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Combined Independent Auditor’s and Assurance Report

General

Triodos Bank N.V. (‘the Bank’) renders sustainable banking services to its customers. This includes financing of companies, institutions and projects that adds cultural value and benefits people and the environment, with the support of depositors and investors who want to encourage socially responsible business and a sustainable society. This purpose makes that customers and other stakeholders are interested in more than just the financial performance of the Bank.

Our assurance procedures therefore consisted of an audit of the annual accounts (‘the financial statements’) of Triodos Bank N.V. and limited assurance procedures (review procedures) over the sustainability information in the Bank’s Annual Report.

Our scope can be summarised as follows:

Independent auditor’s report

To: the general meeting and supervisory board of Triodos Bank N.V.

Report on the financial statements 2016

Our opinion

In our opinion the accompanying financial statements give a true and fair view of the financial position of Triodos Bank N.V. as at 31 December 2016, and of its result for the year then ended in accordance with Part 9 of Book 2 of the Dutch Civil Code.

What we have audited

We have audited the accompanying financial statements 2016 of Triodos Bank N.V., Zeist (‘the Bank’). The financial statements include the consolidated financial statements of Triodos Bank N.V. and its subsidiaries (together: the group) and the company financial statements.

The financial statements comprise:

  • the consolidated and company balance sheet as at 31 December 2016;
  • the consolidated and company profit and loss account for the year then ended; and
  • the notes, comprising a summary of the accounting policies and other explanatory information.

The financial reporting framework that has been applied in the preparation of the financial statements is Part 9 of Book 2 of the Dutch Civil Code.

The basis for our opinion

We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. Our responsibilities under those standards are further described in the section ‘Our responsibilities for the audit of the financial statements’ of our report.

Independence

We are independent of Triodos Bank N.V. in accordance with the ‘Verordening inzake de onafhankelijkheid van accountants bij assuranceopdrachten’ (ViO) and other relevant independence requirements in the Netherlands. Furthermore, we have complied with the ‘Verordening gedrags- en beroepsregels accountants’ (VGBA).

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Our audit approach

Overview and context

The Bank operates in a low interest environment and being a banking institution active across Europe, is subject to regulatory developments. During 2016, these development significantly impacted the Bank’s profitability, amongst other things as a result of regulatory costs (such as contributions to the Depository Guarantee Scheme and Resolution Fund) and banking taxes. We have addressed these developments in the context of our audit as explained below.

We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements. In particular, we looked at where the Executive Board made subjective judgements, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. Complex items relevant to the audit of banks in general include loan impairments related to their main business of providing loans to customers, the fair value measurement of financial instruments, the valuation of deferred tax assets, which is dependent on future profitability, and a contingent liability relating to potential VAT charges on intra-company transactions. These items have therefore been included as key audit matters and are elaborated upon below. As in all of our audits, we also addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias by the Executive Board that may represent a risk of material misstatement due to fraud. Laws and regulations and changes therein have significant impact on the banking business and have therefore been addressed to the extent it was relevant to our audit.

The outlines of our audit approach were as follows:

Materiality

  • Overall materiality: €1.9 million, which represents 5% of profit before tax.

Audit scope

  • We conducted audit work on the five branches, head office and Triodos Investment Management B.V.
  • Site visits were conducted to all branches.
  • Audit coverage: 98% of consolidated revenue and 98% of consolidated total assets.

Key audit matters

  • Valuation of the loan portfolio
  • Fair value of financial instruments
  • Valuation of deferred tax assets
  • Disclosure of a contingent liability relating to potential VAT charges on intra-company transactions
Materiality

The scope of our audit is influenced by the application of materiality which is further explained in the section ‘Our responsibilities for the audit of the financial statements’.

We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and to evaluate the effect of identified misstatements on our opinion.

Based on our professional judgement we determined the materiality for the financial statements as a whole as follows:

€1.9 million

5% of profit before tax

We have applied this benchmark, a generally accepted auditing practice, based on our analysis of the common information needs of users of the financial statements. On this basis we believe that profit before tax is an important metric for the financial performance of the Bank.

To each component in our audit scope, we, based on our judgement, allocate materiality that is less than our overall group materiality. The range of materiality allocated across components was between €0.4 million and €1.9 million.

We also take misstatements and/or possible misstatements into account that, in our judgement, are material for qualitative reasons.

We agreed with the supervisory board that we would report to them misstatements identified during our audit above €97 thousand as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.

The scope of our audit

Triodos Bank N.V. operates five branches across Europe and is the parent company of a group of legal entities. The financial information of this group is included in the consolidated financial statements of Triodos Bank N.V.

The group audit focused on the significant components including the five branches, head office and Triodos Investment Management B.V. These components were subject to audits of their complete financial information as those components are individually financially significant to the group.

In total, in performing these procedures, we achieved the following coverage on the financial line items:

98%

98%

99%

None of the remaining components represented more than 1% of total group revenue or total group assets. For those remaining components we performed, among other things, analytical procedures to corroborate our assessment that there were no significant risks of material misstatements within those components.

For the Triodos Bank head office and the Dutch branch the group engagement team performed the audit work. For Triodos Investment Management B.V. we used a component team from the Netherlands and for the Belgian, German, Spanish and the UK branches we used component auditors who are familiar with the local laws and regulations to perform the audit work.

Where the work was performed by component auditors, we determined the level of involvement we needed to have in their audit work to be able to conclude whether sufficient appropriate audit evidence had been obtained as a basis for our opinion on the consolidated financial statements as a whole. Since this concerned a first year audit, the group engagement team decided to visit all component teams and branches at least once. Furthermore, detailed instructions were sent to component teams and several update calls were held to discuss the instructions and the progress and outcome of the work performed.

The group consolidation, financial statement disclosures and a number of complex items were audited by the group engagement team at the head office. These include derivatives, impairment of incurred but not reported losses and fair value disclosures.

Banks in general depend heavily on an effective and efficient information technology (IT) environment. We engaged our IT specialists to assist us in assessing the information technology general controls (‘ITGCs’) at the Bank for the purpose of and where relevant for the audit. This includes the policies and procedures used by the Bank to ensure IT operates as intended and provides reliable data for financial reporting purposes. Furthermore, our IT specialists supported us in our key report testing and application controls testing. Our approach was tailored towards the fact that the Bank operates an in-house developed IT system as well as external IT systems throughout the group.

We ensured that the audit team included the appropriate skills and competences which are needed for the audit of a bank. In addition to banking and IT specialists, we therefore included valuation experts, treasury specialists and tax specialists in our team.

By performing the procedures above at components, combined with additional procedures at head office level, we have obtained sufficient and appropriate audit evidence regarding the financial information of the group as a whole to provide a basis for our opinion on the consolidated financial statements.

First year audit considerations

Prior to becoming the Bank’s auditors in 2016, we developed our transition plan starting in August 2015. We carried out a comprehensive process of understanding the strategy of the Bank, its business, its environment including internal controls and IT systems, and the way this impacts the Bank’s financial reporting and internal controls framework. Additionally, we carried out a review of the predecessor auditor’s files and discussed the outcome thereof to confirm our understanding of the opening balance sheet and internal controls within the Bank. Based on these procedures, we prepared our risk assessment and audit plan which have both been discussed with the Executive Board and the Audit and Risk Committee.

We discussed and agreed our audit plan with the Audit and Risk Committee in May 2016 and we reported key observations from our half-year review.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were the most significant in the audit of the financial statements. We have communicated the key audit matters to the supervisory board, but they are not a comprehensive reflection of all matters that were identified by our audit and that we discussed. We described the key audit matters and included a summary of the audit procedures we performed on those matters.

The key audit matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon. We do not provide a separate opinion on these matters or on specific elements of the financial statements. Any comments we make on the results of our procedures should be read in this context.

Key audit matter

Valuation of the loan portfolio

See ‘The use of estimates and assumptions in the preparation of the financial statements’ on page 81 and ‘Banks and loans’ on page 83 of the accounting principles and note 4 ‘Loans’ on page 90.

Given the size of the loan portfolio of €5,765 million (note 4 ‘Loans’ in the financial statements) and the need for management to apply judgement in the determination of impairments, we consider this to be a significant element in our audit. This means that differences in judgements and changes in assumptions may result in higher or lower impairment charges.

The Bank assesses whether there is an indication of a possible impairment of loans on an individual basis. As of 31 December 2016, the specific allowance for impairment amounts to €53.7 million (note 4 ‘Loans’ in the financial statements).

In accordance with Part 9 of Book 2 of the Dutch Civil Code, impairments are based on incurred losses at balance sheet date. When a trigger is identified, the Bank determines the level of impairment which includes judgements on elements such as:

  • the estimation of expected future cash flows;
  • their timing; and
  • the market value of the underlying collateral.

Management’s judgements change over time as new information becomes available, or as recovery strategies evolve, resulting in revised scenarios to individual impairments. The Bank has controls in place by which the Bank regularly reviews the methodology and assumptions used for estimating both the amounts and timing of future cash flows, to reduce any differences between loss estimates and actual loss experiences.

Furthermore, the Bank estimates an impairment for incurred but not reported losses (IBNR). As of 31 December 2016, the IBNR amounts to €3.4 million (note 4 ‘Loans’ in the financial statements). For loans that are individually not impaired, the Bank determines, based on experience and historical loss data, whether further impairment losses are present in the portfolio. The key parameters used in this calculation are:

  • the exposure at default (‘EAD’);
  • probability of default (‘PD’);
  • the loss given default (‘LGD’); and
  • the loss identification period (‘LIP’).

How our audit addressed the matter

 

Our audit procedures included an assessment of the overall governance of the credit and impairment process of the Bank and the testing of operational effectiveness of the key controls directly related to:

  • the identification of impairment triggers;
  • the parameters and data applied in the impairment models; and
  • the review and approval by management on the outcomes of the individual impairments and the impairment models.

We determined that we could rely on these controls for the purpose of our audit.

We examined the methodology that is applied by the Bank in determining specific impairments. Based on a risk assessment we tested a sample of specific loan loss provisions to verify the judgemental elements such as:

  • classification as performing or non-performing loans based on the existence or non-existence of triggering events;
  • nature and accuracy of the expected future cash flows based on the source from which the cash flows arise;
  • the accuracy of the applied discount rate given the applicable latest interest rate; and
  • the valuation of the corresponding collateral based on appraisal reports and other external information.

We assessed the completeness of the provision through reconciliation of past due listings and loans with low credit ratings as compared to the detailed listing of the specific loan loss provision.

We examined the methodology that is applied, as well as the calculation used by the Bank in determining the IBNR. We assessed the assumptions applied by management with respect to the PD, LGD and LIP parameters by reperforming the extraction of data used and performing back-testing procedures on the parameters applied. Furthermore, we tested the outcome of the model based on historical loss information and reconciled the EAD to the banking system.

We also assessed the completeness and accuracy of the disclosures relating to impairments of loans at amortised cost to assess compliance with disclosure requirements included in Part 9 of Book 2 of the Dutch Civil Code.

In our view, the recognised impairments of management were within a reasonable range of outcomes in the context of the overall loan portfolio and the related uncertainties and sensitivities as disclosed in the financial statements.

Key audit matter

Fair value of financial instruments

See ‘Financial Instruments’ on page 83, ‘Participating interests’ on page 84 and ‘Derivatives and hedge accounting’ on page 86 of the accounting principles, note 7 ‘Participating interests’ on page 98, note 11 ‘Prepayments and accrued income’ on page 104, note 15 ‘Accruals and deferred income’ on page 107, and ‘Fair values’ on page 110.

As of 31 December 2016, the items carried at fair value in the financial statements concern:

  • Participating interests amounting to €16.4 million at 31 December 2016.
  • Derivatives amounting to €35.7 million on the asset side and €34.6 million on the liability side of the balance sheet.

Loans, government paper and interest-bearing securities are valued at amortised cost. The fair values, disclosed in ‘Fair values’ on page 110 of the financial statements, amount to €5.9 billion, €179 million and €1.8 billion respectively.

Quoted prices from liquid market sources can be obtained for a portion of the portfolio. The areas that involved significant audit effort and judgement relate to the valuation of illiquid instruments that are valued based on models and assumptions that are not market observable. These areas have a higher potential risk of being affected by error or bias and therefore need our specific focus in our audit.

How our audit addressed the matter

 

Our audit procedures included an assessment of the overall governance of the treasury and investment process of the Bank and the testing of operational effectiveness of the key controls with respect to financial instrument deal capturing and source data management. We determined that we could rely on these controls for the purpose of our audit.

We used our internal valuation specialists to assist us in performing our substantive audit procedures. For every type of financial instrument, we have tested the outcome of management’s valuations of the illiquid market financial instruments by:

  • assessing the appropriateness of the classification as either an instrument measured based on quoted prices from liquid market sources or instruments in an illiquid market;
  • evaluating the appropriateness of the valuation models used considering market practices;
  • comparing on a sample basis the observable input data against externally available market data and evaluating the adequacy of the unobservable inputs applied; and
  • independently reperforming management’s valuation using our own valuation tools for a sample of instruments.

We found no significant differences in the liquid versus illiquid market classification of the financial instruments nor in the testing of the input data. In comparing the models with market practices and reperforming the valuations for a sample ourselves, we found that the estimates made by management were within an acceptable range considered in the context of the estimation uncertainty in the fair valuation of the financial instruments.

Finally, we assessed whether the Bank’s disclosures in the consolidated financial statements in relation to the valuation of financial instruments are compliant with the disclosure requirements included in Part 9 of Book 2 of the Dutch Civil Code.

Key audit matter

Valuation of deferred tax assets

See ‘Taxation on operating result’ on page 86 of the accounting policies and note 11 ‘Prepayments and Accrued Income’ on page 104.

The deferred tax assets amount to €9.7 million, of which €7.3 million relates to a deferred tax asset of historically incurred losses of the German branch that are expected to be offset against future taxable profits and which have an unlimited duration.

We consider this deferred tax asset to be key audit matter given the fact that the valuation is dependent on management’s estimation on future profitability. The German branch has not been able to achieve a break-even point yet. In 2016, a loss was reported, resulting in a further increase of the deferred tax asset. This indicates a risk that the tax losses of the German branch may not be (fully) recoverable in the foreseeable future.

Management expects the branch to be profit making within two years. The branch is performing in line with expectations (i.e. management’s plan, budgets and forecasts).

How our audit addressed the matter

 

To test the deferred tax asset relating to the German branch we performed the following procedures:

  • Assessing the recoverability by agreeing the forecasted future taxable profits with the approved management forecast for the German branch.
  • Challenging the approved management forecast for feasibility and historical accuracy. This also includes that assumptions used within management forecasts are acceptable within the relevant tax regime, are reasonable and are consistent with those used elsewhere by the German branch.
  • Back testing prior year estimates against actual results and the analysis made by management of any differences between prior year estimates against actuals, and challenging this by obtaining corroborating evidence.
  • Considering the existence of any local expiry periods together with any applicable restrictions in recovery for each individual jurisdiction.

We considered the fact that German tax law allows indefinite recovery of net operating losses through future taxable income.

In our view the recognised deferred tax asset related to the German branch is within a reasonable range of outcomes.

Key audit matter

Disclosure of a contingent liability relating to potential VAT charges on intra-company transactions

See ‘Value added tax’ in note 20 under ‘Irrevocable facilities’ on page 112.

The Bank disclosed a contingent liability relating to possible value added tax (‘VAT’) charges on intra-company transactions. Following jurisprudence around VAT treatment in Europe on intra-company transactions, the Bank faces possible charges effective since 1 July 2015. The Bank is of the opinion that it has good arguments to not have to pay these charges. The outcome of the process is not known and management is of the opinion that disclosing this matter is the appropriate response. If management would have to pay the charges, the impact would be a charge to the income statement of €2.6 million as of 31 December 2016.

Inclusion of this position as an off-balance sheet liability as opposed to a provision on the balance sheet is dependent on the likelihood and the ability to estimate the magnitude (€2.6 million is the maximum exposure). Given the estimation uncertainty, we considered this to be a key audit matter.

How our audit addressed the matter

 
 

We assessed the requirements with respect to provisions and off-balance sheet liabilities included in Part 9 of Book 2 of the Dutch Civil Code. We obtained an opinion from management’s tax expert. We assessed the competence and capabilities of this tax expert. We evaluated the content of the expert’s report with the help of our tax specialist. We discussed management’s position both at branch and head office level. We challenged management’s point of view with respect to the likelihood of having to pay the VAT and the eligible elements.

Based on these procedures we agreed management made a reasonable evaluation of the situation.

We recalculated the maximum impact of the contingent liability. We found no significant differences.

We assessed whether the wording as included in the off-balance sheet liabilities adequately represented the current situation and found this to be reasonable.

Report on the other information included in the Annual Report

In addition to the financial statements and our auditor’s report thereon, the Annual Report contains other information that consists of:

  • Key figures;
  • About this Report;
  • Triodos Bank Group Structure 2016;
  • Our Purpose: Sustainable Banking;
  • Triodos Bank Business Model: Creating Value;
  • Executive Board Report;
  • Sustainable Development Goals;
  • Corporate Governance;
  • Supervisory Board Report;
  • Other Information; and
  • Report by the Foundation for the Administration of Triodos Bank Shares (SAAT).

Based on the procedures performed as set out below, we conclude that the other information:

  • is consistent with the financial statements and does not contain material misstatements;
  • contains all information that is required by Part 9 of Book 2 of the Dutch Civil Code.

We have read the other information. Based on our knowledge and understanding obtained in our audit of the financial statements or otherwise, we have considered whether the other information contains material misstatements.

By performing our procedures, we comply with the requirements of Part 9 Book 2 of the Dutch Civil Code and the Dutch Standard 720. The scope of such procedures was substantially less than the scope of those performed in our audit of the financial statements.

The Executive Board is responsible for the preparation of the other information, including the Executive Board Report and the other information pursuant to Part 9 Book 2 of the Dutch Civil Code.

Report on other legal and regulatory requirements

Our appointment

We were appointed as auditors of Triodos Bank N.V. at the recommendation of the supervisory board following the passing of a resolution by the shareholders at the annual meeting held on 22 May 2015. We are the auditors of the Bank as of the financial year 2016.

Responsibilities for the financial statements and the audit

Responsibilities of the Executive Board and the supervisory board for the financial statements

The Executive Board is responsible for:

  • the preparation and fair presentation of the financial statements, in accordance with Part 9 of Book 2 of the Dutch Civil Code; and for
  • such internal control as the Executive Board determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.

As part of the preparation of the financial statements, the Executive Board is responsible for assessing the Bank’s ability to continue as a going concern. Based on the financial reporting framework mentioned, the Executive Board should prepare the financial statements using the going-concern basis of accounting unless the Executive Board either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so. The Executive Board should disclose events and circumstances that may cast significant doubt on the Bank’s ability to continue as a going concern in the financial statements.

The supervisory board is responsible for overseeing the Bank’s financial reporting process.

Our responsibilities for the audit of the financial statements

Our responsibility is to plan and perform an audit engagement in a manner that allows us to obtain sufficient and appropriate audit evidence to provide a basis for our opinion. Our audit opinion aims to provide reasonable assurance about whether the financial statements are free from material misstatement. Reasonable assurance is a high but not absolute level of assurance which makes it possible that we may not detect all misstatements. Misstatements may arise due to fraud or error. They are considered to be material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

Materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identified misstatements on our opinion.

A more detailed description of our responsibilities is set out in the appendix to our report. 

Assurance report of the independent auditor

To: the general meeting and supervisory board of Triodos Bank N.V.

Report on the sustainability information 2016

Our conclusion

Based on our review procedures performed, nothing has come to our attention that causes us to believe that the sustainability information included in the Annual Report 2016 of Triodos Bank does not present, in all material respects, a reliable and adequate view of:

  • the policies with regard to sustainability and business operations; and
  • the events related thereto and achievements for the year ended 31 December 2016;

in accordance with the sustainability reporting Guidelines version G4 of the GRI and the internally applied reporting criteria.

What we have reviewed

The sustainability information contains a representation of the policy and business operations of Triodos Bank N.V. at Zeist (‘Triodos’) regarding sustainability and the events and achievements related thereto for 2016.

We have reviewed the sustainability information for the year ended 31 December 2016, as included in the following sections in the Annual Report 2016 (‘the sustainability information’) of Triodos:

  • Our Purpose: Sustainable Banking
  • Triodos Bank Business Model: Creating Value
  • Executive Board Report sections 
    • Our Stakeholders
    • Strategic Objectives
    • Results
    • Co-worker Report
    • Environmental Report
  • Appendix on pages 238-245.

page 11
page 12-13
page 14-43

The links to external sources or websites in the sustainability information are not part of the sustainability information itself, reviewed by us. Therefore we do not provide assurance over information outside of this sustainability information.

The basis for our conclusion

We conducted our review in accordance with Dutch law, including Dutch Standard 3810N ‘Assurance-opdrachten inzake maatschappelijke verslagen’ (Assurance engagements on corporate social responsibility reports). This review engagement is aimed at obtaining limited assurance. Our responsibilities under this standard are further described in the section ‘Our responsibilities for the review of the sustainability information’ of this report.

Independence and quality control

We are independent of Triodos Bank N.V. in accordance with the ‘Verordening inzake de onafhankelijkheid van accountants bij assuranceopdrachten’ (ViO, the Dutch auditor independence regulations for assurance engagements) and other relevant independence requirements in the Netherlands. Furthermore, we have complied with the ‘Verordening gedrags- en beroepsregels accountants’ (VGBA, the Dutch Code of Ethics for Professional Accountants and regulation with respect to Rules of Professional Conduct).

We apply the ‘Nadere voorschriften accountantskantoren ter zake van assuranceopdrachten (RA/AA)’ and accordingly maintain a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and other applicable legal and regulatory requirements.

We believe that the assurance evidence we have obtained is sufficient and appropriate to provide a basis for our conclusion.

Reporting criteria

Triodos developed its reporting criteria on the basis of the sustainability reporting GRI Standards: Comprehensive option, as disclosed in on page 8 of the Annual Report 2016. The information in the scope of this assurance engagement needs to be read and understood in conjunction with these reporting criteria. The Executive Board is responsible for selecting and applying these reporting criteria. The absence of a significant body of established practice on which to draw, to evaluate and measure non-financial information allows for different, but acceptable, measurement techniques and can affect comparability between entities and over time.

Inherent limitations

The sustainability information includes prospective information such as ambitions, strategy, plans, expectations and estimates and risk assessments based on assumptions. This means that the actual results are likely to differ from these expectations, due to changes in assumptions. These differences may be material. We do not provide any assurance on the assumptions and achievability of prospective information in the Annual Report.

Our review approach

Materiality

Based on our professional judgement we determined specific materiality levels for each part of the sustainability information. When evaluating our materiality levels, we take into account the relevance of information for both stakeholders and the organisation, based on the materiality analysis performed by Triodos.

In reviewing the quantitative information in the Annual Report we assessed possible deviations versus the percentage set out below.

Indicators
Materiality level
Reference to theme, aspect, performance indicator in the Annual Report

Impact

5%

pages 38-40

Environment

5%

pages 244-245

People

5%

pages 238-243

Scope of the group review

All procedure were performed by the central engagement team. The central review team assessed the local working papers of the branches. The consolidation was reviewed by the central engagement team at the head office.

Key review matter

Key review matters are those matters that, in our professional judgement, were the most significant in our review of the sustainability information. We have communicated our key review matter to the Executive Board and supervisory board.

The key review matter is not a comprehensive reflection of all matters discussed. We described the key review matter and included a summary of the review procedures we performed on this matter.

This key review matter was addressed in the context of our review of the sustainability information as a whole and in forming our conclusion thereon. We do not provide a separate conclusion on this matter or on specific elements of the sustainability information. Any comments we make on the results of our procedures should be read in this context.

Key review matter

Quality of the reporting process on the non-financial indicators

Refer to ‘Targets and benchmarks’ on page 21.

Triodos reports on non-financial figures as supportive and informative indicators on the sustainability goals. In reporting non-financial data, Triodos strives for transparency of the impact it makes through its activities. Obtaining the relevant impact information is labour intensive and involves the usage of spreadsheets. This leads to an increased risk of material misstatement.

Given the significance of the non-financial data in Triodos’ Annual Report and the nature of the process as described above, we have included this matter as a key review matter.

How our review addressed the matter


 

Our procedures included an assessment of the internal control environment around the non-financial reporting process of Triodos. We have reviewed the Triodos’ impact manual which defines criteria and details the process for gathering data.

We performed analytical procedures to identify unusual trends and testing procedures to verify the accuracy of the data. To address the nature of the information gathering process, which is manual in nature and contains the use of spreadsheets, we performed additional substantive procedures to obtain limited assurance concerning the completeness and accuracy of the sustainability information.

Our procedures did not reveal any significant differences.

Responsibilities for the sustainability report and the assurance engagement

Responsibilities of the Executive Board

The Executive Board Triodos is responsible for the preparation of the sustainability information in accordance with the GRI Standards and the internally applied reporting criteria as disclosed on page 8 of the sustainability information, including the identification of stakeholders and the definition of material matters. The choices made by the Executive Board regarding the scope of the sustainability information and the reporting policies are summarised in the section ‘About This Report’. The Executive Board is also responsible for such internal control as it determines necessary to enable the preparation of the sustainability information that is free from material misstatement, whether due to fraud or errors.

Our responsibilities for the review of the sustainability information

Our responsibility is to plan and perform the review assignment in a manner that allows us to obtain sufficient and appropriate assurance evidence for our conclusion.

A review aims to obtain a limited level of assurance. Procedures performed to obtain a limited level of assurance aim to determine the plausibility of information and are less extensive than a reasonable assurance engagement. The procedures performed consisted primarily of making inquiries of staff within the entity and applying analytical procedures on the sustainability information. The level of assurance obtained in review engagements is therefore substantially less than the assurance obtained in an audit engagement.

Misstatements can arise from fraud or errors and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this sustainability information. The materiality affects the nature, timing and extent of our review procedures and the evaluation of the effect of identified misstatements on our conclusion.

Procedures performed

We have exercised professional judgement and have maintained professional scepticism throughout the review, in accordance with the Dutch Standard 3810N, ethical requirements and independence requirements.

Our main procedures consisted of:

  • Performing an external environment analysis, and obtaining insight into relevant social themes and issues and the characteristics of the organisation.
  • Evaluating the appropriateness of the reporting policy and its consistent application, including the evaluation of the results of the stakeholders’ dialog and the reasonableness of management’s estimates.
  • Evaluating the design and implementation of the reporting systems and processes related to the sustainability information.
  • Interviewing management (or relevant co-workers) at corporate and branch level responsible for the sustainability strategy and policies.
  • Interviewing relevant staff responsible for providing sustainability information, carrying out internal control procedures on the data and consolidating the data in the sustainability information.
  • An analytical review of the data and trends submitted for consolidation at corporate level.

We have discussed our observations with management.

From the matters communicated with Triodos, we determine those matters that were the most significant in the review of the sustainability information and are therefore the key review matters. We describe these matters in our assurance report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, not mentioning it is in the public interest.

Amsterdam, 24 March 2017
PricewaterhouseCoopers Accountants N.V.

G.J. Heuvelink RA

Appendix to our auditor’s report on the financial statements 2016 of Triodos Bank N.V.

In addition to what is included in our auditor’s report we have further set out in this appendix our responsibilities for the audit of the financial statements and explained what an audit involves.

The auditor’s responsibilities for the audit of the financial statements

We have exercised professional judgement and have maintained professional scepticism throughout the audit in accordance with Dutch Standards on Auditing, ethical requirements and independence requirements. Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error. Our audit consisted, among other things, of the following:

  • Identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error, designing and performing audit procedures responsive to those risks, and obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the intentional override of internal control.
  • Obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank’s internal control.
  • Evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Executive Board.
  • Concluding on the appropriateness of the Executive Board’s use of the going-concern basis of accounting, and based on the audit evidence obtained, concluding whether a material uncertainty exists related to events and/or conditions that may cast significant doubt on the Bank’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report and are made in the context of our opinion on the financial statements as a whole. However, future events or conditions may cause the Bank to cease to continue as a going concern.
  • Evaluating the overall presentation, structure and content of the financial statements, including the disclosures, and evaluating whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Considering our ultimate responsibility for the opinion on the Bank’s consolidated financial statements we are responsible for the direction, supervision and performance of the group audit. In this context, we have determined the nature and extent of the audit procedures for components of the group to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole. Determining factors are the geographic structure of the group, the significance and/or risk profile of group entities or activities, the accounting processes and controls, and the industry in which the group operates. On this basis, we selected group entities for which an audit or review of financial information or specific balances was considered necessary.

We communicate with the supervisory board regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We provide the supervisory board with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the supervisory board, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, not communicating the matter is in the public interest.