyright MuniFin 22 22 Sustainable bonds Green and social bonds MuniFin MuniFin Green bond Social bond NEW#23MuniFin 23 Copyright MuniFin MuniFin's finance addresses SDG-related challenges in Finland "Inclusive and competent Finland - a socially, economically and ecologically sustainable society" 3 GOOD HEALTH AND WELL-BEING 4 QUALITY Key challenges EDUCATION 6 CLEAN WATER AND SANITATION • Per capita energy consumption • GHG emissions 7 AFFORDABLE AND CLEAN ENERGY 9 AND INFRASTRUCTURE 10 INEQUALIT INEQUALITIES • 11 SUSTAINABUNCITIES SUSTAINABLE CITIES 12 15 LIFE ON LAND RESPONSIBLE CONSUMPTION AND PRODUCTION QO LIFE • 14 BELOW WATER • • Ageing water and sewage networks Eutrophication of bodies of water Biodiversity Recycling of waste Regional differences in access to services and transportation Finland's goal is to be carbon neutral by 2035 • Increasing inequalities and social exclusion • Outcomes between socio-economic groups https://julkaisut.valtioneuvosto.fi/bitstream/handle/10024/162268/VNK 2020 8 Voluntary National Review Finland.pdf?sequence=4&isAllowed=y 1 Title of the Finnish Government programme: https://valtioneuvosto.fi/en/marin/government-programme#24MuniFin Copyright MuniFin 24 MuniFin's sustainable products • MuniFin Green bond First pure Finnish Green Bond issuer - 5 Green Bonds issued since 2016 Outstanding ~2 billion € • CO2 • Green Bonds Framework Prepared in accordance with ICMA GBP Green Evaluation Team Customer margin discount Second opinion Cicero and Stockholm Environment Institute: Medium Green Annual allocation and impact reporting - MuniFin Social bond First Nordic SSA Social Bond issuer Inaugural social bond issued in 2020 Oustanding 600 million € Social Bonds Framework Prepared in accordance with ICMA SBP Social Evaluation Team Customer margin discount Second opinion ISS ESG EC • Annual allocation and impact reporting#25MuniFin Copyright MuniFin 25 Sustainable bonds Outstanding Green bonds 5 bonds ~2.0 EUR, billion Issuance year MENT GREEN USD 500m 9/2021 2016 NASDAQ WELCOMES MUNIFIN FIRST GREEN BOND ISSUER HELSINKI SUSTAINABLE BOND MARKET GREEN BOND Nasdaq Outstanding Social bonds 1 bond 600 EUR, million GREEN EUR 500m 9/2027 2017 GREEN AUD 50M 10/2027 GREEN EUR 500m 9/2029 2019 NASDAQ WELCOMES MUNIFIN'S SOCIAL BOND TO THE SUSTAINABLE DEBT MARKET MuniFin Nasdaq 2020 SOCIAL EUR 500m 9/2035 SOCIAL TAP EUR 100M 9/2035 GREEN EUR 500m 10/2030#26MuniFin Copyright MuniFin 26 Green finance in figures Outstanding amount of green finance: 1,786 EUR million Total committed green finance: € 2,206 EUR million Average remaining maturity of green projects: 24 years Annual CO2 emissions avoided/reduced: 50,260.co Number of green projects: 147 Annual energy savings (avoided/reduced): Annual production of renewable energy: 23,558 17,879, M Annual amount of treated wastewater in existing plants immediately after project completion: 19,499,714m Read more: MuniFin Sustainable Bonds Impact Report 2020 1) 23,558 MWh: Equals the annual consumption of about 1,170 electrically heated single-family houses (Source: Motiva) 2) 50,260 tCO2: Equals the average annual carbon footprint of about 4,800 Finns (Source: Sitra) Renewable energy production capacity: 35 MW Annual amount of treated wastewater with increased capacity in the future: 17,746,667 m Figures based on the outstanding amount of green finance on 31 December 2020#27MuniFin Copyright MuniFin 27 Executive summary of green finance Green finance in figures Green finance project breakdown Project category Sustainable buildings 0.3% 1.8% Outstanding amount, EUR million Annual CO2 emissions avoided/reduced, tCO2 Impact, tCO2 per EUR million 853 4,706 6 Sustainable public transportation 740 6,865 9 Water and wastewater management 156 n/a n/a Renewable energy 31 37,512 1,192 Energy efficiency Number 1,176 207 Total 1786 50,260 n/a projects: 10 8.7% 10 5 ount e number of projects 117 on Other impact indicators 47.8% %/eur Annual energy savings (avoided/reduced MWh) Annual production of renewable energy (MWh) Renewable energy production capacity (MW) 41.4% Sustainable buildings Sustainable public transportation Renewable energy Energy efficiency Total committed green finance: Development of green finance and green bonds 2500 2000 1500 1000 500 ce and green bo EUR million Average remaining maturity q green projects: 24 year Water and wastewater management (avoided/reduced): 23,558 Outstanding amount of green finance Annual CO, emissions Unwithdrawn avoided/reduced: credit commitments USD 500M (9/2021) 19/201 AUD 50M (10/2027) EUR 500M (9/2027) EUR 500M (9/2029) 0 2016 2017 2018 2019 2020 EUR 500M (10/2030) Annual amount of treated wastewater in existing plants immediately after project completion (m³) Annual amount of treated wastewater with increased capacity in the future (m³) Impact attributable to green bond investors Outstanding amount of green bonds divided by outstanding amount of green finance (in EUR) as of 31 Dec 2020. Capped at 100% Amount 500m EUR 500m EUR 500m EUR 500m USD 50m AUD Annual production of ISIN renewable energy. Basic information XS2242924491 XS2023679843 XS1692485912 Issue date te existir Maturity datenm 23,558 17,879 35 19,499,714 17,746,667 100% 14 Oct 2020or pro14 Oct 2030 leti 25,3% 10 July 2019 6 Sept 2029 MWh 3 Oct 2017 7 Sept 2027 25,3% 25,3% 4 Oct 2016 2 Sept 2021 22,5% XS1706174015 25 Oct 2017 1,7% Desawalala amara XS1498532271/US62630CAH43 Green Bond Frameworks applied to the green finance portfolio tCO2 Reporting period 1) 23,558 MWh: Equals the annual consump Report publication date Frequency of reporting Next reporting planned for Reporting approach Reporting framework 2)50,280 ICO.: Equals the average annual carbon footprint of about 4 your Finns [source: Sia) 25 Oct 2027 Annual amount of treated waetametar Green bonds frameworks as of May 2019, November 2018, August 2017 and February 2016 The reporting is based on the green finance portfolio as at 31 Dec 2020 4 March 2021 Annual March/April 2022 Portfolio-based and project-by-project reporting Nordic Public Sector Issuers: Position Paper on Green Bonds Impact Reporting (February 2020)#28MuniFin Copyright MuniFin 28 Social finance in figures Outstanding amount of social finance: 589 EUR million Number of social projects: 27 Total committed social finance: € 768 EUR million Average remaining maturity of social projects: 19 years Welfare: Number of patient visits: 665,966 Number of welfare service users reached: 1,641,290 Social housing: Number of apartments: 922 Of which housing for the most vulnerable population: 922 Number of residents: Read more: MuniFin Sustainable Bonds Impact Report 2020 1,079 Education: Number of students, pupils and children reached: 136 Average class size: 17 Figures based on the outstanding amount of social finance on 31 December 2020#29MuniFin Copyright MuniFin 29 Thank you NEW#30MuniFin Copyright Muni Fin 30 Senior Management contact information Esa Kallio President and CEO Tel +358 9 6803 6231 Joakim Holmström Executive Vice President, Capital Markets & Sustainability Tel +358 9 6803 5674 Funding and Sustainability contact information Please visit www.munifin.fi Annual and Interim reports One Pager in various languages News Links Funding Contact information [email protected] Direct e-mail address format [email protected] Antti Kontio, CFA Head of Funding and Sustainability Tel +358 9 6803 5634 Martin Svedholm Manager, Funding Tel +358 9 6803 5685 Karoliina Kajova Manager, Funding Tel +358 9 6803 6215 Miia Palviainen Analyst, Funding Tel +358 9 6803 5694 Kalle Kinnunen, CFA Manager, Sustainability Tel +358 400 489 425#31MuniFin Copyright MuniFin 31 Appendices#32MuniFin 32 Copyright MuniFin Appendix 1 The Finnish healthcare, social services and regional government reform The former Finnish government proposed changes to legislation concerning Finnish social and healthcare services as well as regional governments. Although the preparations for the implementation of this reform were discontinued in 2019, the current government has continued the preparations. At this point in time MuniFin is not in a position to evaluate the reform's potential impact on its operations, as there is no finally approved legislation available and the plans related to the reform are under political discussion. While there is no telling how the reform will materialise and what effects it will have on MuniFin or its customers, it is not expected to have any significant effects on MuniFin's operations in 2021. More information concerning the status of the reform, including the latest published draft proposals for legislation, can be found at: https://soteuudistus.fi/en/frontpage. More information: https://www.kuntarahoitus.fi/app/uploads/sites/2/2021/05/Munifin-EMTN-2021-Offering-Circular.pdf#33MuniFin Copyright MuniFin 33 Appendix 2 MuniFin's credit assessment and credit granting process Annual credit assessment Credit granting process Decision making . MuniFin conducts an annual assessment of the ability of its customers to meet their future obligations. The assessment covers both economic and qualitative factors, including indicators of solvency, debt-servicing capacity and profitability. For municipality customers, the municipal evaluation criteria of the Ministry of Finance is taken into account. As a result of the annual assessment, MuniFin will have a view of a customer's current risk position. • • MuniFin's credit granting process is carried out by the account manager, who will estimate whether a customer and a financing request will fulfill requirements of the Act on the Municipal Guarantee Board and MuniFin's credit risk strategy. As a part of the credit granting process MuniFin will conduct a credit analysis covering both financial and qualitative factors of the borrower. Factors include for example current, historical and future repayment capacity, purpose of the credit, borrower's funding structure, borrower's position within the sector, the outlook of borrower's industry and risks posed by macro-economic development. →The final risk assessment and scoring of a customer is the weighted sum of financial and qualitative factors • The results of both the annual credit assessment and the credit granting process indicate the risk profile of a customer and will influence the final credit decision.#34MuniFin Copyright MuniFin 34 Appendix 3 Municipality Finance - Legal structure Municipalities Keva (local government pensions institution) Republic of Finland 53% 31% 16% Municipality Finance plc (the "Issuer") 100% MGB is an institution under public law which was established under the MGB Act to safeguard and develop the joint funding of the Finnish municipal sector. Its members (100% of the Finnish mainland municipalities) are jointly responsible for the obligations of MGB. Membership is permanent. Senior unsecured funding guarantee Municipal Guarantee Board (Aa1/AA+) ("MGB") Financial Advisory Services Inspira Ltd According to the Articles of Association, the Issuer's shares may not be assigned to anyone other than Keva (former name "the Local Government Pensions Institution"), municipalities, joint municipal authorities, central organizations of municipalities, entities wholly owned by or under the control of municipalities or joint municipal authorities or companies owned by such entities without the consent of the Issuer's Board of Directors. Inspira offers financial advisory services for the public sector.#35MuniFin Copyright MuniFin 35 Appendix 4 Finnish economy: Ministry of Finance's key forecast figures 2020 EUR 2020 change in volume 2021* change in volume 2022* change in volume billion (%) (%) (%) GDP at market prices 237 -2.8 2.6 2.5 Imports 84 -6.6 4.1 3.8 Total supply 322 -3.8 3.0 2.8 Exports 85 -6.6 4.6 4.7 Consumption 178 -2.7 3.1 2.0 - private 120 -4.9 3.5 2.9 - public 58 2.3 2.3 0.0 Investment 56 -3.1 -0.2 3.5 - private 45 -4.6 -1.0 4.8 - public 11 3.4 3.3 -2.0 Total demand 321 -3.8 3.4 3.2 *forecast Source: Ministry of Finance, Economic Survey, Spring 2021#36MuniFin Copyright MuniFin 36 Appendix 5 MuniFin Euro-Commercial Paper (ECP) programme Investor by type 2020 Unknown 5 % . • • The size of the programme (under English law) is EUR 10 billion STEP-compliant since 2020 Outstandings have been during 2020 on average EUR 3.5 billion • Main currencies: EUR and USD • - Also available: CHF, GBP, SEK Dealers: Citibank, BAML, Barclays, BMO, Bred, UBS and Rabobank Central Bank 22 % North America 14 % Unknown 9% Aasia 15 % Investor by region 2020 South America Africa 1 % 1 % Europe 60% Asset Manager 73 %#37MuniFin Copyright MuniFin 37 Appendix 6 Keva - Local Government Pensions Institution • · Mandatory pension fund for people working in the local government sector. Responsible for funding the pensions of local government employees and for investing their pension funds (1.3 million insured persons and pension recipients). • Independent body governed by public law and operating. in accordance with the Public Sector Pensions Act and the Keva Act. • Supervised by the Ministry of Finance, the Financial Supervisory Authority and the National Audit Office of Finland. . • Fund assets totalling €58.0 billion (12/2020). Largest pension fund in Finland. Breakdown of investments Hedge Funds 6 % Real Estate 6 % Private Equity 13 % Fixed Income 35 % As of 31 December 2020 Source: Keva 2020 Equities 40%#38MuniFin 38 Copyright MuniFin Appendix 7 Green bond eligible project categories Renewable energy Wind, solar, small hydro, geothermal, bioenergy and biogas from waste Water and waste water management Sustainable buildings • • • 1. Buildings: Finnish energy classification class A or best of B. For class B there is a requirement to include additional components e.g. use of renewable energy, life- cycle analysis or certifications (LEED, BREEAM) with high ratings 2. Major renovations leading to a reduction of energy use per m² in year of at least 30% Public Energy efficiency transportation District heating/cooling, recovered energy, smart grids Waste management Recycling, re-use, incineration and rehabilitation of contaminated areas Environmental management (max 20%) 72 The Green Evaluation Team analyses each project separately and approves projects only if the longer term net environmental impact is positive.#39MuniFin Copyright MuniFin 39 Appendix 8 Green finance portfolio € Total committed amount of green finance 2,206 million € Green finance portfolio split by project category Outstanding amount of green finance 1,786 million € Number of projects in the portfolio 117 10 لام As of 31 December 2020 10 5 5 Sustainable public transportation 41.4% Water and Renewable waster water energy 1.8% management 8.7% Energy efficiency 0.3% As of 31 December 2020 based on outstanding amount of green finance Sustainable buildings 47.8%#40MuniFin Copyright MuniFin 40 Appendix 9 The Green Evaluation Team approves projects The Green Evaluation Team consists of three independent experts MuniFin's customer solutions division screens projects, which it believes to be aligned with eligible project categories in the Green Bonds Framework. Vesa Peltola Energy Adviser Association of Finnish Local and Regional Authorities MuniFin's green finance application form includes the following sections: 1. project description 2. estimated environmental benefits 3. project documents (e.g. project plan, energy certificate, environmental impact assessment, carbon footprint assessment) The Green Evaluation Team reviews application materials. Each loan and lease application will be analysed independently by the green evaluation team and will only be approved if the long-term net environmental impact is positive. MuniFin gives a margin discount of 0-10 basis points to approved green finance projects. The discount is based on the project's estimated environmental benefits, which are assessed and scored on a scale of 0 to 10 points by the Green Evaluation Team. Dark green projects are granted 7-–10 points, medium green 4-6 points, and light green 1-3 points. Jyri Seppälä Professor, Director Centre for Sustainable Consumption and Production, Finnish Environment Institute (SYKE) Päivi Sieppi Environmental Advisory Manager City of Lahti#41MuniFin Copyright MuniFin 41 Appendix 10 Social bond eligible project categories Social housing (+) Welfare Education Social housing sub-categories i. ii. Most vulnerable population Supports communal living Target populations i. Elderly, homeless, students, disabled people, people with mental health or substance abuse problems, people suffering from memory illness, youth, refugees, rehabilitees, severely marginalised people ii. People with risk of being socially excluded Sub-categories İ. ii. Healthcare facilities (public hospitals, health centres/properties, clinics, care homes) and health service hardware Sport facilities and public open spaces (parks, fields, centres, swimming halls, ice rinks) iii. Culture facilities (libraries, culture centres, museums, theatres, multipurpose venues) Target populations i. ii. General public (healthcare) Population living in areas where social investments are needed (sports and culture) Sub-categories Education facilities (daycare centres, pre-primary education, primary and secondary schools, upper secondary schools, higher education campuses and education centres) and education hardware Target populations Population living in areas where social investments are needed General public (higher education campuses) i. ii. 10 REDUCED INEQUALITIES 11 SUSTAINABLE CITIES AND COMMUNITIES 3 GOOD HEALTH AND WELL-BEING 10 INEQUALITIES REDUCED 11 SUSTAINABLE CITIES AND COMMUNITIES 4 QUALITY EDUCATION 10 REDUCED INEQUALITIES#42MuniFin 42 Appendix 11 Social finance portfolio € Total commited social finance 768 million € Social finance portfolio split by project category Social Housing 14.4% Education 0.8% Copyright MuniFin Outstanding amount of social finance 589 million € As of 31 December 2020 Number of projects in the portfolio 20 As of 31 December 2020 CO 6 Δ A 1 Welfare 84.8% As of 31 December 2020 based on outstanding amount of social finance#4343 MuniFin Copyright MuniFin Appendix 12 The Social Evaluation Team approves projects E MuniFin's customer solutions division screens projects, which it believes to be aligned with eligible project categories in the Social Bonds Framework. • For sports, culture and education projects internal evaluation model is applied for screening. The model analyses post code areas and municipalities across socioeconomic factors to identify areas where investments would have the greatest impact on the vitality of the area. After the initial screening, a project report is written based on an interview with the client. The report includes the following information: 1. project description 2. rationale of the investment 3. solved problems 4. desired social impacts 5. target population 6. SDGs addressed The Social Evaluation Team reviews the project report and makes the final decision based on the overall impact. Projects need to promote some of the wider social goals such as equality, communality, safety, welfare and regional vitality. For loans/leases, which are up for pricing will receive a 2 basis point margin discount. The Social Evaluation Team consists of two independent experts and one MuniFin representative Jenni Airaksinen University Lecturer in Local and Regional Governance Tampere University Jouni Parkkonen CEO Association for Advocating Affordable Rental Housing (KOVA) Rami Erkkilä Senior Specialist MuniFin#4444 Appendix 13 7y EUR 500 million benchmark Copyright MuniFin 62 MuniFin • MuniFin priced its third benchmark transaction of 2021 on 14 April 2021. • The bond is a 7-year EUR 500 million note due 21 April 2028. • The joint lead managers were Danske, LBBW, Morgan Stanley and Nordea. • The benchmark was priced at mid swaps -6 bps and pays an annual coupon of 0%. The spread over the DBR 0.50% due 15 February 2028 was 30.3bps. • The final order book stood at EUR 732 million (ex. JLM orders). A total of 33 investors participated in the transaction with 86% allocation to European and 14% to Asian investors. Central banks took the largest 41% allocation and banks were a close second with 38% allocation. The final 21% allocation went to asset managers. 21% 38% ■Central Banks / Official Institutions ■ Banks 11% 7% 11% 14% 15% ■ BeNeLux ■ Asia ■ Nordics ■Germany/Austria ■Central and Eastern Europe ■ France ■Rest of Europe 41% Asset managers 26% 16%#45MuniFin Copyright MuniFin 45 Appendix 14 10y EUR 1 billion benchmark • MuniFin priced its second benchmark transaction of 2021 on 23 February 2021. • . The bond is a 10-year EUR 1 bn note due 2 March 2031. • The joint lead managers were Barclays, Citi, HSBC and Swedbank. • The benchmark was priced at mid swaps -3 bps and pays an annual coupon of 0%. The spread over the DBR 0% due February 2031 was 28.7 bps. · The benchmark quickly gathered an orderbook above EUR 3.8 billion, which is one of the largest in MuniFin's history. • 106 investors participated in the transaction with 89% allocation to European investors and 52% allocation to bank treasuries, 24% to asset managers and 23% to central banks and other official institutions. 1% 23% 24% ■ Banks ■Asset managers 52% ■Central Banks / Official Institutions ■ Other 14% 25% 11% 50% ■Germany/Austria/Switzerland BeNeLux ■Rest ■Other Europe#46MuniFin Copyright MuniFin 46 Appendix 15 5y USD 1.5 billion benchmark . • MuniFin kicked off 2021 with a USD denominated benchmark transaction on 12 January 2021. The bond is a long 5-year USD 1.5 bn note due 20 March 2026. • The joint lead managers were Bank of America, • • . Goldman Sachs, JP Morgan and TD. The final order book was over USD 3.1 billion and the benchmark was MuniFin's largest USD benchmark since 2013. The benchmark was priced at MS+8bps, with central banks and official institutions taking over 40% of the final allocations. Geographically, EMEA took the bulk with 79% of the allocations, supplemented by Americas (16%) and Asia (5%). • The benchmark pays an annual coupon of 0.625%. The spread over the CT5 was 17.78 bps. 41% ■ Banks 3% 8% ■Central Banks / Official Institutions 48% ■Asset managers/Insurance/Pension funds ■ Other 16% 5% 79% ■ EMEA ■ Americas ■ Asia Pacific#4747 Copyright MuniFin • • . Appendix 16 EUR 500 million 10-year green bond • • MuniFin issued its third public green bond on 6 October 2020. A record 55% allocation was sold to ESG focused investors, highest allocation in MuniFin's green bonds. The 10-year EUR 500 million benchmark offers a 0% coupon and a spread of 30.7bps over the DBR 08/2030, equivalent to 2 bps over mid-swaps. The mandate of a new 10y 500m green bond benchmark was announced at 11.00am London time on Monday 5th of October. The following morning books were officially opened at 8.00am London time with spread guidance of mid-swaps +5bps which represented minimal new issue concession of 1bp. Momentum was strong from the outset and orders built rapidly. By 9.35am London time demand was in excess of EUR 2.7bn and spread was revised by 3bps to ms+2bps, representing a negative new issue concession of 2bps. Insurance/Pension funds Banks 28 % 9% Other 10 % Americas 8% Despite the negative new issue concession on offer, orders continued to build with final books at 3.35bn. France 9% MuniFin Green bond Central Banks / Official Institutions 33 % Asset Managers 30% Germany/Austria/ Switzerland 32 % MuniFin 62 • Green bond was jointly led by Danske Bank, NatWest Markets, Nomura and Nordea. • 106 investors participated in the transaction. Southern Europe 10 % Benelux 10% Nordics 21 %#48MuniFin Copyright MuniFin 48 Appendix 17 Inaugural EUR social bond MuniFin issued its inaugural EUR 500 million 15-year social bond on 3 September 2020. The bond is the first Nordic and Finnish social bond issued in the SSA category. MuniFin will use the proceeds of the social bond to finance social housing, welfare and education in accordance with its Social bonds framework. MuniFin aims to encourage investments that have a notably strong impact and bring about wide-ranging social benefits. • Ahead of the transaction MuniFin held a GIC as well as a series of one-on-one investor calls to update investors ahead of the inaugural transaction. • The benchmark was almost four times oversubscribed in just 2.5 hours, which is a testimony of increasing investor interest in sustainable products. Books were opened on 3 September with price guidance at MS+12bps area and as a result of strong investor demand spread was set at MS+9bps with final orders in excess of EUR 1.9 billion. • More than 91% of the bond was distributed to European investors. Almost one third of the bond was allocated to Germany, Austria and Switzerland and nearly one fifth to Nordic countries. Asset managers took the largest share by representing almost half of the investors, with significant demand from SRI investors. The note has a final maturity of 10 September 2035 and pays a fixed coupon of 0.05 % annually, which equates to 9 bps over the 15-year mid swap rate. This is equivalent to a 33.6 bps spread over the DBR 0% May 2035. The bond will be listed on the Sustainable Debt Market at Nasdaq Helsinki. The Joint Lead managers of the transaction were BNP Paribas, Credit Agricole CIB, DZ Bank and SEB. Insurance/Pension Others funds Banks 15 % 3% 8% Central Banks / Official Institutions 25% Asia Pacific 9% France 15% Other Europe 9% Asset Managers 49 % Germany/Austria/ Switzerland 30% Nordics 17 % Benelux 20 % MuniFin Social bond#49MuniFin Copyright MuniFin 49 Appendix 18 MuniFin Additional Tier 1 Capital Transaction ◉ ☐ ■ On 16th September 2015, Municipality Finance Plc ("MuniFin") announced a series of investor meetings in connection with the launch of their inaugural Additional Tier 1 Capital transaction. This transaction is the first publicly distributed AT1 instrument from a public sector entity in Europe, and achieved a new pricing milestone for this product in terms of lowest offered coupon The securities were issued to ensure that MuniFin complies with leverage ratio requirements, well ahead of anticipated entry into force in 2018. MuniFin's leverage ratio at 30 June 2015 stood at 1.9% The securities are expected to be rated BBB+ by S&P which makes the securities the highest rated AT1 in the market, due to the high quality nature of the credit Goldman Sachs International acted as joint bookrunner on this transaction together with Barclays, BNP Paribas and Nordea Markets Structure The securities are EUR denominated (RegS format) and feature a fixed coupon of 4.500% up to but excluding the First Call Date (1st April 2022). The coupon will reset every 5 years thereafter (non-step up). They also feature a 5.125% CET1 trigger (Issuer and Group) with temporary write-down loss absorption Execution Following a three-day constructive roadshow in London, Amsterdam, Zurich, and the Nordic region, MuniFin launched a € RegS PNC6.5 on Thursday 24th September 2015 ■Investor feedback throughout the roadshow was very supportive, leading syndicates to enter the market with IPTS of high 4% for a no-grow €350mm trade Following tightening guidance to 4.625% area, the Lead Managers finally printed a €350m transaction at MS+396bps on the back of a substantially oversubscribed orderbook Distribution by Geography ■ Finland 5% 5% 19% 63% Issuer: Pricing Date: Instrument: Issuer Ratings: Municipality Finance Plc (Kuntarahoitus Oyj) 24th September 2015 Perpetual Fixed Rate Resettable Additional Tier 1 Securities AaaAA+ (Moody's / S&P) Expected Issue Rating: BBB+ (S&P) Issue Size: €350m Maturity & Non Call Period: Coupon Interest Cancellation Trigger Event Write-Down and reinstatement Distribution by Type 4% 2% 43% Optional Redemption. ■ Owners 15% 36% ■Fund Managers ■ Pension & Insurance Official Institutions Nordics (ex Finland) United Kingdom ■Rest of Europe ■Middle East & Other ■ Banks Special Event Redemption ISIN: Perpetual NC6.5 The coupon is fixed until the First Reset Date and then reset every 5 years thereafter (non-step up) First Reset Date: 1 April 2022 and will be fully discretionary non- cumulative, payable annually in arrears, with a short first coupon Coupon payment is at the full discretion of the Issuer. Mandatory cancellation upon insufficient Distributable Items, Maximum Distributable Amount to be exceeded or otherwise so required by the CRD IV, including the applicable criteria for Additional Tier 1 Capital instruments. Non-cumulative Common Equity Tier 1 Ratio of the Issuer on an unconsolidated basis and/or the Group on a consolidated basis is less than 5.125% Upon a Trigger Event, the Prevailing Outstanding Amount will be written by the relevant Write-Down Amount. Following a Write-Down the Issuer may, at its discretion, reinstate some or all of the Original Principal Amount of the Securities, subject to compliance with the Relevant Rules and the Reinstatement Limit on a pro-rata basis with the reinstatement of all other Equal Trigger Instruments (if any) 1st April 2022 ("First Call Date") and any Interest Payment Date thereafter, at the Original Principal Amount, subject to the Conditions to Redemption and Purchase The issuer may redeem the Securities at the Prevailing Outstanding Amount upon the occurrence of a Capital Event (exclusion in whole or in part of Additional Tier 1 Capital) or a Tax Event (future additional amounts or loss of interest deductibility) (each a "Special Event"), subject to the Conditions to Redemption and Purchase XS1299724911 Source: Bloomberg, Company Press Releases as of 24 September 2015#50MuniFin §. Disclaimer This presentation has been made by Municipality Finance Plc ("MuniFin"). All information expressed herein are at the time of writing and may change without notice. MuniFin holds no obligation to update, modify or amend this publication. The material is informative in nature, and should not be interpreted as a recommendation to take, or not to take, any particular investment action. The information in this presentation is intended only for the named addressee. The material may not be copied, in part or in whole, without written permission from MuniFin. This presentation or copies of it must not be distributed in the United States or to recipients who are citizens of the United States against restrictions stated in the United States legislation. Laws and regulations of other countries may also restrict the distribution of this presentation. This presentation may contain forward-looking statements that reflect views with respect to certain future events. Although MuniFin believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. The past events discussed in this presentation may not be indicative of future results.