CLIMATE AND SOCIAL ENVIRONMENT, NEW CHALLENGES Working in a changing world

Global economic performance dependent on:

• Viral contagion and the public health response (vaccination and quarantine/lockdown strategy);
• Structure of economies (relative weight of manufacturing and services, such as tourism);
• Fiscal and monetary countermeasures (amount of support to business).

Paths to recovery remain highly varied:

• China boosted by its foreign trade and growing at a rate of 8.1%;
• United States and the Eurozone turning in very strong performances, despite subdued recoveries;
• Fragile rebounds in emerging countries and a trend towards fragmentation.

In late February 2022, tensions between Russia and Ukraine led to an armed conflict. Beyond its immediate financial consequences (risk aversion, falling equity markets, falling yields on the safest bonds, and rising volatility), the Russian-Ukrainian conflict has resulted in a significant rise in the prices of commodities of which the warring parties are major players.

In a context of very high uncertainty and eroding trust, one sees a depressive effect on business and an increase in inflationary pressures.

Long-forgotten inflation has returned to centre stage in 2021. Its very sharp acceleration resulted from a combination of several factors: pressures felt upstream, with sharp increases in commodity prices and bottlenecks, downstream pressures from the strong rebound in household consumption supported by substantial financial aid and high savings left over from the 2020 crisis, and baseline effects after very low inflation that same year.

OPPORTUNITIES

• Recovery financing to accompany the stimulus plans carried out by the States and supported by the European Union.
• Assisting the transformations undertaken by corporates and the changes in societal behaviour.
• Capitalising on our useful, effective risk models to offer our customers the support of a strong banking group.

RISKS

• Impact on the global economy of geopolitical tensions.
• Longer-lasting presence of inflation and at a higher level, with a short-term impact on purchasing power.
• The conflict between Russia and Ukraine will affect the global economic situation and create uncertainty in the financial markets.

Plurality of regulatory authorities and tighter prudential rules.

Stronger protection for customers and investors.

Fight against money laundering and financing of terrorism.

Greater requirements for transparency.

Recognition of climate and CSR risks in risk management.

OPPORTUNITIES

• Confirmation of the Group’s role in providing committed support to its customers;
• Continuous improvement in the Group’s processes and ethical framework;
• Management of new risks and better customer knowledge.

RISKS

• Higher capital requirements and stricter liquidity management;
• Rise in operating costs;
• Distorted competition against new, less-regulated players.

OUR ACTIONS

• Application of the Smart Compliance strategy (launched in 2019 and incorporating the regulatory and ethical dimensions) to the organisation of the Group Project;
• Generation of capital at Group level. Crédit Agricole Group phased-in solvency ratio 17.5%.