The purpose of Triodos Bank N.V. (‘the Bank’), as disclosed in the annual report on page 8, is to render 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 2018
In our opinion, Triodos Bank N.V.’s financial statements give a true and fair view of the financial position of the Bank and the Group as at 31 December 2018 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 2018 of Triodos Bank N.V., Zeist (‘the Bank’). The financial statements include the consolidated financial statements of Triodos Bank N.V. together with its subsidiaries (‘the Group’) and the company financial statements.
The financial statements comprise:
- the consolidated and company balance sheet as at 31 December 2018;
- the consolidated and company profit and loss account for the year then ended; and
- the notes, comprising the accounting policies and other explanatory information.
The financial reporting framework 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. We have further described our responsibilities under those standards in the section ‘Our responsibilities for the audit of the financial statements’ of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of Triodos Bank N.V. in accordance with the European Regulation on specific requirements regarding statutory audit of public-interest entities, the ‘Wet toezicht accountantsorganisaties’ (Wta, Audit firms supervision act), the ‘Verordening inzake de onafhankelijkheid van accountants bij assuranceopdrachten’ (ViO – Code of Ethics for Professional Accountants, a regulation with respect to independence) and other relevant independence requirements in the Netherlands. Furthermore, we have complied with the ‘Verordening gedrags- en beroepsregels accountants’ (VGBA – Code of Ethics for Professional Accountants, a regulation with respect to rules of professional conduct).
Our audit approach
Overview and context
The Group is comprised of several components and therefore we considered our group audit scope and approach as set out in the section ‘The scope of our group audit’. We paid specific attention to the areas of focus driven by the operations of the Group, as set out below.
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we considered where the Executive Board made important judgements, for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. In the note ‘The use of estimates and assumptions in the preparation of the financial statements’ the Group describes that the main areas of judgement concern the methods for determining the fair value of assets and liabilities and determining impairments and other value adjustments. As set out in the section ‘key audit matters’ of this report, we considered the loan impairments related to their main business of providing loans to customers and the fair value measurement of financial instruments as key audit matters, given the significant estimation uncertainty and the related higher inherent risks of material misstatement in these areas. In addition, we considered the potential VAT charges on intra-company transactions in Belgium to be a key audit matter, due to the uncertainty in the outcome of the discussion with the Belgian Tax authorities.
Other areas of focus, that were not considered to be key audit matters were the valuation of deferred tax assets, IT and compliance with laws and regulation (including the deficiency detected in the area of customer identification and acceptance and monitoring of customer transaction behaviour as disclosed on page 57 and 139 of the annual report). 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.
We ensured that the audit teams at both group and component level included the appropriate skills and competences needed for the audit of a bank. We therefore included specialists in the areas of IT, accounting, valuation for financial instruments and taxation in our team.
The outline of our audit approach was as follows:
- Overall materiality: €2.5 million.
- We conducted audit work on the five branches, head office and Triodos Investment Management B.V.
- We conducted site visits to all branches.
- Audit coverage: 100% of consolidated revenue, 100% of consolidated total assets and 99% of profit before tax.
Key audit matters
- Impairments of loans to customers
- Fair value of financial instruments
- Disclosure of potential VAT charges on intra-company transactions in Belgium
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’.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall materiality for the financial statements as a whole as set out in the table below. 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, both individually and in aggregate, on the financial statements as a whole and on our opinion.
Overall group materiality
€2.5 million (2017: €2.4 million).
Basis for determining materiality
We used our professional judgement to determine overall materiality. As a basis for our judgement, we used 5% of profit before tax.
Rationale for benchmark applied
We used profit before tax as the primary 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 Group.
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 €0.5 million and €2.3 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 €125 thousand (2017: €120 thousand) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons. For balance sheet only reclassifications we agreed with the Group’s Supervisory Board to report on misstatements amounting to € 5.4 million.
The scope of our group audit
Triodos Bank N.V. is the parent company of a group of entities. The financial information of this group is included in the consolidated financial statements of Triodos Bank N.V.
We tailored the scope of our audit to ensure that we performed sufficient work to be able to give an opinion on the financial statements as a whole, taking into account the management structure of the Group, the nature of operations of its components, the accounting processes and controls, and the markets in which the components of the Group operate. In establishing the overall group audit strategy and plan, we determined the type of work required to be performed at component level by the Group engagement team and by each component auditor.
The group audit focused on the significant components, which are the five branches (in the Netherlands, Belgium, the UK, Spain and Germany), 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. Additionally, we in selected two components for audit procedures to achieve appropriate coverage on financial line items in the consolidated financial statements.
In total, in performing these procedures, we achieved the following coverage on the financial line items:
Profit before tax
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 head office and the components selected for audit procedures to achieve appropriate coverage on financial line items in the consolidated financial statements, the Group engagement team performed the audit work. For Triodos Investment Management B.V. and the Dutch branch, we used component teams 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 component auditors performed the work, we determined the level of involvement we needed to have in their audit work to be able to conclude whether we had obtained sufficient appropriate audit evidence as a basis for our opinion on the consolidated financial statements as a whole.
We issued instructions to the component audit teams in our audit scope. These instructions included, amongst others, our risk analysis, materiality and scope of the work. We explained to the component audit teams the structure of the Group, the main developments that are relevant for the component auditors, the risks identified, the materiality levels to be applied and our global audit approach. We attended all local clearance meetings where we discussed the significant accounting and audit matters identified by the component auditors, the reports of the component auditors, the findings of their procedures and other matters, which could be of relevance for the consolidated financial statements. For each of these locations we reviewed selected working papers of the component auditors.
The group engagement team performed the audit work on the group consolidation, financial statement disclosures and a number of complex items 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, for the purpose and to the extent relevant for our audit, the information technology general controls (‘ITGCs’) at the Group. This includes the policies and procedures used by the Group 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. We tailored our approach towards the fact that the Group operates an in-house developed IT-system as well as off the shelf IT-systems throughout the group.
By performing the procedures above at components, combined with additional procedures at group level, we have been able to obtain sufficient and appropriate audit evidence on the Group’s financial information, as a whole, to provide a basis for our opinion on the financial statements.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements. We have communicated the key audit matters to the Supervisory Board. The key audit matters are not a comprehensive reflection of all matters identified by our audit and that we discussed. In this section, we described the key audit matters and included a summary of the audit procedures we performed on those matters.
We addressed the key audit matters in the context of our audit of the financial statements as a whole, and in forming our opinion thereon. We do not provide separate opinions on these matters or on specific elements of the financial statements. Any comments or observations we made on the results of our procedures should be read in this context.
We note that the key audit matters related to ‘Valuation of the loan portfolio’ and ‘Fair value of financial instruments’ are recurring. These related to the Group’s primary business processes and objectives, and did not change significantly compared to prior year. With respect to the potential VAT charges on intra-company transactions in Belgium, no decision has been made by the Belgian Tax authorities yet and is therefore considered as a key audit matter in line with prior year.
Key audit matter
Impairments of loans to customers
Refer to paragraphs ‘The use of estimates and assumptions in the preparation of the financial statements’ and ‘Banks and loans’ of the accounting principles and note 4 ‘Loans’.
Given the size of the loan portfolio of €7,274 million (note 4 ‘Loans’ in the financial statements) and the high level of management estimates associated with the determination of impairments, we consider this as a key audit matter in our audit.
The high level of management’s judgement associated with the impairments of loans to customers means that differences in judgements and changes in assumptions may result in higher or lower impairment charges.
The Group assesses whether there is an indication of a possible impairment of loans on an individual basis. As of 31 December 2018, the specific allowance for impairment amounts to €33.7 million (2017: €43.7 million, refer to 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 Group determines the level of impairment which includes judgements on elements such as:
- the identification of an impaired loan;
- 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 recovery strategies evolve, resulting in revised scenarios to individual impairments.
Incurred but not reported losses
Furthermore, the Group estimates an impairment for incurred but not reported losses (‘IBNR’ or ‘collective provision’). As of 31 December 2018, the IBNR provision amounts to €5.4 million (2017: €5.9 million, refer to note 4 ‘Loans’ in the financial statements). For loans that are individually not impaired, the Group 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’);
- the probability of default (‘PD’);
- the loss given default (‘LGD’) and
- the loss incubation period (‘LIP’).
Our audit work and observations
Our audit procedures included an assessment of the overall governance of the credit and impairment process of the Group and the testing of design and operating effectiveness of the key controls directly related to:
- the identification of impairment triggers;
- the parameters and data applied in the impairment models (e.g. exposures, cash flows, market values of collateral etc.); 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 applied by the Group in determining specific impairments. Based on a risk assessment we tested a sample of loans included in the specific loan loss provision to verify the judgemental elements such as:
- the reason for classification as an impaired loan;
- 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 expected timing of the future cash flows; and
- the valuation of the corresponding collateral based on appraisal reports and other external information.
Furthermore, we assessed the past due listings and loans with low credit ratings as compared to the detailed listing of the loans actually provided for in specific loan loss provision to determine whether the loans were adequately classified as performing or non-performing.
We found the assumptions applied by management in determining the specific provision to be consistent with historical practices and in line with our expectations and we did not identify any material exceptions.
Incurred but not reported losses
We examined the methodology applied, as well as the calculation used by the Group in determining the IBNR provision. We assessed the assumptions applied by management with respect to the EAD, PD, LGD and LIP parameters by, amongst other:
- reconciling the EAD to the banking system;
- re-performing the calculation of the PD times LGD and reconciling the Group’s historical loss data to the source systems; and
- performing our own sensitivity checks on both the PD times LGD and the LIP.
We found the IBNR calculation to be mathematically accurate and, based on our sensitivity analyses, to fall within acceptable ranges of reasonable outcomes.
We also assessed the completeness and accuracy of the disclosures relating to impairments of loans to customers and observed that the disclosure complies with the requirements included in Part 9 of Book 2 of the Dutch Civil Code.
Fair value of financial instruments
Refer to paragraphs ‘Financial Instruments’, ‘Participating interests’ and ‘Derivatives and hedge accounting’ of the accounting principles section, note 7 ‘Participating interests’, note 11 ‘Prepayments and accrued income’, note 15 ‘Accruals and deferred income’ and the note disclosure ‘fair values’.
As of 31 December 2018, the items carried at fair value in the financial statements concern:
- Participating interests amounting to €22.4 million (2017: €14.6 million);
- Derivatives amounting to €5.2 million (2017: €14.5 million) on the asset side and €4.8 million (2017: €13.4 million) on the liability side of the balance sheet.
Loans and interest-bearing securities are valued at amortised cost. The fair values, disclosed in ‘Fair values’ on page 99 of the financial statements, amount to €7.4 billion and €1.3 billion respectively. Cost price hedge accounting is applied on the interest rate swaps on loans and on interest-bearing securities. The fair values amount to €1.3 million (negative) and € 1.2 million (negative) respectively.
For a part of the portfolio quoted prices from liquid market sources can be obtained for the fair value valuation. The more illiquid instruments on the other hand are valued based on models and assumptions that are not market observable (like spreads and prepayment rates applied). These areas have a higher potential risk of error or bias and consequently we determined the fair value of these financial instruments to be a key audit matter.
Our audit procedures included an assessment of the overall governance of the treasury and investment process of the Group and the testing of design and 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.
For a sample of the participating interests we performed the following substantive procedures:
- testing the mathematical accuracy of the valuation performed by management;
- reconciling the applied share price per year-end to supporting documentation; and
- assessing the classification as participating interest based on the level of influence.
We found that the estimates made by management were in line with market practice.
We used our valuation specialists to assist us in performing our substantive audit procedures with respect to derivatives and the fair value disclosures of loans and interest-bearing securities.
For every type of financial instrument, we have tested the outcome of management’s valuations of the hard to value financial instruments by:
- 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 reasonableness of the unobservable inputs applied; and
- independently re-performing management’s valuation using our own valuation tools for a sample of instruments.
We found no material differences in the re-performance of the valuation of the financial instruments nor in the testing of the input data. In comparing the models with market practices and for a sample of instruments using our own valuation tool, 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 these financial instruments.
Finally, we found the Group’s disclosure, in relation to the valuation of financial instruments, meeting the disclosure requirements included in Part 9 of Book 2 of the Dutch Civil Code.
Potential VAT charges on intra-company transactions in Belgium
Refer to ‘Value added tax’ in note 19 under ‘Irrevocable facilities’.
The Group disclosed its discussion with the Belgian tax authorities on the potential value added tax (‘VAT’) charge on intra-company transactions. Following EU case-law around VAT treatment of intra-company transactions, Belgium has published a Decision that results in charges from a foreign establishment to a Belgian establishment being VAT taxable in case one of these establishments is part of a local VAT group. The Group faces potential charges / VAT assessments as a result of this decision, that is effective since 1 July 2015. Following the Decision, the Group faces double VAT taxation for externally bought supplies or services by Triodos Bank NV’s head office in The Netherlands, allocated to Triodos Bank Belgian Branch.
The Group is of the opinion that it has good arguments for its position not to be liable for these VAT charges. Management obtained an opinion from a tax expert supporting the view of management. The outcome of the discussion with the Belgian Tax authorities remains unknown.
If management would have to pay the VAT charges, the impact would be a charge to the income statement of €4 million as of 31 December 2018 (2017: €4 million). Given the high level of estimation uncertainty and the potential exposure, we considered this as a key audit matter.
We assessed the accounting requirements with respect to provisions and off-balance sheet liabilities included in Part 9 of Book 2 of the Dutch Civil Code. We obtained the opinion from management’s tax expert. We assessed the competence, objectivity, reputation and capabilities of this tax expert. We evaluated the content of the expert’s report with the help of our tax specialist.
We discussed and challenged 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 concluded that management made a reasonable evaluation of the situation, specifically with respect to the likelihood of outflow of funds. We recalculated the maximum impact of the potential charge. We found no significant differences.
We assessed whether the wording as included in the disclosure note adequately represents 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;
- Our purpose: sustainable banking;
- Triodos Bank business model: creating value;
- Executive Board report;
- UN Sustainable Development Goals;
- Corporate Governance;
- Supervisory Board report;
- Other information;
- Report by the Foundation for the Administration of Triodos Bank Shares (‘SAAT’);
- Addresses; and
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 the 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 of 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 directors’ report and the other information in accordance with Part 9 of Book 2 of the Dutch Civil Code.
Report on other legal and regulatory requirements
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 for a total period of 4 years. Our appointment has been renewed annually by shareholders, representing a total period of uninterrupted engagement appointment of 3 years.
No prohibited non-audit services
To the best of our knowledge and belief, we have not provided prohibited non-audit services as referred to in Article 5(1) of the European Regulation on specific requirements regarding statutory audit of public-interest entities.
The services, in addition to the audit, that we have provided to the Bank and its controlled entities, for the period to which our statutory audit relates, are disclosed in note 27 to the financial statements.
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 Group’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 Group 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 Group’s ability to continue as a going concern in the financial statements.
The Supervisory Board is responsible for overseeing the Group’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.
Assurance report on the sustainability information 2018
Based on our procedures performed nothing has come to our attention that causes us to believe that the sustainability information included in the annual report 2018 of Triodos Bank N.V. does not present, in all material respects, a reliable and adequate view of:
the policy and business operations with regard to corporate social responsibility; and
the thereto related events and achievements for the year ended 31 December 2018 in accordance with the Sustainability Reporting Standards of the Global Reporting Initiative (GRI) (comprehensive level) and the internally applied reporting criteria as included in the section ‘reporting criteria’.
What we have reviewed
We have reviewed the sustainability information included in the annual report for the year ended 31 December 2018, as included in the following sections in the annual report (hereafter: “the sustainability information”):
- Key figures - page 4-5
- Our purpose: Sustainable Banking - page 8
- Executive Board Report sections - page 9-13
- Our stakeholders and material topics - page 14-17
- Strategic objectives - page 18-22
- Impact and financial results - page 30-40
- Co-worker report - page 41-44
- Environmental report - page 44-46
- About this report - page 197-200
- Appendix - Triodos Bank business model: creating value - page 202-203
- Appendix - Global Alliance for Banking on Values score card - quantitative evidence of our impact - page 228-230
- Appendix - Co-worker and environmental statistics - page 231-237
This review is aimed at obtaining a limited level of assurance.
The sustainability information comprises a representation of the policy and business operations of Triodos Bank N.V., Zeist (hereafter: “Triodos”) with regard to corporate social responsibility and the thereto related business operations, events and achievements for the year ended 31 December 2018.
The basis for our conclusion
We have performed our review in accordance with Dutch law, which includes the Dutch Standard 3810N ‘Assurance-opdrachten inzake maatschappelijke verslagen’ (‘Assurance engagements on corporate social responsibility reports’) [. Our responsibilities under this standard are further described in the section ‘Our responsibilities for the review of the sustainability information’ of this assurance report.
We believe that the assurance information we have obtained is sufficient and appropriate to provide a basis for our conclusion.
Independence and quality control
We are independent of Triodos in accordance with the ‘Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten’ (ViO – Code of Ethics for Professional Accountants, a regulation with respect to independence) and other for the engagement relevant independence requirements in the Netherlands. Furthermore, we have complied with the ‘Verordening gedrags- en beroepsregels accountants’ (VGBA – ‘Code of Ethics for Professional Accountants, a regulation with respect to rules of professional conduct’).
We apply the ‘Nadere voorschriften kwaliteitssystemen’ (NVKS – ‘Regulations for quality systems’) 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.
The sustainability information needs to be read and understood in conjunction with the reporting criteria. The Executive Board of Triodos is solely responsible for selecting and applying these reporting criteria, taking into account applicable law and regulations related to reporting.
The reporting criteria used for the preparation of the sustainability information are the Sustainability Reporting Standards of the Global Reporting Initiative (GRI) and the internally applied 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.
Limitations to the scope of our review
The sustainability information includes prospective information such as expectations on ambitions, strategy, plans and estimates and risk assessments. Inherently, 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 sustainability information.
The links to external sources or websites in the sustainability information are not part of the sustainability information reviewed by us. We do not provide assurance over information outside of this the annual report.
Responsibilities for the sustainability information and the review
Responsibilities of the Executive Board
The Executive Board of Triodos is responsible for the preparation of the sustainability information in accordance with the reporting criteria as included in section ‘reporting criteria’, 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 policy are summarised in the section ‘About this report’ of the annual report. The Executive Board is responsible for determining that the applicable reporting criteria are acceptable in the circumstances.
The Executive Board is also responsible for such internal control as the Executive Board determines is necessary to enable the preparation of the sustainability information that is free from material misstatement, whether due to fraud or errors.
The Supervisory Board is responsible for overseeing the Bank’s reporting process on the sustainability information.
Our responsibilities for the review of the sustainability information
Our responsibility is to plan and perform the review engagement in a manner that allows us to obtain sufficient and appropriate assurance information to provide a basis for our conclusion.
Procedures performed to obtain a limited level of assurance are aimed to determine the plausibility of information and vary in nature and timing from, and are less in extent, than for a reasonable assurance engagement. The level of assurance obtained in review engagements is therefore substantially less than the assurance obtained in audit engagements.
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 the 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.
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 procedures included amongst others:
- Performing an analysis of the external environment and obtaining insight into relevant social themes and issues and the characteristics of the Bank.
- Evaluating the appropriateness of the reporting criteria used, their consistent application and related disclosures in the sustainability information. This includes the evaluation of the results of the stakeholders’ dialogue and the reasonableness of estimates made by the Executive Board.
- Obtaining and understanding of the reporting processes for the sustainability information, including obtaining a general understanding of internal control relevant to our review.
- Identifying areas of the sustainability information with a higher risk of misleading or unbalanced information or material misstatement, whether due to fraud or errors. Designing and performing further assurance procedures aimed at determining the plausibility of the sustainability information responsive to this risk analysis. These procedures consisted amongst others of:
- Interviewing management (and/or relevant staff) at corporate (and business/division/cluster/local) level responsible for the sustainability strategy, policy and results;
- Interviewing relevant staff responsible for providing the information for, carrying out internal control procedures on, and consolidating the data in the sustainability information.
- Reviewing, on a limited test basis, relevant internal and external documentation;
- Performing an analytical review of the data and trends.
- Reconciling the relevant financial information with the financial statements.
- Evaluating the consistency of the sustainability information with the information in the annual report, which is not included in the scope of our review.
- Evaluating the presentation, structure and content of the sustainability information;
- To consider whether the sustainability information as a whole, including the disclosures, reflects the purpose of the reporting criteria used.
We communicate with the Supervisory Board on the planned scope and timing of the engagement and on the significant findings that result from our engagement.
Amsterdam, 20 March 2019
PricewaterhouseCoopers Accountants N.V.
Original has been signed by
G.J. Heuvelink RA
Appendix to our auditor’s report on the financial statements 2018 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 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. In this respect, we also issue an additional report to the audit committee in accordance with Article 11 of the EU Regulation on specific requirements regarding statutory audit of public-interest entities. The information included in this additional report is consistent with our audit opinion in this auditor’s report.
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.