Thales S.A. (HO) Earnings Call Transcript & Summary

Good morning. Good afternoon, everyone, and good morning to those of you connecting from across the Atlantic. Welcome to Thales' inaugural ESG Investor Day. My name is Bertrand Delcaire. I am the Head of Investor Relations. As ESG integration gains momentum in portfolio management, we have seen strong interest in attending this event, and we're grateful that you're all connected. Let me point out that today's presentation slides are now available on our website and that a replay of the event will be available in 48 hours. To give you a sense of time, here is today's agenda. We're going to do our best to stick to this schedule while making sure that there is plenty of opportunity for Q&A. And there the ESG heading, there are actually many topics and subtopics to make sure we were going to address the most important ones today. A few months ago, we carried out a detailed investor survey and we asked an independent third party to update our ESG materiality metrics on the basis of detailed discussions with key stakeholders. You'll find the results of this research in appendix. Based on this work, we have organized the event in 4 stages. After the keynote presentation by Patrice Caine, we will hold 3 panel discussions involving a great line up of senior leaders addressing, first, our climate strategy from 3 different and complementary angles. Second, the sustainability value added of our other solutions with great examples in demonstration space, defense and DIS. Third, the cultural, governance and people aspects of ESG. All these presentations will demonstrate our unique position as an enabler of sustainability for our customers and society. Two final introductory comments on this agenda. First, all these initiatives fit in the financial framework we presented before and support our medium-term financial targets. Pascal Bouchiat, our CFO, will, of course, join us for the final Q&A session. Second, since transport is now treated as a discontinued operation, we will not discuss this segment. Needless to say, it is, of course, completely aligned with everything that will be presented today. So with that, it's my pleasure and honor to introduce Thales Chairman and CEO, Patrice Caine.

Thank you, Bertrand. Hello, everyone, and thank you for joining us today. I'm very pleased to kick of this first ESG Investor Day. We thought this was the right time to talk to you about Thales ESG commitments for several reasons. Number one, the general context. The general context is clearly changing. All around the world, we are witnessing a growing public interest in environmental, social and governance issues. There is a strong expectation for both the public and private sector to act. This external dynamic also reflects the internal dynamic we see within our group. Our employees today are extremely sensitive to these issues, which are clearly anchored in our group purpose. So for Thales, building a future we can all trust means working towards the world that is more sustainable and more responsible. And I not only refer to the expectations of our current employees but even more so to our future recruits. Younger generations are especially mindful of the ESG performance of the companies they work for. So I don't need to remind you how crucially important it is for a high-tech company like Thales to attract the best talent. So today, we want to share a global view of our ESG strategy and the 3 pillars that support it, which are making the world safer, greener and more inclusive. So we have taken some new decisions to step up our ESG commitments, and that is where I will start. So at Thales, we are generally not the most vocal or outspoken company about ESG. But in this area of climate change, compliance, diversity and inclusion and health and safety, we have been among the best industry performers for a very long time. And now we intend to take our performance to the next level. So let's start with the fight against global warming. In 2019, we set ambitious targets for reducing our direct emissions, and today, we want to go even further. Compared with our 2018 baseline, we are now aiming for 35%, 3-5, 35% reduction in emissions by 2023 versus our previous target of 20%. By 2030, we intend to raise that target to 50% versus previous target of 40%. So these targets are consistent with the objective of limiting global warning to 1.5 degrees Celsius. And in 2022, we will begin the SBTI Certification process to really substantiate our progress. Now in addition to these 2 important milestones, and this is new, we also intend to get to net zero by 2040. Second is diversity. Our current objective is to have at least 3 women on at least 75% of our management committees by 2023. And in parallel, we also plan to have 20% of women sitting at the highest levels of responsibility within the group. Third is about ethics. You may also know that in 2021, this year, we became one of the first companies in our sector to achieve ISO 37001 certification for our anti-bribery management. We will continue to apply our 0 tolerance policy on corruption and influenced peddling, including mandatory employees training every 2 years. Last but not least, let's look at health and safety. We have strict measures in place to reduce workplace accidents by a minimum of 30% and even more, if possible, of course, between now and 2023, again, compared with our 2018 baseline. In all these areas, global warming, compliance, diversity, health and safety, Thales is taking the necessary steps to remain a top industry performer. We make these issues -- we take these issues very seriously. This is probably best illustrated by our decision to include these ESG objectives in our variable compensation structure for all eligible employees which represents 70% of our workforce. Now the main point I want to insist on today is that our ESG commitments go well beyond the initiatives I've just mentioned. By the very nature of our business, Thales is working every day to build a world that is safer, more environmentally responsible and more inclusive. And let me go into a bit more details about these 3 pillars of our strategy. So first, what do we mean by building a safer world? Well, I think some people still struggle to understand the role the defense industry really plays. The ability to live in peace is a basic requirement for sustainable development of society. And at Thales, yes, we are proud to our fellow citizens safe around the world, protecting democracies, safeguarding individual and collective liberties. Well, Europe is progressing well on this peak, as illustrated by the European Commission decision to build a European defense capability by investing large sums of money, close to EUR 8 billion into the European defense stand. It's also worth noting that defense is probably the more transparent and tightly regulated industry in the world. So there is no doubt in my mind that security has its place at the ESG table. And I firmly believe it will soon be given the credit it deserves in Europe as it is already the case in the U.S. One last point on that topic. When I talk about security, I mean both physical and digital security. With the acquisition of Gemalto, Thales is now a Tier 1 player in digital security, and digital security is a prerequisite for new technologies to reach the greatest possible number of people. With the digitalization of society and exponential growth in the number of connected devices, the risks and dangers are increasing every day. Cybersecurity, which already generates about EUR 1 billion in sales for Thales is definitely one of the key growth drivers. Clearly, helping make the world safer is an important part of our mission at Thales. And our technologies can also play a valuable role in the transition to a greener more environmentally responsible world, and this is my second point. You cannot fight climate disruption without first observing and understanding climate phenomena. As a leader in sensors and satellites, Thales is directly contributing to this effort. We are, for example, a key player on Europe's Copernicus Earth Observation program. We are also part of the shift towards more frugal and more sustainable technologies. Eco design is really core to all our developments in order to deliver products that are small, lightweight and as energy efficient as possible. But we have the same approach to digital technologies. We are developing through algorithms and moving towards smart data rather than big data, which reduces demand for computing power and therefore, limits energy consumption. So beyond this move towards a more frugal and sustainable use of technologies, we also use these technologies to help our customers reduce their own emissions. One of the most promising examples that you will see in the first roundtable is about optimizing aircraft flight path. The advantages of twofold. First, it can be applied now, really now on the current fleet, no need to wait for a new engine or a new aircraft. And second, the potential reduction of CO2 emission is really substantial, up to 10%. So you see our systems have a useful part to play in protecting the planet. And they also play a role in building a world that is more inclusive and more equitable and this is my third point. Using technology to grant universal access to fundamental rights is an integral part of our mission at Thales. Our biometric solutions help hundreds of millions of people gain access to a legal identity. And only by having a legal identity can a person, exercise, his or her civic and social rights. Another key contribution to a more inclusive world is how our telecom satellite business is helping bridge the digital divide. It provides web access to communities who currently have none. And let's remember that Internet is not just about entertainment. It provides, first and foremost, access to knowledge. And in that respect, our work is most definitely contributing towards inclusion. So in a nutshell, this is how we see our role in addressing the major societal issues the world is facing today. And this directly stems from our purpose. Building a future we can all trust means working towards a world that is safer, more respectful of the planet and more inclusive. To accomplish our mission, we draw on science. We draw on technologies like AI today and quantum technology is tomorrow. We do tackle these issues in both the physical world and the virtual world. We are making this contribution with modesty, yet with the intimate conviction that this is how Thales will deliver even more sustainable growth over the long term. Thank you for your attention. And now I will hand over back to Bertrand.

Yes. Thank you, Patrice. Let's now move on with our first panel, tackling one of the major societal issues you mentioned, climate change. On this panel today, we have 3 senior leaders, Jean-Loïc Galle, who is our Senior EVP, Chief Operating Officer and Chief Performance Officer, who will discuss the overall context of action and annuities. Yannick Assouad, who is EVP, Avionics, will present what she and her teams are concretely implementing together with the teams in charge of their traffic control solutions. And finally, Marko Erman who is our Chief Scientific Officer, will share some longer-term perspectives on the opportunities to make digital technologies more energy efficient. Jean-Loic, the floor is yours.

Thank you, Bertrand. Let me remind you that Thales has been committed to strong and ambitious environmental targets since 15 years. That also decided to accelerate in 2019 its strategy for a low carbon future. It has been important for us to categorize our different kinds of emissions. First, on the left, CO2 operations emissions related to all Thales operations. Both types of emissions are fully in our hands and cover offices, factories, industrial processes, and the emissions related to business travel of our employees. It is important to note that Thales operations are not carbon intensive as our activities are mostly high tech, engineering and also assembly of equipment. So as you can see on the left-hand side chart, we are today a low carbon emitter if compared to large European aerospace and defense peers. Secondly, in the middle, let's talk about other CO2 emissions, comprising both emission of our supply chain and use of our products and system by our customers up to their end of life. If we just consider the emissions related to our products, they represented in 2020 roughly 80% of our total carbon footprint. But what is worth to note is that are, in fact, extremely low, less than 1% of the commercial aircraft industry emissions. Finally, third category on the right. Thales has also a strong contribution to what some people start to call the Scope 4, namely the very important avoided emissions which are emissions that benefits to other players in the value chain directly linked to the use of Thales product. Avoided emissions take a significant part in the fight against climate change. At Thales level, they are really important, as you can see on the right-hand side diagram. In fact, 10x larger than our emission. And this time, with a positive contribution. So if we consider the sum of those 3 categories of this page, it results in a positive net carbon balance. 2 years after signing our strategy for a low-carbon future in line with the 2 degrees Celsius trajectory of the Paris Agreement, it's time again for Thales to accelerate its commitment to fight against climate change. Our new ambition is structured around 3 streams that will be, in fact, the 3 topics of its first panel. First, our own emissions will have objective to target net zero in 2040, in line with the new 1.5-degree sensors trajectory following IPCC recommendations. Second, a strong push towards our supply chain based on collaborative work with our suppliers in order that they accompany us in our journey. And finally, an acceleration on innovation with a clear access on eco design and CO2 avoidance to support our customers and society. Worth to be note, this 3-fold action plan targets are committed to SBTI guidelines and will be submitted by us for certification to ensure accountability and complete alignment with climate trajectories. Our past performance. Let's start by talking of what we have already achieved in the past concerning our operational emissions. If we examine our performance since the beginning of our journey in 2010, you can see that looking at the carbon intensity KPI, we have reduced this KPI by a factor of almost 2%, minus 14%, to be precise. Now let's look at the figures with this time a start-up point in 2018 baseline year of our quantitative objective. I remind you that we committed at that time to reduce by minus 20% in 2023 and minus 40% in 2030, fully in line with the 2 degrees Celsius trajectory. The reality has been that in absolute value, carbon emissions have been reduced by 120 kilotons of CO2 between '18 and '20, which corresponds to a 35% reduction, much higher than the 20% committed for 2023. But of course, the COVID-19 crisis had an impact on the 2020 operations emission, mainly linked to business travel reduction. It is the reason why we have corrected this on the graph to figure out a more realistic and fair level. Nonetheless, even when corrected, the 2020 level still already exceeds the target of minus 20%. This decrease in emissions is the result of a robust action plan for operations and is based on 2 key reduction levers. On the one hand, optimization of our energy efficiency with more than 300 actions conducted throughout the group worldwide. You have some example of this on this slide. On the second hand, in addition to the reduction of energy consumption, the group has also taken action to increase the share of green electricity supply so that we have reached 27% green in 2020, mainly through the U.K., Germany and France. We, therefore, confirm the achievement in 2020 of our 2023 target for our own operational emission. So it's time for new targets. In light of this good performance over the last 2 years, Thales decided to make a step further to fight the climate change, always in reference to 2018 by committing to reduce its operational emission by in 2023 and 50% by 2030 in absolute value and also to target a net zero carbon footprint in 2040. In order to succeed, the group has set up a strong action plan based on 4 main axis: first, by further reducing the energy intensity of its operation. Second, move extensively to green energy supply with a country-by-country plan starting, obviously, with most emissive countries of Thales. Third, systematically get rid of the latest high emitting coolant gas used in clean rooms. And fourth, also take advantage of new ways of working post COVID through the reduction of internal business travels, thanks to new collaborative and engineering tools that we have set up last year. And also the decision to switch all new company vehicles to electric or hybrid as of 2022. Let's now turn to other emissions. And let's focus in this category and the emissions related to our supply chain. By the way, it's important to recall that Thales was one of the first service and defense companies to commit on targets in 2019 for those kinds of emissions. When we deal with the emissions of our supply chain, it should be understood, But it is a big challenge considering the complexity and the disparity in terms of maturity of [indiscernible]. Nonetheless, I want to share with you the comprehensive action plan that we launched in this field 2 years ago. We started by focusing on the top 150 most emissive suppliers, which represent roughly 40% of the procurement carbon footprint of our supply chain. Collaboration with those suppliers started to understand emissions related to the goods they supply to Thales. We ask to all of them to display to us their internal action plan with a goal to review it, to challenge it, and finally, to join and agree on a plan which is acceptable by us. Today, we have reviewed 60% of their action plans, and we target to have finalized 100% of the agreements by 2023. Obviously, in parallel, we will engage interactions with the rest of our supply chain next year. In addition, we launched another action towards the supply chain which is to discuss eco design with our main suppliers and also include eco design criteria to select all purchases of subsystem to be incorporated in Thales product. As a conclusion, through [indiscernible] stream, we face a complex panorama, mixing well climate advanced and educated companies, but as well very small- and medium-sized company, less mature, but Thales will support Invest journey. What is sure is that we have also vigorously engaged in this field. We, therefore, also aim to accelerate with our suppliers to compare to our 2019 commitment and align them with Thales new operations emission goal of minus 50% in 2030. Let's now share with you the third topic. Our innovation and eco design are integral part of our environmental journey. I will first share with you the way we have implemented everywhere eco design in Thales. Then Yannick will present to you some aerospace experience inventing a sustainable future. And Marko will finally explain how to make digital technologies environmentally friendly. Reducing emissions related to the use of our product by our customer is the target. Eco Design is a method and the solution. Eco-design is, of course, about reducing environmental impacts, but it is also essential to share the idea that a green solution shall keep on creating more value for our customers. Since 2019, we are addressing the subject, and we have already reached some results end of 2020 with 44% new products fully Eco-design. The objective being to have all our new products going through this process in 2023. In fact, we based our approach on 2 levers. On one hand, an extensive training of all people involved in product policy. Thus, 50% of 1,500 people have been trained so far, and we target 100% of this population end of 2022. On the other hand, we have developed in-house, and we are already using unique and powerful tools to support the choices of engineers to deliver the least emissive solution. You have a description on this chart of fleet that we have developed for this journey. As a conclusion, we developed eco-design skills inside the company, supported by specific in-house tools to develop greener and better products for our customers. Let me now pass the floor to Yannick who will talk of our low carbon initiatives for civil aviation.

Thank you, Jean-Loïc. Good morning and good afternoon to everyone. Beyond mid-2020, upon my arrival at Thales, we into the COVID-19 crisis, which you know the impact on the sector, I encourage my team to project itself beyond this crisis to define a new vision on what the aviation business should be post-COVID pandemic. We want to invent a sustainable aerospace future together. We could spend long minutes exploring the implication of this vision, but in a nutshell, it underlines the challenges that we will have to tackle in the coming years if we want to be a sustainable player and a strong contributor to transforming our air transport ecosystem into a carbon-free sector. The aviation industry contributed 2.8% of total global CO2 emission in 2019. Prior to the COVID panic, this industry was the sole one to have taken the decision to act on a global scale from the onset with an ambitious target at the International Civil Aviation Organization level to decrease by a factor of 2 in absolute term by 2050 versus 2005 despite the growth that was then and still is expected over these 45 years. Now ICAO is on the path to take a decision to reach net zero emissions by 2050. As such, the most important challenge we need to address in the coming decade is how to fly better more efficiently and more eco responsibly. I am convinced that this industry will meet and even exceed this target. The same way this industry met the security challenge post 9/11. This will not be achieved in only 1 decade. We will need to integrate new disruptive technology and progressive step over the span probably 30 years. We, therefore, need to reason with different time horizons for each challenge. What is Thales contribution in all of this? We contribute to 2 of the level, 2 of the ICAO level. First, we can significantly help the aviation industry as a whole to avoid emission growth already by the end of this decade through the combination and leveraging of Thales unit capability in Avionics, air traffic management, space-based navigation system and equipment and cybersecurity. Second, we are continuously reducing the group overall scope 3 induce emission footprint to new product and technology solutions. Let me start by our initiative related to induce emission. This slide presents 2 examples. The first one is the redesign of the flight control system for the A320neo rudder. The redesign is based on a new flight control architecture that require fewer but more powerful and efficient computers instead has been in 30% weight and power consumption gain. The contract was awarded to Thales by Airbus in 2018 and is currently undergoing airworthiness certification. This sort of innovation further increases the value of current generation of aircraft, boosting the business case for fleet renewal. A simple figure if all the world aircraft were to be replaced tomorrow, we will gain immediately 20% in global air transport emission. The other product on the right-hand side that I want to describe is our new in-flight entertainment system, we have recently achieved a 20% gain in weight and power consumption over our current even project flying today. We anticipate to gain a further 30%, gaining 50% versus the system that are flying today with our future IFE system. In between those 2 products that represent 8% of Thales Group total induced emission gain, which is part of our Scope 3 in the coming years. The airline industry currently process 3 level to meet part of this emission reduction target by the end of this decade already. In addition to global aircraft fleet replacement that I touched on talking about the A320 rudder redesign, and sustainable aviation fuel, the third major lever on the other hand is where all the capability of Thales can significantly contribute. It is the optimization of flight trajectory and airspace operation, which we can term as green operation optimization. Indeed, we believe that up to 100 million tons of CO2 of fuel burning related emission, roughly 10% of the total air transport emission could be saved by the end of the decade should green operation be implemented and operational. This secure does not include the opportunity related to non-CO2 emission. I'm referring here to the condensation trial that formed behind an airplane. We could bring an additional 100 million tons of savings. Greens operation or in their infancy, and we are currently validated their full potential in several proof-of-concept studies, which we are doing alongside several airlines NSP, NGO and academic partners. This proof-of-concept are testing and validating the real potential of those main levers that we need to develop a first level of green operation optimization by 2030 already. The first one is the integration of carbon and non-carbon emission detection [indiscernible] both on board the airplane and on ground. The second lever, the most important one is the ability to interact and collaborate more easily and automatically between pilots and air controller. The principle of air traffic management is still today, as we speak, based on pre-authorized route that follow the location of ground electromagnetic beacon that dates back the middle of the 20th century. This route are far from being a straight line between any airport, not talking about the ascent and decent procedures that look more like stairs than continuous increase or decrease of altitudes and therefore, take much longer than required. The interaction between the air and the ground goes to the voices of the pilot and the controller. Of course, this voice connection has a limited bandwidth and does not allow much optimization of fly path. A digital air-to-ground connection will allow realtime data to be baken into account by an airplane. A good example is weather data that could allow the airplane to benefit from favorable wind condition at a given altitude or to avoid condition that favors the inception of condensation trail, this will also allow to operate more automatically slowing the [indiscernible] of an airplane depending on the rest of the traffic around it. Major enabler of the air-to-ground connection is, of course, cybersecurity. It will only develop if we can demonstrate to the certification authority that this connection of bulletproof from a cybersecurity standpoint. And here, Thales really possesses all the key building block and capability. As a quick reminder, we are #3 in avionic systems and equipment; #2 in the air traffic management system worldwide and #1 if we exclude the U.S. #1 in Europe for space-based navigation and certify communication for the elution sector, thanks to Thales Alenia Space. And additionally, our DIS business, former Gemalto, give us access to a large portfolio of technical solutions both in cybersecurity and identification. Green operation optimization, however, will not be done overnight. The aircraft certification authorities and navigation body will play a key role on the speed of its deployment over the course of this decade. I'm not going to talk about 2 development projects that are well underway at Thales that will serve this purpose. So to go a step further in the green operation optimization domain, we had first to rethink the brain of the airplane, it's flight management system or FMS. Until now, FMS were conceived as complex, self-contained computer system and still onboard all commercial airplane, integrating all the route I was referring to earlier. By opening up this navigation system to the latest metro data or to the latest airline flight operation data that are available, and [indiscernible] control adapt and immediately refine an airplane route, optimizing it in a way that it would consume up -- less to 10% less fuel. This new flight management system can become even more efficient in the coming year. So for they can already integrate the condition of contraformation in their algorithm. Contrail the peer as airplane flies to coal and human air contributing to the global warming. There -- this could be avoided by changing the airplane course or altitude in actually real time. This is what Thales is proposing with its new generation of FMS called Pure flight, which will be available and certified by 2024. Likewise, our ATM system solution, called Top Sky, ATC1 will include tools that enable air traffic controller on ground to facilitate green operation with enhanced coordination between the pilot and the controller. Of course, this new solution will allow controller to implement die recruiting rather than through a pre-authorized route with support of tools that ultimately update the ATC system, avoidance of [indiscernible] entity via that contribute to contra formation and continuous decent operation, optimizing lending sequence between flight. There are several other technology building block where the group can play a key role in the coming year that will contribute to green operation. It's secure cloud and cybersecurity solutions are key to secure air-to-ground data exchange network. It's big data and AI analytics capability can offer predictive air traffic modeling on a global basis. So we will offer a solution and service for air traffic modeling. This is the reason why we at Thales believe that green operation optimization can easily become a reality, not in 2035 or 2030, but by this decade and supporting the global industry ambitious objective. Thank you. And I hand the mic to Marko Erman, our Chief Scientist Officer.

Thank you so much, Yannick. I will address now how innovation help us making digital technologies environmental friendly while at the same time improving the system performance. For instance, consider data and cloud. The energy consumption is mainly due to data processing, storage and data exchange, hence communication. The more data we use, the higher the electrical consumption. Of course, cloud and data are very useful, but we can considerably decrease the carbon footprint by adopting a distributed structure by installing smaller clouds called Cloud Edge close to the user, thus reducing the amount of data that has to travel to the cloud while ensuring a better quality of service and security. Some elements of the network such as platforms and sensor will have local data processing in a so-called fire edge equipment, which will preprocess the row data and has delivered data of higher quality and smaller quality is what we call smart data. The overall architecture delivers a better value for our customers while at this time, reduces strongly the overall energy consumption. The artificial intelligence is another example of energy consuming technology. This is particularly the case for the AI based on big data and learning algos like deep learning is the most famous one. This AI being a black box has other advantages, disadvantages. The results are not explainable thus are not trustable, which may be a problem for critical systems. Now there are other types of AR based on knowledge, such as laws of physics, regulation, operating procedures, the domain knowledge and so on. When applicable, this approach bring advantages, including very low power consumption and increased trustworthiness. The AI used by cybernetics, one of our bolt-on acquisition perfectly illustrate these advantages. For training purposes, they use 2 interconnected flight simulator, one operated by human pilot and the second by the AI, which actually contained the knowledge of an experienced pilot. Not only did the AI outperform the human, the algorithm runs on a modest raspberry pie processor, which requires a power of only a few watts. And this is orders of magnitude lower than other alternative techniques. Obviously, there are circumstances in which the use of database AI is necessary. This is why we take a hybrid data and knowledge-based approach, called True AI, true for transparent, understandable ethical and environment friendly, an approach that is also at the heart of our ethical charter. Now let me say a word on another breakthrough innovation, quantum technologies. They will revolutionize computers, communications and sensors. I will illustrate the later with the example of Quantum antennas. Antennas detects radio frequency signals. They are widely used in both defense and civilian application. Their size depends on the frequency. The lower the frequency, the larger the antenna. And this site can exceed several tens of meters. In our system, we often need to detect a range of frequencies from low to high, so we need to have many antennas of different sizes. And Quantum technology brings a paradigm shift. The antenna size isn't any more linked to the frequency. 1 tiny antenna can detect all frequency simultaneously. And the advantage is obvious. We can considerably reduce the size of our system. From an environmental point of view, we will use much less raw materials to build our antennas, but also in operation, they will consume mattress energy than their classical equipment. So this is another example where less is better for the environment. And thanks to innovation, it is also better for our customers. With this, I give the floor back to you, Jean-Loïc, for your final words.

Thank you. Thank you, Marko. As a conclusion, 3 key takeaways. We are targeting net zero by 2040, thanks to a robust plan that we will submit to SBTI certification. We increased momentum on eco-design and innovation on our product with specific focuses on the decarbonization of aviation, I refer you to the presentation of Yannick and low-carbon digital technologies, I refer here to the presentation of Marko. And third, we now ask the same effort, the same momentum from our supply chain. Obviously, this low-carbon strategy is fully coherent with Thales purpose and provides us growth opportunities thanks to product differentiator. Back to you, Bertrand.

Yes. Thank you very much to all of you for these fascinating presentations. We have about 10, 15 minutes for Q&A session, our first Q&A session. focus on this topic, the low-carbon strategy.

[Operator Instructions] So let's start with questions for the 3 panelists today, Marko, Jean-Loïc and Yannick. Do we have the first question? Yes. The first question is coming from Sash Tusa from Agency Partners Sash. You want to turn on your video, if you can, so we can interact better?

I've got a question for Yannick. And it's specifically about rudder for the A320, but more broadly in terms of the innovation that you are trying to offer your customers. Every time that we've seen systems companies offer the OEMs great functionality or better functionality as each generator of equipment comes through, certainly over the last 30 years, I've been following the industry, the procurer has looked at the item, weighed it and price it by the kilogram. So that if you produce something that's lighter, you gain less. And I would assume that [indiscernible] 30% less for your erode than you rudder getting for the previous because that cures work. Can you tell us that you're being paid the same for that as you were for the previous rudder system?

It's a tricky question, but I will answer it. You're absolutely right. There was that firm rule that a price per kilo of electronics in the aerospace industry. I must say that it's changing. And the way changing is really competing on avionics or system company against the other, first, it's slowly changing. And second, you've heard I'm sure the value base proposal that principle that is more and more the case in the industry and in the aerospace industry. And we are pushing that kind of idea, and we are not the only one, by the way, towards the OEM to value the new concept, the new architecture concept and not be quote in that kind of some room that used to exist, you're absolutely right. And to answer very transparently, no, we are not to pay the same price, but certainly not -- the difference is certainly not pro rate the wait game because of that value proposal that we are making. By the way, we are more impacted by the rate increase that more and more in -- the buyer has increased price decrease rather than the kilo ratio.

Excellent. Yes. Thank you, Yannick. Let's see if we have other questions. Yes. Let me remind you about the procedure. Let me remind you about the procedure to ask a question. [Operator Instructions] You also have the possibility to ask questions through the chat system. So please go ahead. Let's give 1 or 2 minutes for additional questions. I think we have one question from the chat side. Let me read it. "You are setting a 2014 net-zero target, but some peers declared that they would be faster to achieve this objective. Could you achieve this sooner? And if not, why not?" I think this is a question for you, Jean-Loïc.

Thank you. Thank you for your question. In fact -- so today, as you understood, we have already upgraded our objectives and our targets. Our strategy is to have a stepwise approach, and we are targeting first 2023 with the new objective of 35%. Obviously, we will look at this year-after-year, looking at our actual real performance. And if we think that we can upgrade our target and objective, we will do so as we did in '19 and as we are doing this year in 2021.

Excellent. Thank you, Jean-Loïc. Do we have other questions? With no other questions, I think it's fine. That means we are a little ahead on the schedule. So I propose we move to the second panel. Before -- so to move to the second panel, the -- sorry, let me just take one step.

So moving to the second panel, looking at the rest of our portfolio, space, defense and DIS. Before I introduce our 3 speakers for the second panel, let's see a short video on Thales Alenia Space's involvement in Copernicus. Can we launch the video on Copernicus, please? [Presentation]

Yes. I'm back. On the second panel today, we have 3 senior leaders from our management. Hervé Derrey, our EVP, Space, will show how sustainability is at the heart of Space Systems; Alex Cresswell, who is Chairman and CEO of Thales U.K. and has a long experience in several of our different businesses, and he will address the ESG contribution of Thales Defense Solutions, and now we act responsibly; and finally, Philippe Vallée, our EVP, Digital Identity and Security, who will showcase the contribution of many of these products and solutions to a more sustainable digital world. Let me now hand over to Hervé Derrey. Hervé, the floor is yours.

Good afternoon. In space, governments, institutions and companies rely on us to design, deliver and operate satellite-based systems that position and connect anyone or anything everywhere but also to observe our planet, protect and defend our populations and explore solar systems. Thales Alenia Space believes in space as humankind's new horizon, which will enable to build a better, more sustainable life on earth. Since 2017, Space for Life summarizes our vision, which covers all the 5 markets in which we operate in space. In the current context and pandemic situation, this vision is more than ever appropriate, in particular, considering the growing focus from institutions on green deals, notably in Europe. And today, I'm going to zoom on the observation, navigation and telecom markets that represent 75% of our portfolio and that are strongly contributing to sustainability. So let's start with observation. In earth observation, 75% out of the 54 essential climate variables that are used by the [ Inter-govermental ] Panel on Climate Change are measured from space. Satellite data are today a pivotal source of information, enabling, for example, decision makers to develop environmental policies or to take critical decisions in the event of natural disasters. Since the beginning of the Copernicus program, Thales Alenia Space has been working hand in hand with the European Space Agency and is on board 11 out of the 12 missions. And these missions are very useful, among others, to measure atmospheric carbon dioxide emissions or to detect changes in the [ 8 ] of ice and glaciers around the world. In the navigation field, many sectors use space systems to become more sustainable. Today, for instance, over 90% of all tractors in the European Union benefit from the [ agno ] services, which enhance satellite positioning systems and allow farmers to save fuel by making sure they don't pass twice over the same parcels and also reduce by 20% the use of pesticides and fertilizers. So we, Thales Alenia Space, are on the front seat as major partner on Galileo, and this applies both for ground and space segment and on the [ agnos ]program that we currently deliver. In the telecom side, the latest estimates from the International Telecommunication Union, the ITU, showed that the majority of the world population, we are talking about more than 5 billion people, live more than 10 kilometers away from any fiber optic cable infrastructure. And the COVID-19 pandemic dramatically increased the importance of Internet communication infrastructure, as we all know. So in that context, low earth orbit satellite constellations but also geo [indiscernible] satellites complement terrestrial infrastructure, the provision of connectivity to unserved or poorly served regions, thanks to quick and [ swift ] deployment in remote areas. A good example is Satria. Dedicated to reduce the digital divide in Indonesia, our Satria satellite has the ambition to connect 90,000 schools and more than 40,000 hospitals and public buildings not linked by existing satellite or terrestrial infrastructure. So let's now -- let's look at the market. Space agencies and governments are accounting for over 60% of Thales Alenia Space accessible market. Sustainability is a core pillar of our institutions and is driving budgets upward, notably in Europe. The European Commission, at the end of 2020, a budget of EUR 2.4 billion per year for the period '21 to '27, almost entirely devoted to sustainability initiatives. And this, combined with the sustainability envelop of EUR 1.9 billion per year from the European Space Agency and [indiscernible], the European Metrological Agency. And on top of that, this is a dark blue part of the slide, additional budgets are to be expected on one side from the EU next-generation recovery plan with at least 30% focus on sustainability and, on the other side, from the EU secured connectivity initiative that has been launched by [indiscernible]. This new constellation initiative aims to provide secure connectivity for citizens, commercial enterprise, public institutions, covering also rural regions and areas without adequate communication services. So beyond the institutional growth opportunities, NSR and [ Euroconsult ] anticipate a double-digit growth between 19 and 28 for global space connectivity. So you see the market is pushed, and the market is booming in terms of action with the sustainability. So now let's look at Thales Alenia Space performance within that market. We have built, year-after-year, a strong technological expertise, bringing us to solid reputation and leadership among our customers in all the markets in which we operate. European institutions, in particular, consider us as first in class and trustful industrial partner, winning us, for instance, 50% of Galileo's second-generation satellites, this was announced earlier this year; and 5 out of the 6 newly awarded Copernicus missions, of which the CO2 measurement instrument. You have seen that in the movie. Those competencies enable Thales Alenia Space to be well positioned with an expected 7% annual organic growth over the period '20 to '24, above the overall infrastructure market growth. No a trustful partner is also one that is acting responsibly through sustainable products and an attentive use of our resources. And sustainability in space cannot be duly tackled without considering the system performance of the satellites we develop. Our teams have been pioneer in the transition from chemical to electrical propulsion and managed to improve significantly launch mass efficiency in geostationary satellites over 6 years in terms of [indiscernible] per gigabit per second. This is a graph you see on the right-hand side. So for a given performance in gigabit per second, what is the launch mass required. Now let's focus on our activities in preventing, monitoring and safeguarding the space environment. Preventing. At Thales Alenia Space, we have been working for a long time on space debris prevention. In France, our experts have cooperated with KONNECT, the French Space Agency, and other partners on the definition of the French debris mitigation law, which is considered as a precursor on the international scene. We are, by the way, now working on the next generation of that law that will take into account mega constellations and on-orbit servicing. Another illustration is that we are a prime contractor of the SWAT satellite, which is a joint mission between [indiscernible] and NASA, and that will be the first one fitted by design with a controlled atmospheric reentry subsystem, avoiding any debris [indiscernible] at end of life. Monitoring. Another key aspect is space situation awareness to monitor and prevent collisions. Thales Alenia Space is in charge of developing and producing the first small sat satellites of the world, most advanced commercial space-based monitoring system. I'm talking about North Star Skylar constellation, a system that monitors space from space. In other words, telescopes are not oriented towards the earth, as usual, but they are looking into space and this in order to predict and avoid collisions. Safeguarding. we are also working on solutions to anticipate the satellite's end of life by developing brand-new on-orbit servicing vehicles that will carry out a wide range of operations directly in space, station-keeping, refueling, repairing or upgrading in order to provide life extension with advanced robotic operations. Thales Alenia Space has already validated on ground with its project, EROSS, all the key technologies to provide on-orbit servicing, and we are now leading the European EROSS+ project to take all these technologies to space. So what are the key takeaways? Up. Space for Life, our vision for safer, cleaner and more inclusive world. Sustainability is a strong market growth driver, notably in Europe. And Thales Alenia Space has a strong leadership, driving market outperformance. Finally, we are accelerating initiatives towards a sustainable space ecosystem.

Thank you, Hervé. Let's now move to defense with Alex Cresswell, the Chairman and CEO of Thales U.K. I think a great opportunity to develop some of the points made earlier by Patrice on sustainability and defense. Alex?

Well, thanks, Bertrand. I'm going to talk about how Thales' defense capabilities strongly contribute to a safe, stable and sustainable society. Governments, institutions and large global companies are facing new threats in a world that's more and more unpredictable. Society relies on them to protect states, to protect cities and critical national infrastructure. And they rely on Thales to design and deliver solutions that keep our world safe, keep our world moving. [ Regulatory ] forces have always been a nation's insurance policy against external threats, but this role has evolved, driven by the globalization of commerce and the interdependency of comparative advantage. UN Sustainable Development Goal 16 outlines a widespread global commitment to promote peace, justice and strong institutions. To achieve the resolution of disputes nonviolently often requires the capability and capacity to act militarily yet may also use diplomatic development assistance and military means in a coherent way. The protection offered by defense to wider society, therefore, provides the foundation to make the world safer, to make the world more secure and provide the necessary conditions for sustainability. Now defense is a highly regulated sector. Legislation provides tight controls governing the sale of equipment to and from national markets. Companies must comply to continue to do business. Thales sales equipment and services, which comply with international law and treaties and all national laws of the countries where we operate or sell to, and we do it in a responsible and ethical manner. We're certified to global standards and comply with all applicable export control regulations. These are stringent, yet we go beyond with the culture of compliance reinforced by integration into our day-to-day business processes. And we do this through training, through audit and by focus on continuous improvement. Our defense exports are primarily from European countries, all of whom have signed the Arms Trade Treaty and the legally binding EU Code of Conduct on arms exports. It includes 8 criteria for the assessment of applications for the export of goods, software and technology. And the code also includes a transparency procedure through the publication of EU annual reports on arms exports. And one of these criteria includes the respect of international sanctions, the respect of human rights and the assessment of the risk that military equipment could be diverted elsewhere. The judgment related to the respect of these criteria and, of course, for granting export control licenses is applied by each nation's laws and regulations. Thales has a clear zero-tolerance approach to corruption that we constantly review, improve and embed across our organization. This includes code of conduct, risk management, audit and an alerting system along with a comprehensive training program, which covers all of our employees. We recognize and support the conventions on controversial weapons, and in 2018, we adopted a plan to phase out completely white phosphorus from our products by mid-'22. Today, it's used only in the production of smoke equipment that protect French Armed Forces and represents less than 0.1% of the group sales. So if we turn now to artificial intelligence in autonomous systems. Our approach here is to make it safe to use AI by focusing the technology on being trustworthy. So what does that mean? That means it's got to be valid. It must be explainable. It must be secure and for the responsibility for the consequences to be clear. And this is the approach we've used to develop maritime mine countermeasure systems where platforms can determine their own search pattern, but a human is always in the loop with clear responsibility for the outcome. And Marko has already unveiled our digital ethics charter. In this way, we put humans at the center, helping them to think smarter, act faster and make critical decisions in environments where lives are at stake. Now nation states used to plan to defeat attacking nations in all-out war, and this threat remains. Defense spending is rising across key Thales markets, particularly in sensors and defense systems. But military cooperation between nations is now used more and more to resolve conflict, which drives the need for command, control, communications, computing, intelligence, surveillance and reconnaissance. You see you wish I'd use the acronym, which is C4ISR for short, and I'll use that next time, and secure networks. Now in addition, a new and permanent presence of state-on-state conflict has emerged that sits below all-out war with economic stake craft, disinformation, use of proxies and cyber attacks, and adversaries seek to achieve their objectives without open military conflict. So for example, in 2020, there were more than 100 cyber attacks launched against nations. If you couple this with extremist threats, warfare is now more hybrid in nature. So cybersecurity, resilient communications, information sharing and, above all, collaboration are required across land, sea, air, cyber and space. And Thales' solutions are well aligned to these emerging challenges. There's also a growing recognition of the social value that defense creates in many of our markets. The robustness of the defense and security market and its national supply chains have supported economic recovery post COVID and promoted economic equality. More often, defense forces are being called on to support humanitarian assistance, disaster relief or even vaccine rollout. And environmental change is now more prominent in defense thinking. Of course, there are operational issues like maritime security where the ice caps are receding but also sustainable solutions that provide operational advantage such as quieter, all-electric vehicles. And defense has got a role to play in contributing to climate change reduction, even though it's not a major emitter of CO2. Many nations' defense forces now have policies to support the Paris Climate Change Agreement. So whilst defense is constantly looking for ways to counter new threats more effectively, more and more, they also deliver a positive environmental benefit. Now Thales has a broad defense capability. From just 3 market segments, we generate more than EUR 7 billion of annual revenues from a full range of sensors, sonars, electronic warfare, radar, optronics, through networks and C4ISR solutions to defense systems where capabilities are integrated to deliver complete solutions. So let's look at each of these in turn. So for sensors, if you reduce the size, weight and power consumption of a product, you reduce the resource consumption. Our new [ Sofie ] thermal imager, for example, replaces 9 kilograms with 2.5 kilograms, yet it increases mission effectiveness, and it uses less power. It's the same with our latest sonar buoys. Now this area has -- we assess an addressable market of EUR 480 million per annum. Likewise, with an addressable market of more than EUR 1 billion per annum, our Synapse software-defined radio is smaller, uses 20% less energy, and you need 15% fewer of them for the same mission. So if we turn to C4ISR solutions, which are also -- which also enable collaboration between assets and across domains that deliver more resilient outcome with fewer assets. So as military operations become increasingly data-driven, access to critical data and applications is vital. And NATO has recently selected Thales to provide the first certified defense cloud solution that can be deployed in less than 24 hours. It used to take several weeks. That means less logistics, smaller teams using fewer resources. Here, we assess the addressable market to be growing to EUR 700 million per annum by 2030. So if we move to systems, where the addressable market has a significant EUR 5 billion per annum. Synthetic environments are having an equally dramatic impact. For example, in the U.K., aviation accounts for around 2/3 of all defense emissions. So their ambition is to reduce live flying to only 10% of the total pilot training in favor of simulators, and that's going to significantly reduce emissions. But the real game changer is increasing the use of digital twins, which help to optimize system design and test in a way that just can't be done with physical prototypes whilst also cutting emissions from live testing. Now innovation in defense often goes beyond the industry, benefiting wider society. Indeed, the high standards that are set for certification, development and deployment makes it ideal for nondefense applications where safe, resilient, adaptable systems are required. For example, we will take GPS for granted, but using satellites for navigation was first developed for defense. A Thales example is Watchkeeper, Europe's largest military UAV system. Now we're using unmanned traffic management to help with safe adoption and commercialization of this growing civil market with EUR 1.7 billion per annum addressable by 2030. And this crossover happens a lot in cybersecurity. malware respects no national nor sectoral boundaries. So the solutions intended to bring security and resilience to one sector apply to the other. Our defense products and services often have reuse in critical national infrastructure. And here, we see a large addressable market of EUR 20 billion per annum. If we return to the physical world, using a defense stabilized electro optical imager on an autonomous ship to do live wind farm blade inspection avoids having to shut the turbine down and reduces risk to technicians. We're also using Thales' holographic radars to mitigate the effect of spinning turbine blades on air traffic control radars, giving more options for sighting equipment. Here, the addressable market will grow to EUR 1.3 billion per annum by 2030. So what are the key takeaways? Well, in summary, the protection offered by defense to wider society provides the foundation for safe, stable and prosperous societies, and they're all necessary prerequisites to sustainability. The defense industry works in a framework of stringent regulation, and within this framework, Thales operates legally and ethically, selling responsibly within tight controls. We implement best-in-class ethics and compliance practices. The nature of warfare has become more hybrid. Thales' market leadership in smart and digital solutions are helping to deliver military capabilities that underpin nations' security and economic stability. Thales is constantly looking for ways to counter new threats and increase mission effectiveness but increasingly also to deliver environmental benefits. Thales supports the move towards the development of greener solutions by better and more resilient outcomes delivered with fewer assets, lower fuel burn through using synthetic environments and digital twins, reducing the size, weight and power consumption of our products. And there's emerging recognition of the social value that defense creates economically, environmentally or by humanitarian support to relief from natural disasters. Ultimately, in the same way that the capabilities developed for the military often have application in civil society, innovation in Thales defense businesses fuels growth for the group and contributes to a safe, stable and sustainable future for our customers.

Thank you very much, Alex. Let's finish the panel with Philippe Vallée, our EVP, Digital Identity and Security, who will demonstrate how DIS technologies are essential in an increasingly digital future. Philippe, the floor is yours.

Thank you. Thank you, Bertrand. So with the COVID pandemic digital transformation has accelerated with working from home, buying from home, learning from home. Trust is the foundation of a sustainable digital future. Building trust is what we aim at within the Digital Identity and Security business of Thales. How do we build trust for everyone in an ever more digital future? Well, we enable a cycle of trust between people and their digital service providers. It starts with everyone having a trustable identity that can be used in the physical and the digital world. I am who I am, and nobody can claim to be me. It is also required more and more by connected object and things where an identity is required to open a connection and perform remote operations like with an electricity meter or in a drone, like Yannick said before. The cycle of trust goes on by protecting data generated by the digital interactions. This is to ensure data privacy and cybersecurity for everyone and everything. I decide which data I want to share with who, and when shared, the data is not exposed. As a result, digital transformation of business and government is socially responsible. Providing a legal identity for all is one of the key sustainable development goals of the United Nations. 1 billion people don't have a legal identity today. The goal is to give them one by 2030. Very significant funding is coming from the World Bank through the ID for Development initiative that we welcome and support. Identity is key to access education, health care, claiming social benefits, voting, et cetera. Thales has been instrumental to civil registers project in more than 20 countries, benefiting over 300 million people in Asia Pacific, in Africa and in Latin America, leveraging our biometrics and cybersecurity technologies. But there is still a lot to be done, and we will take our fair share to make sure this UN goal is a clear success. It is a significant business opportunity for us, around EUR 100 million in 2025. Building trust in our digital world means cybersecurity is really the foundation to make it sustainable, like Patrice said in his keynotes. With ever more impacting, more frequent, more widespread cyber attacks targeting everyone, everywhere, everything, the growth of the cybersecurity market is here to stay for many years at around 10% CAGR. Looking on the slide at the NIST cybersecurity framework from identifying potential risks and defining the security policies to mitigate those cyber risks by detecting and responding to attacks, Thales is uniquely positioned with sovereign product, consulting, integration, managed services activities in major countries. We are a clear leader with EUR 1.1 billion in sales in 2020 and more than 2,800 cybersecurity engineers. Now zooming on the protect part of the framework. We are providing solutions to encrypt sensitive data and personal information and by managing digital identities to grant or refuse access to data and application. In these 2 domains, we are the indisputed market leader, as recognized by the largest enterprises and government organization, including, for example, 19 of the 20 top banks in the world. And on top of this, we work and partner with major cloud service providers like Google Cloud and Microsoft Azure. Overall, this is a EUR 500 million high-margin incremental growth opportunity by 2025. While we make digital transformation trustable and socially responsible, we are, at the same time, committed to making it as low carbon as possible. Therefore, we are designing all our new products to be eco-friendly and low carbon, combining our ability to innovate and our manufacturing excellence. We have highlighted on the slide some flagship eco product here like SIM cards, the eco SIM cards, some new payment card generation, token made with recycled plastics from biosourced materials with 50% less material, delivering 50% to 85% CO2 savings underway. We have had and continue to have, by the way, a very strong market traction. We are working hand in hand with our supply chain to keep up with the demand. We have given ourselves the ambitious target of more than 1/3 of our product delivered in 2025 to be eco-designed. This means around 0.5 billion units. We also offer carbon neutrality for existing products. The new British passport is a great example. It was the first passport in the world to be certified carbon neutral by a third party. Now in terms of plastic reductions, the introduction of the eSIM is the ultimate answer as there is no longer any plastic. We have been working on this transition to the eSIM for many years. We have invested to be ready for the takeoff. Where do we stand? More and more smartphones are equipped with an eSIM on board. 1 billion eSIM equipped smartphone should be shipped in 2025, and more importantly, 50% them will download the subscription directly into the eSIM without any removable SIM alongside. The momentum is clearly there. Apple has been pushing in this direction for years, just had significant success with T-Mobile in the U.S., proposing its iPhone 13 S without RSIM and activating directly the subscription onto the eSIM located on board the device. Our base scenario for 2025 is to supply 200 million eSIMs and to also activate roughly 200 million subscriptions in eSIMs, resulting in 900 tons of plastic saved and 15,000 tons of CO2 emission saved. As we already presented previously, the eSIM business model is very attractive as it shifts from a hardware-based business model to a software and services business model, which is high margin, high growth revenues as well as proposing recurring revenues. This is a very sizable opportunity as it represents EUR 150 million in 2023 and EUR 300 million in 2025. We enable to conclude a sustainable digital future and a sustainable digital transformation of enterprises and government. We do so by providing identities for everyone and ensuring data privacy and data protection. We are the recognized global leader for data protection and identity and access management. We set ourselves emission targets for our smart card business, delivering at scale eco-design product and accelerating the migration towards the eSIM. Thanks to our technologies and innovation, our manufacturing excellence and our leading market position serving today the most demanding customers globally, we are, I think, really best positioned to enable the digital transformation, both socially responsible and with a lower carbon footprint.

Excellent. Thank you, Philippe. We now have time for a second Q&A session focused on the 3 business presentations we have just heard, space, defense and DIS. We have around 15 minutes. Let me remind you the procedure for Q&A. [Operator Instructions] And to make it as interactive as possible, please turn on your video camera before speaking. You also have an option to ask questions through the chat function. So let's see if we have questions. Do we have questions by video? No. No questions at this point. We have one question coming from the chat side. This is for Alex. "Could you address a question of nuclear weapons? You talked about controversial weapons. What is your exposure to nuclear weapons? And what about the carriers, submarines, fighter jets?" Alex?

Well, our involvement in this area is minimal. We don't produce nuclear weapons. We do supply components that are not specific to the nuclear nature of the systems. We're also not alone. There are 140-or-so companies in the [ REN ] space supply chain, including many subsidiaries of some quite large French groups. But materially, our involvement here represents less than 0.1% of the group's sales.

Excellent. Thank you, Alex. I think we have another question coming from the chat side. So this is coming from [ Christophe ]. Does Thales -- so I think this is for Hervé, yes. "Does Thales have any capability for solving the space debris issue? Do these debris pose a danger to constellations?" Hervé?

So as I explained, I mean we are working on that topic. First, I explained that there is a law in France as a space debris mitigation law that basically is made in a way to avoid space debris generation. And we participated to the elaboration of that law. And this law applies to anybody that launch from a French territory or that builds satellites in France. So it applies basically almost to our entire portfolio. And this law is made in such a way that anything we build is preventing of having specific or additional decrease. Now this being said, what do we do in that space? Because I mean we are not the only one to build satellites and to build spacecraft. As I explained, we work on the -- on one side, on the space [indiscernible], so basically to monitor everything that is taking place in space and making sure that if any collision could happen, we would avoid it, and this is basically what is currently applied. And also, we are working on a more future -- futurist approach, I would say, which is in-orbit servicing in order to be able to basically manage situations in space, whatever the situations are, including small, let's say, issues on satellites that could happen because of small debris that will hit a satellite. So repair facility for the future. So this is the kind of thing we do today.

Thank you very much, Hervé. Now we have another question coming from the chat. I think this is for Philippe Vallée. "You mentioned the carbon-neutral passport for the U.K. Are there other countries you're planning to work with over the next 5 years with a similar request? How do you address this opportunity?"

Yes. Thank you for the question, Bertrand. So indeed, in the specific case of the British passports, our customer here, the [indiscernible] or Majesty Passport Office issued a tender with the requirement to make it neutral -- carbon neutral. And this is what we achieved with our customers working on the different options we had to achieve this goal. Now as any -- for any other passport business, I mean this is highly regulated, let's say, businesses. We answer to request for quotation from -- coming from the different governments. And usually, they have to stipulate, to indicate into the tender, the need to achieve such a goal. For the time being, only the British had this idea. The good news is that we have been able to deliver it and demonstrate it for these customers. So -- and that's the reason why we are voicing it today, by the way, in order to be more explicit and to indicate that this is possible, this is feasible and really pushing other governments to do the same.

Excellent. Thank you, Philippe. I think we have another question coming from the chat. If you can delay -- show it. Yes. So this is another defense question. Let me read it for you, Alex. "Could you frame for us the part of the defense backlog exposure to NATO countries or allies of NATO? Also, how are your main defense customers trying to embrace this carbon-reduction journey? Have they got a target in mind or planning to?"

Well, as far as framing the part of the defense backlog exposure to NATO or the NATO countries that we have in our backlog, I can't answer that precisely, but I would -- I'm fairly sure it's about 40% of our defense backlog. If you added up all the NATO member states and NATO as an organization itself, possibly even 50%. I've already mentioned our defense customers trying to embrace the carbon-reduction journey. Most of our Western clients either have very specific targets or, as I said, are committed to the Paris climate accord or, as I said in the speech, the U.K. having very, very specific goals associated with reduction of their live flying to 10% only of their pilot training in order to reduce it. So almost every customer we come across has some kind of target, sometimes quite comprehensive, sometimes quite specific.

Excellent. Thank you, Alex. We have a question from video. Tristan, I think your feed is on. So please go ahead.

Yes. I have a couple, please. The first one is on the use of artificial intelligence in the military domain. I think you have an AI charter today, but can you remind us of your position on autonomous weapon systems and what type of development you may have on the field of armed drones? That's the first one. And the second question is to come back on some comments about -- from Alex Cresswell about the contribution of defense activity to the stability of society. I wonder whether you can share with us what is your strategy to make this perception more consensual. And especially, how do you lobby to make sure that you don't have any military restrictions included in the taxonomy?

So I can start. Alex Cresswell can try to tackle the second one, and I'll give you a few minutes to think about it also. So it's not an AI charter per se. It's a digital technology charter. It's a charter related to digital technologies. So it's a bit broader than just AI, typically embraces biometrics, cybersecurity and some other, I would say, key technologies. We are not the first to, we say, publish this kind of charter. Typically, large groups like IBM or Capgemini has done the same kind of, I would say, proactive initiative in this regard. The idea is really to, I would say, provide guidelines to our engineering teams. So to raise the awareness, the level of awareness in terms of ethics in a general sense, in a very broad sense, not only related to, I would say, defense, but ethics also, dealing with environmental issues, ethics related to diversity, typically, how do we try to eliminate unconscious bias in the data or algorithm and so forth. Now more specifically on defense, and I think we -- I personally, I've been quite vocal about that early on, on this topic. We really definitely took care with a commitment to always keep the man in the loop, the human at the center of the decision. And by the way, since we spoke about that, I think it was 3 years ago, many other, I would say, things have been said by governments by, I would say, official authorities, by democracies, generally speaking, to keep the human in the loop or to put the human at the center of these so-called autonomous algorithm. By the way, this charter is public. So we -- I would say, make your own opinion about that. Take it as a first step. I always say let's stay modest about that, but take it as a first step. And of course, we will enrich this charter, I would say, along the time and, in particular, because the use of technology is an evolving, I would say, matter.

And if I could just add one or 2 words to that answer. The notion of a human taking responsibility for an outcome of an action that involves artificial intelligence is also completely consistent with what the great majority of our customers use as, what they call, rules of engagement, ways of working and ways of engaging and principles they use to engage, and putting a human absolutely at the center of decision-making for actions that have a consequence is also entirely coherent with the military ethos of most of our clients. If I turn to your second question about the notion of defense contributing to safer, more stable and more prosperous societies. Certainly, when you look at the basis of global trade, and I mentioned the notion of comparative advantage, which is as long as economics have been around, it's not -- it's to us entirely obvious that a societal protection of the capacity to trade, the capacity to act with freedom is consistent with that. In terms of the view of the societies that our clients serve, certainly, in a number of our clients already, and you see this in the United States, you see this also in the U.K. and some European countries, there is a positive societal perception to the role of Armed Forces and their contribution to society. And certainly, we see that increasing as the arguments that we're making here are better understood and more broadly discussed.

And if I may add, because I think your question, Tristan, was as well related to taxonomy. Perhaps several -- I would say, several elements to feed the discussion. First of all, as I said during my keynote, and you know that very well, it's always, I would say, interesting to observe that it's not at all a question in debate in the U.S. U.S. investors consider that defense industry and defense -- U.S. defense firms, clearly, is a key contribution to sustainability because stability goes with sustainability and vice versa. In the EU, you're right to say that it's more ambivalent, if I may say. It's more ambivalent. On one hand, you see, I would say, a very robust and broad initiative to build up, to strengthen the industrial base, the defense industrial base, typically by the setting up of a European defense fund. It's -- it was not existing 2 years before. So it's really something which shows that the European Commission has really changed its mind about, I would say, how defense is important. It's -- the amount that would be, I would say, devoted to this fund is EUR 8 billion, so it's not negligible at all. And on the other hand, you're right to say that taxonomy is under discussion. And it may have some consequences on such or such industry. Having said so, the debate is not yet over, of course, on taxonomy. It's as well our responsibility to explain and to plea that's what we do today to the vast majority of investors that are today not at all against the defense. In fact, the investor that have said, okay, I will not invest in defense for the moment is a minority portion of our investors. Now it's up to us to reassure or to bring the right arguments to demonstrate or to -- I would say, to explain why this industry operates or how this industry operates in a very stringent, rigorous environment in terms of laws, regulations. Alex has explained typically how export works in defense and some other things that gives, I would say, all these noble, I would say, part of this industry, which brings stability, prosperity to many, many countries. Now at the end of the day, it will be a governmental decision. It will be a decision taken by, I would say, nations in Europe to spur in its defense industry or to take another decision. We will see. But clearly, the jury is out and still the debate is going on.

Excellent. Thank you, Patrice. Thank you, Alex. One more question coming from the chat, but still on defense. Do you feel -- coming from Jeremy Bragg, do you feel that your strict compliance and ethical framework in defense places you at a relative disadvantage to peers when winning new work in some geographies, for example, in some export markets? So it's a competitive advantage from this ethical framework. Alex, do you want to take this one?

No, not at all. Quite the opposite, quite the opposite. In the long term, it is certainly an advantage. In order not to do this in the short term, it would be really, really poor with the long term in mind. So the answer is absolutely not a disadvantage in terms of a sustainable business.

Excellent. Thank you, Alex. I think there are some other questions from the chat. Can we have them displayed on our screen? I think it's -- there's one question for Hervé. I will read it from my computer. So it's a question on space. So regarding LEO constellations, as they are increasingly adopted by service providers, how is addressed the criticisms that it crowds space? Do you see any upcoming regulation about this question of the -- the accumulation of objects, I suppose, with LEO constellations?

So LEO constellations, by the way, don't always mean a very large number of satellites. For a given performance, you can do LEO constellations with, let's say, tens of thousands of satellites. But you can also do that with a few hundred satellites, which is more the approach that we take, by the way. This being said, LEO constellations require indeed, let's say, a certain level of regulation because you have to keep in mind that as of today, there are about 2,700, 3,000 satellites, let's say, that are flying. And we are indeed talking about the potential number of satellites in the future. That will go up to a few tens of thousands if the plans from Elon Musk are confirmed. So in that regard, regulation is key. Regulation is extremely key. Once again, I'm going to come back on this French law, French debris mitigation law, which is a rule -- by the way, it's not a standard or -- it's a law. So it has to be applied. And this example from France is now taking -- is probably going to be adopted. Across the world, there are a number of, let's say, law entities or regulation entities that are trying to adopt and have a similar, let's say, completely consistent set of regulations in order to make sure that those satellites that are going to be shipped, that are going to be launched respect all the, let's say, rules required in order to avoid any risk of a collision on our side and a risk of debris on the other side. We would apply the French law everywhere. This would be the case as of today. In the second generation of the law, this would be the case. But I'm quite confident that in -- let's say, in the next 2 years, we will have a real regulation that will apply.

Perfect. Thank you, Hervé. One more question on the defense side. I don't know if Patrice or Alex will take it regarding our nuclear exposure. Let me read it to you. Would you consider divesting your nuclear exposure to improve your ESG perception to investors even though this is an immaterial contributor to group sales?

Well, to make it sure, the answer is clearly no, for the reasons that have been explained by Alex. It's totally negligible. And it's not specific to the nuclear, I would say, mission of the so-called electronics. Just take one example to illustrate that. Radio Altimeter, Radio Altimeter for an Airbus, I would say, appeals -- or call, sorry, for the same, I would say, competence and team than a Radio Altimeter for a weapon system. So it makes no sense to divest, I would say, such, I would say, team, which is, by the way, by nature, dual in this case. I hope it illustrates the point.

Excellent. Thank you, Patrice. Do we have other questions on the chat or through video? I think we're good. We're actually bang on time. We will stop for a short break. So we're going to have a 10-minute break and resuming at 5:10 p.m. Paris time for the third and final part of this ESG Investor Day. So see you back in 10 minutes at 5:10 p.m. [Break]

Yes, it's 5:10 p.m. Time to resume for our last panel. During which, we will briefly focus on cultural, governance and people issues. We're very happy to have on this panel Philippe Knoche, who joined the Thales Board of Directors 18 months ago as an independent member. He is the Chairman of the Governance and Remuneration Committee of the Board, holding both French and German nationalities. He is the CEO of Orano, a major operator in the field of nuclear materials. Next to him, we have Isabelle Simon, who is the Group Secretary and General Counsel. Among others, Isabelle is in charge of governance, ethics and corporate responsibility and legal and contracts. She is also responsible for audit, risks and internal control as well as group security. Our third speaker for this panel is Clement de Villepin, who joined earlier this year as Senior EVP, Human Resources. Clement has led HR organizations for more than 20 years, most recently at Transdev, a public transportation company with more than 80,000 employees. Let me start with you, Philippe. Could you share your perspective on how the Board thinks about ESG? How are these important topics addressed at Board level?

As you mentioned, I've chaired the Board committee for governance and compensation since May 2020. And my presence today is the affirmation of the importance that the Board gives to ESG topics. This translates into the involvement of the Board members in-depth and sometime vivid debates, both, of course, supporting the management in the deployment of a program regarding ESG and also sometimes challenging some aspects. Sustainability as such is organically followed by the committee for strategy and CSR since 2017. The committee with the Board continuously monitors the achievements and the deployment of a program. This is audited yearly by an independent expert. Of course, the policies, the targets are adapted as time goes with the achievements and with the priorities of the company. I can give here examples of the decisions which were taken in the last 3 years. First one, on the climate strategy what -- that was quantified in February 2020 and has been, in fact, enhanced today. The corporate citizenship program is another example. It has been totally overalled. The purpose of the company has been defined with internal work first and discussion in the Board from December 2019 to February 2020, building a future we can all trust. Diversity and inclusion is a long-term topic of a Board discussion. And in February, just this year, we even increased the quantified targets for gender diversity. Last but not least, under proposition of the committee for compensation, the Board incorporates into the compensation of the CEO CSR objectives.

Thank you, Philippe. Turning now to the internal point of view. Isabelle, could you detail Thales' internal CSR governance?

Thank you, Bertrand, for giving me this opportunity to share our governance best practices. Yes, our governance is key to CSR performance. This is why we have a structured CSR governance in place, which is, one, fully aligned with our CSR priorities, and two, strongly supported by top management. First, we have dedicated committees for all our CSR priorities: climate change; diversity and inclusion; ethics and integrity; health and safety. Our top management is directly involved. To give you an example, Patrice is the Chairman of the D&I Committee. Each committee has a network of correspondents in the businesses and geographies to ensure a group-wide impact. Second, on top of this specialized committees, we have a CSR committee. Its purpose is twofold: first, to ensure a global and transversal CSR strategy; and second, embark all the group functions in this journey. So to serve this purpose, we have included in this committee our CSR experts as well as representatives of the key group functions, like research and technology, procurement, finance, Investor Relations. In addition, this committee includes 3 members of the Executive Committee who are around the table today: Clement; Jean-Loïc and myself. And of course, all these committees report all their activities to the board, as was just explained by Philippe.

Thank you, Isabelle. Now that we have laid out the governance structure, let me ask you, Philippe, how does the Board approach the integration of ESG criteria into CEO remuneration policy? What are the practical challenges you have been facing? And maybe touching as well on the inclusion of ESG measures in long-term incentive plans.

First, I want to highlight that for the Board, 2 aspects are really important. First, it is adequate to have CSR objectives in the short-term incentive for the CEO. And second, the objectives also need to be adapted along with time. And this has been done in the past. The first inclusion was in 2013. 2014, diversity and inclusion was brought to the table, and more recently, the climate targets. It was done in 2018. Now this is the adaptation along with time. We have also increased, and the board has increased the share of the short-term incentive linked with ESG targets. It used to be historically 5%, increased to 8% in 2019. And now on the proposition of the committee, the Board has fixed it to 10% of a short-term incentive being linked with CSR targets. Now these targets are covering 4 fields: climate; health and safety; diversity and inclusion; and of course, anticorruption. The targets are both qualitative and quantitative. They are coherent with what is done for 70% of the employees that have CSR targets in their short-term incentive themselves. They are done to be clear, understandable, and that there is little discussion at the end of the year, whether they are reached or not. As regards the long-term objectives, there is no inclusion at this stage of CSR objectives in the long-term incentive plan for the CEO. We have concentrated the efforts of increasing the scope and increasing the quantum in the short-term incentive of the CSR objectives. However, I guess with the maturity we have reached, it could be a subject in next meetings of a committee.

Thank you, Philippe. I think you mentioned as one of the 4 CSR objectives in Patrice's remuneration is anticorruption. So maybe Isabelle, since you oversee ethics and compliance, can you tell us more about Thales' anticorruption program? In particular, how do you make sure it is implemented on a day-to-day basis across the organization?

Prevention of corruption, this is of the highest importance to Thales, of course. And we take this matter very seriously. This comes in 3 ways: first, a best-in-class compliance program; second, a strong tone from the top; and third, a shared compliance culture. Let me share with you more details on these 3 points. We have a 0 tolerance policy on corruptions, as said earlier. And this policy was adopted 20 years ago already. Today, our anticorruption program is fully compliant with the most stringent regulation, you know them: U.S. FCPA, the U.K. Bribery Act, the French Sapin II law. To be more concrete, we have 10 compliance pillars that apply everywhere in the group. Just to name a few: a detailed code of conduct; an extensive network of compliance officers; a mandatory training program; and the confidential alerting system. And all of this is fully embedded across our organization, and it is audited regularly. And talking about audits, this includes external audits as well. As was said earlier, Thales became this year one of the very first companies in its sector to achieve ISO 37001 certification for anticorruption management system. And this certification perfectly illustrates my first point about Thales' commitment to a best-in-class compliance program. Another key ingredient of effective compliance is tone from the top. And let me give you a few examples of what we do. First, our 0 tolerance policy on corruption is regularly communicated to our employees at least once a year by top management and by middle management. This is key. Second point, our governance is actively involved in compliance oversight, from our Board of Directors, as you heard from Philippe, to our Chairman and CEO and the entire Executive Committee. The fourth point is ethical behavior. This is a key requirement of Thales' leadership program. And with HR, we have embedded it into recruitment, promotion and performance reviews. And talking about performance, this is another recent illustration of our tone from the top, is the decision we made to include an anticorruption objective in the variable compensation for 2021, because not only does it apply to our Chairman and CEO, but to 54,000 group employees, 70% of our workforce. Because at the end of the day, the strong tone from the top needs an echo from the bottom. So how do we do this? Two ways: first, raising employer awareness; and second, promoting a speak-up culture. To raise Employee awareness, training is essential. This is why we have mandatory staff training every 2 years. Now turning to speak-up culture, what is very important is that employees feel comfortable reporting any suspicious behavior, and we encourage them to do so, to the manager, to their compliance officer or to our confidential alert system. But in compliance, figures speak louder than words and especially to this investor relation audience. So I'd like to quote a recent engagement survey, which says that 84% of our employees, 84%, consider that Thales sets clear expectation on the high integrity and ethical standards. And when we compare with the aerospace and defense sector, this score from Thales is 20 points above the average result, which is 64%. So in conclusion, I hope that all the actions and initiatives I've described have convinced you that Thales takes prevention of corruption very seriously. It's fully embedded in our purpose, building a future we can all trust.

Thank you very much, Isabelle. Let me now turn to you, Clement. In his introduction, Patrice outlined diversity and inclusion as one of the group priority areas. Where do you stand on this topic? What are the priorities and actions of the group?

Thank you, Bertrand. Within Thales, we strongly believe that we learn from differences. And that is the reason why with the strong support of our CEO, but also with the support of our board and with the support of most of our employees, we have been working actively on these topics since 2014. Since then, we are improving year after year. And we are proud now to be in the top of the defense and aerospace sector benchmark, even if we are fully aware that we still have a lot to do there. Diversity and inclusion is a long-term journey which we need to manage through short-term objective to be sure we are improving continuously, and it's what we are doing. If we look specifically at gender diversity, we are today at 20% of women in our workforce. We have significantly improved since we started to work on this topic, and we are now among the top 3 in our benchmark, I mean in the aerospace and defense sector benchmark. And now we are comparable to other industrial company, knowing that with 26%, we are also above the representation of women in engineering and IT higher education, which is between 15% to 25%, depending the country. When we started to work actively in this topic in 2015, we have decided to work more specifically on the glass ceiling topic. And we are progressively improving through our 2 main metrics. The first one is percentage of women in our top management community and the second one is a number of our EXCOM having at least 3 women. For the first KPI, so the number of top manager of women in the top manager community, in 2015, we were at 14.9%. We are today at 18.5%, and we target to be at 20% in 2023. For the second KPI, which is the number of women in our executive committee, we started quite low actually at 20% -- at 25%. And we are today in 2021 at 68%, so 6-8%, And we target to be at 75% in 2023. So those figures demonstrate that Thales is now one of the leader of the aerospace and defense benchmark in this area of diversity and inclusion. It is clear that we will continue to work on it -- to work actively on it and to improve further.

Thank you, Clement. Maybe coming back to you, Philippe. You have been a Board member for 18 months now. Could you give us your perspective on how the Board functions? In particular, what is your experience on the interaction between the French government and Dassault?

I'm strongly convinced on this topic that the Board functioning protects well the interest of the minority shareholders. I will give 3 reasons for that. The first one is the skills, the competencies of the directors. I mean the competency metrics is public, but one feature is, for example, that 8 of the directors are either CEO, in a position of CEO or have the experience of a CEO, and this in various sectors: aerospace, of course, defense, digital, but also finance or energy and large projects. And this goes together with a wide range of experiences in the Board, leads to rich debates, high-level debates and detailed examinations. The second reason is that there are 4 independent directors. One of them chairs the Audit and Accounts Committee. I chair the Governance and Compensation Committee. And we're joined with 3 employee or employee shareholder directors. The third reason is the relationship between the 2 major shareholders. That's the aviation family and listed company and the French government. The shareholder agreement between them provide that we must consult before important decisions, such as the appointment of a CEO, budget, multiyear plan or big M&A operations, significant M&A operations. Dassault has a veto right on this decision, which means that the French government just can't act on its own will and alone. These discussions take place before the Board. But at the end of the day, and it has been proven on the last M&A discussion about transport, for example, the Board discusses, has in-depth examination and decides. My personal experience over these last 18 months is that the debate is quite strong. And the Board not only debates, but is also committed to improve. One of my first tasks, in fact, when joining the Board was to review the action plan following the last evaluation. Internal evaluations of a Board take place early, of course and there's external evaluation every 3 years. And we are just currently doing one post COVID with an external adviser. So yes, it's a Board that works for the protection of all shareholders' interest and it is committed to improve its work.

Excellent. Thank you, Philippe. To finish this panel, let me ask you Clement. Thales' success depends a lot on staff motivation. As the race for talent accelerates, what sort of issues do you face attracting, developing and retaining the best people?

Today, in terms of human resources, our attraction and retention capability is, from my point of view, one of the most significant Thales competitive advantage. Of course, in a market which shift towards more digitalization and more competition, it is a key HR priority for us to keep this competitive advantage in the next coming years. We work on it. And we measure our performance 3, 4 metrics. So the first one is a number of external people we recruit every year. The second one is how we are perceived by the market. And the third one is our own employee perceive us as an employer. The fourth metric we use is our attrition rate, which is a classical one. About the first one, which is our ability to recruit externally every year, so we are increasing year after year the number of people we recruit. In 2020, we recruited 5,700 people. In 2021, we will end up the year around 8,200 external recruitment. And we plan to recruit for next year, 2022, close to 9,000 people. The second metric is a very important one for us as it assesses the external vision the market has about Thales. In 2021, we have been awarded in the Best Employer list of most of our countries. Let me give you some example. In France, for LinkedIn, we are #4 in French company global ranking. For Universal, which is a worldwide standard, we are #1 in France for IT position in defense and aerospace market. In India, an increasing country in terms of headcount for Thales, for CEO Insights, we have been ranked in the top 10 of the best company to work with. In Hong Kong for Classified Post, we have been awarded as HR best practices business partner. And last one, in Canada, for Forbes, we have been awarded as one of Canada best employers. The third metric we use is our own employee perception. And this one is measured through our global engagement survey we set up every 2 years. The last one has been set up in June this year, so result are quite recent. And we look at always 3 question which are strongly related to retention and attraction. The first one is about well-being. And for this question, we have 85%, 8-5%, of positive answer, which is 8 points above the benchmark. The second question we looked at is growth and development opportunity we are able to offer to our people. And we have 65% of positive answer in this question, which is 9 points above the benchmark, again, quite significant. And the third question which is key to us is collaboration. Collaboration in our business when we are developing and delivering significant project and platform is, of course, very key. And we have 82% of positive answer, which is, again, 4 points above the benchmark. So those very good figure are very important for us because it demonstrates that we can retain our people, but also because for us, our people are our best ambassador to recruit externally. And we are focusing on this idea to have our people promoting Thales externally. The fourth metric we monitor is our voluntary departure rate. At group level, we were at 4.4% in 2019. We were at 4.1% in 2020 because of the crisis actually. And in 2021, we are at 5.5%, which, again, position us in the top leader of the high-tech company benchmark.

Thank you, Clement.

Let's now move to the final part of the event with our final Q&A session. We have around 20 or 25 minutes for this session. In addition to Isabelle, Philippe and Clement, we are joined by Patrice; Pascal Bouchiat, our CFO; and Jean-Loïc Galle, who presented earlier on the low-carbon future strategy. [Operator Instructions] Of course an opportunity to ask questions both on the topics of the panel and also questions for Pascal and Patrice and Jean-Loïc as well on general question regarding the ESG strategy. What do we have? We have the first question coming from the chat. I think this will be for Pascal. Let me read it aloud. Why is Thales not part of the CAC 40 ESG Index. Pascal, you want to address this question?

Okay. Thank you very much for these questions. So I mean we need to have in mind that, I mean, this CAC 40 ESG today just reflect, I mean, the outcome in term of assessment of just one single rating agency with its own methodology. Just to give you, I mean, a bit of better understanding. If Euronext decided to use not -- I mean, the rating agencies they are using, but MSCI, which is, as we all know, one of the leader in term of nonfinancial rating, I mean we would have been a part of the CAC 40 ESG for very simple reasons, is that we are ranked AA under MSCI. And we know that there are just 6 company within the CAC 40 ESG which are ranked above us. So now, I mean, of course, I mean, I take it as a positive challenge. It's true that in the past, we have decided not to work with these rating agencies that Euronext has selected because it's difficult to work with all rating agencies. But of course, I mean we're starting working with them and answering their questionnaires. What is quite positive for me is that in a few months, we managed to improve our rating by 10 points, which is above 20%, which shows that once we start having, I mean, a good quality discussion with a rating agency of this kind, we can do much better quite quickly. What I also see is that, I mean, there is just, I mean, the minor differences across companies. What we need to know is that the company which is ranked 35 has just 4 additional points as compared to the company which is ranked 45. So all of that is really in a very narrow range. So I mean we will see going forwards. But of course, I mean, we are going to get more and more closer relationship with these rating agencies. And with that, I'm quite sure that we will continue progressing.

Thank you, Pascal. We have a question from Celine Fornaro. Celine, I think you're now un-muted, so please go ahead with your question.

I hope you can hear me okay?

Yes, we can.

Yes.

Yes. Okay. And I think it's the -- my first question, would probably be interesting to hear the thoughts of most of the -- Mr. Knoche speaking on this. But it's regarding the LTIP, which, as you said, at the moment, it's not including some of the ESG topics that we discussed. So how do you in your mind would you differentiate metrics that need to be in an LTIP against the variable remuneration, where you have 4 big brackets there, especially in the light of the new targets that you've released today? And then my second question probably applies more to the Thales management team, which is more regarding the companies that are under somewhat your control of proximity, which could be Naval Group and Telespazio? And how much of some of these stringent ESG principles that you apply to yourself, from diversity to carbon issues, do you think you could apply to these companies or influence in these companies?

Yes. As regards to the first question on the LTI, as I mentioned, now that we have multiyear targets pretty much stabilized, the discussion will start. I cannot prejudge what will be the discussion in the committee and then in the Board. But certainly, it gives us a good opportunity to start a discussion on this, 2023 targets, 20 -- and the years after that. So for a 3-year plan of LTI, it starts to be a discussion.

On the second one, I can start, and Pascal, I will let you complement. Of course, just for the sake of reminding everybody, Naval Group and Telespazio, they are not listed companies, first of all. And secondly, they are -- we are not the majority shareholder of these 2 joint ventures. Just for the sake of remembering what are we talking about. Now, I'm sitting at the board of Naval Group, not at the Board of Telespazio. But clearly, we have, even though it's not a listed company, robust discussions at the Board of Naval Group in terms of ESG. So the nature of the company of Naval Group is quite different from Thales, of course. However, these questions, D&I typically, health and safety environments, all what we have discussed, in fact, for Thales are tackled by the Board very, very seriously, of course, in the environment of Naval Group, again, which is different from us. On Telespazio, Pascal, as you have, I would say, a better view on the board of TPZ, would you say the same?

Yes. I mean I would say the same -- maybe I can complement what Patrice said about Naval Group in particular. I mean there are probably, I mean, 2 matters that I think deserve a bit of additional comments. One is, I mean, overall health and safety in the workplace. I can tell you that, I mean, as compared to Thales and the Naval Group is a bit of a more heavy kind of company in term of overall industry. And I can tell you that we have quite a challenging discussion with the Naval Group management about the overall level of performance of Naval Group. And it's true that we have seen and we keep seeing a number of opportunities for Naval Group, which is to reach a level of performance when it comes to safety at work that would be more in line with best practices. And we urge, I mean, Naval Group not just to compare to benchmark against, I mean, peers in the shipbuilding industry, but looking at the best-in-class in different industry, for example, I mean, chemical can be an extremely good reference when it comes to, I mean, safety at the workplace. Second comment, I could also mention as a board member, together with Patrice, I'm sitting at the Audit and Risk Management committee at Naval Group. And for instance, it's true that we review, I mean, the overall anti-bribery, I would say, the policy and compliance system at Naval Group. And it's true that with the experience that we put together at Thales, I guess, I mean, I hope that we are bringing, I mean, positive challenges to the Naval Group management. And the fact that, as you know, Celine, that, I mean, the new Chairman of Naval Group has been the COO of Thales for quite a time. This also makes this type of challenges and I would say, the added value and bringing our experience probably even easier today than it was in the past. So I do believe that this is quite positive.

Excellent. We have now a question coming from the chat. I think it's both directed to Jean-Loïc and Pascal. This is related to our reduction or CO2 reduction strategy. Let me read it aloud. What are the CapEx and free cash flow implications linked to reducing CO2 emissions by 35% by 2023 and 50% by 2030 and be net 0, of course, by 2040? Does it change any midterm free cash flow guideline? I suppose, Jean-Loïc, you can answer the CapEx aspect, and Pascal, complement on the free cash flow.

Yes. In term of investment for the fight against the climate change, there are 2 items, what we call the SFRD, the self-funded R&D of Thales, and the CapEx. Concerning the self-funded R&D, in my presentation, I told you that we aim to have absolutely all our development of new products be Ecodesign. So in the overall envelope that we have of SFRD for the development of our new product, we include in each development those ecodesign feature. That means that we have not changed our SFRD envelope, and we have included in this envelope all the development of new products. I would say it's exactly the same scheme for CapEx. Each time that we have a project on the specific side aiming at reducing our CO2 emissions, we try to embark this plan in a broader plan in order to increase the efficiency and the competitiveness of the site. So we -- once again, we are using the CapEx budgets and the CapEx envelopes that we have in each unit, in each division, in each site in order to launch those action of CO2 emission. So you understand that neither the CapEx nor the SFRD has been changed taking into account this CO2 journey. Maybe, Pascal, you want to complement?

Just to confirm that, I mean, overall, I mean, the financial trajectory that we shared, I mean, all -- I mean this trajectory, of course, and indeed what we shared today with you, whether it's about, I mean, top line growth, whether it's a level of CapEx, whether it's about investments. And it's true that I see, I mean, some companies saying we will share x percent of our self-funded R&D on environmental matter. I mean, Thales' is quite simple. Whenever we develop a new innovative solution, of course, we strive to make sure that its overall impact from an eco standpoint will be reduced. So it's really I mean, I would say, the same coin that we are looking for. And pretty much the same about the industrial footprint. Whenever we discuss about how to streamline to improve the overall industrial footprint of Thales when we look at the building, I mean, each time we work on a building to make it, I would say, is probably more adequate. And if we need to invest more, I mean, to make it more ecofriendly, we'll do, but through this overall move, which is how to be more performing at Thales overall.

Yes. Another question coming from the chat which is related -- it's for Isabelle. The question is, why was ISO 37001 certification important for Thales? Isabelle?

Yes. Well, it's very important because it's an external recognition, and I mentioned this when I answered the question earlier, an external recognition of our compliance program. And not only does it check the content of the program, but the way it is deployed and applied in the company, and based on the most demanding international norm. So this type of certification increases the trust of our external stakeholders, our customers, our financing banks, in the robustness of our compliance program. And as I said also, it's very important from our tone -- from the top initiatives because it really demonstrates really our commitment to best-in-class compliance. And it will not be unnoticed because we have included it in the variable compensation for 2021. So it's one objective which is already achieved. And more generally, I would add that it's really part of our culture of continuous improvement. There's always something to learn from these external audits. And we certainly continue to progress following this external certification.

Thank you, Isabelle. [Operator Instructions] We have another question from the chat, which is directed to Clement this time. Let me read it, how can a company like Thales achieve men and women parity short term? Typically moving from 18% to 20% in 3 years seems very slow. So what is your point of view, Clement?

Actually, I do think that this target is quite ambitious as we are referring to a broad-based of employees, and we are speaking about 9,000 to 10,000 employees. So it is a broad base we are working on. And we also need to remember that when we started to work on it, we were below 15%. We are now, I said it, at 18.5%. And I mean we are working and we are, let's say, optimistic to reach our 20% target next year. This is including the number of women by 33%. And in absolute value, we are speaking about around 100 to 150 promotions every year. So yes, it is ambitious, and it is a significant effort we are doing on this topic. Maybe a last point to say is that, being at 18.5% position us already in the best, let's say, company in our sector and it position also roughly at the level of representation of the women in the educational level, which is something we work also on, having a lot of partnership with many university and school, for example.

Thank you, Clement. Let me see if we have other questions from the chat or through video. Yes, there is one for Philippe Knoche. The question is related to the Chairman and CEO functions. Let me read it aloud. Why do you retain the combined Chairman and CEO function? This is increasingly viewed as poor governance practice. So what is your perspective?

The discussion, in fact, took place before I joined so in 2015 when Patrice was appointed. He was renewed in 2018 under the same structure. And it makes sense, if you look at the shareholdership of Thales, the way the Board is done. I mean there are 2 lead directors, in fact, that's my personal experience coming from the -- stemming from the 2 principal shareholders. And they have the competencies in the Board to ask question, to challenge and to draw a clear line between oversight and executive management, which Patrice fully represents. So adding here a Chairman between these 2 lead directors and the CEO and Chairman would not be necessary. So in fact, I think we are aligned with the best corporate governance practice with having this oversight being in these 2 directors and generally the skills and competencies of the Board.

Excellent. Thank you. I think we have just time for one more question. Do we have something on the chat? Yes. I think this is for Patrice. The question is back here on the public image question. I think we had a similar question with the previous panel. What role can Thales play more broadly to improve the public image of the industry?

So it's a question for Thales' CEO, but as well for my role at France obviously. No, it goes beyond the responsibility of Thales. Well, I think we, I would say, as CEOs clearly have a role to play in this respect to communicate and to explain why working in such industry offers great career opportunities and great development along the years. It goes through communications, public communications. It goes through, I would say, being present on, I would say, universities or engineering schools at their so-called campus, when we recruit new talents in this respect. So all of this, I would say, is our contribution. Now let's [indiscernible] it's not only, I would say, in the 3 of CEOs that may move the needle. It's also a role for the governments in countries in which we operate to, I would say, improve, if I may say, or develop the image and the interest new generation should pay to our industry.

Excellent. Thank you. I think time is flying. So it's now time to wrap up this Q&A session. And so I propose to now turn over to Patrice for your closing remarks.

Well, thank you, thank you, Bertrand. So I do hope that these 3 hours spent together has given you a better understanding of our strategy and road map on ESG. I would like to thank particularly our Board member, Philippe Knoche. Thank you for your participation.

Welcome.

And my EXCOM colleagues, and some of them are still here with me for this last session who presented today. I hope you will take away with you 3 key points today. First, our portfolio of businesses puts us in a very strong position to address 3 major societal challenges, as I've said, building a safer, more environmentally responsible and more inclusive world. Secondly, we will leverage our unique set of technologies to develop more and more innovative solutions to meet these 3 challenges. Therefore, I'm convinced that sustainability is a key vector of market differentiation, driving value creation and growth. Thirdly, while we recognize that ESG is a long journey indeed, I'm determined to accelerate the implementation of our commitments. We are deploying a global road map combined with concrete short-term objectives linked to a yearly incentive mechanism. So in a nutshell, over the coming months, I'm sure that we will have opportunities to keep you up to date on our progress, and I'm looking forward to pursue this conversation. In the meantime, if you have any further question, of course, do not hesitate to liaise with Bertrand and with our IR team. Thank you very much, and speak to you soon.