General Sustainability Policy¹

Our policy is inspired by best practices taken from international protocols and conventions, and codes of conduct and guidelines that can be applied internationally in this area, with a specific focus on the Sustainable Development Goals (SDG), the Paris Agreement, the Principles of Responsible Banking, and the Equator Principles. Based on these guidelines, we specify that any project over USD $10 million must comply with the Equator Principles.

For further information about the Environmental and Social Risk Analysis Process that is based on the Equator Principles within Project Finance, please click here.

1. In February, 2023 the General Sustainability Policy and the Human Rights Policy merged to better integrate the objectives of both policies into existing processes.

Environmental, Social and Climate Change Risk Management Policy

We are aware that environmental and social issues represent some of the most relevant global challenges to the long-term prosperity of the global economy, the well-being of people and society, and the environment’s capacity to support life.

This policy outlines the criteria to identify, assess, monitor and manage environmental and social risks, as well as those relating to other activities that pose a risk to climate change in the oil and gas, electricity, mining and metallurgy, and soft commodities sectors.

This policy assesses the most relevant impacts of environmental, social and climate change risks for Santander Corporate and Investment Banking (SCIB) customers with activities that encompass financial products or services, such as banking operations that imply credit risk, insurance, consultancy services, equity and asset management, commercial loans and project financing. Santander takes environmental, social and climate change components into consideration.

At a local level, we have developed an in-house guide to complement our policy, the goal of which is to:

• Provide assessment guidelines and tools that have been implemented to identify, analyze, monitor and mitigate these risks.
• Define the local scope of sectoral assessment.
• Reaffirm the Risk department’s commitments regarding training, the scope of which extends beyond its own area, encompassing the remits of the other areas involved in the loan process.

At a Group level, we have a multidisciplinary team tasked with identifying, assessing and mitigating any environmental, social and climate change risks (including those involving human rights) involving our transactions.

At Santander Mexico, our SCIB Risk area has a Green Champions who is responsible for embedding Environmental, Social and Climate Change (ESCC) elements within the credit process by analyzing, monitoring and mitigating these types of risk.

The employees that belong to the areas involved in the supervision and accountability approach regarding the incorporation of ESG factors, as well as the ESCC risk control and assessment as part of the credit process are:

• Business Area: it is the first line of defense and the point of contact with the customer, in addition to being responsible for using internal questionnaires to compile information. In the event that any specific concerns are raised, the Reputational Risk team is consulted.
• Local ESCC Risks: it is tasked with reviewing and making any additions necessary to the questionnaire sent by the Business Area. Using this and other data it compiles, it undertakes the ESCC Risk Analysis. If necessary, it may channel any doubts or questions through the Business Area.
• Global ESCC Risks: it reviews the questionnaire, analysis and recommendations of the local team.
• Reputational Risk: it provides judgement when any reputational risk is detected among any of the parties involved in the process.

We analyze the Environmental, Social and Climate Change (ESCC) risks of customers from sectors defined as being vulnerable to these kinds of risks (oil and gas, electricity, mining and metallurgy, and soft commodities). To provide an ESCC recommendation, we review annual reports, sustainability reports, ratings agency reports, specialist agency reports and NGO considerations, among others, not to mention internal questionnaires and customer calls.

ESCC risk assessments enable us to identify whether a customer is involved in banned activities or if a project is being developed in a prohibited area, allowing us to decline involvement in the operation. Furthermore, this analysis may lead to recommendations being issued regarding conditions and/or the monitoring of specific issues that have raised concerns.

Some of the ESCC trends that we take into consideration when analyzing the portfolio risk profile to commercial and industrial loans include climate change, limitations to natural resources, and human capital risks and opportunities. We also take into consideration other areas including waste management, water stress and social elements such as child labor, forced labor and non-discrimination, among others.

Furthermore, our Defense Sector policy reaffirms our commitment to and respect for human rights by not involving ourselves with or supporting companies that finance, manufacture, sell, distribute or offer maintenance services to prohibited materials.

We also determine whether the operations in which we are involved relating to the manufacturing, sale or distribution of defense material or dual-use technologies lead to the existence of any risks that could be deemed to be a threat to the peace, defense and stability of certain countries, in addition to causing serious economic or environmental damage.

For further information about our Environmental, Social and Climate Change Risk Management Policy, please click here.

For further information about our Defense Sector Policy click here.