BBVA

BBVA's Corporate Governance system is made up of a set of principles, rules and mechanisms that integrate and regulate the structures and operation of its corporate bodies. The System is configured, mainly, by the provisions of the Statutes, the regulations of its different corporate bodies and the general policies of the Bank approved by the Board of Directors. As of December 31, 2024, BBVA's Board of Directors comprises 15 members, two of whom were executive and 13 are non-executive directors. BBVA's Board of Directors has a balanced composition, with high levels of independence and diversity. At the close of the 2024 fiscal year, BBVA's Board of Directors comprises 46.66% women and 53.34% men. In terms of independence, BBVA's Board of Directors includes ten independent directors, representing 66.66% of the total Board members. The Board of Directors has the powers established at any time by applicable legislation and the Bylaws and has the power to approve the general policies and strategies of the Entity. The Board carries out, directly or through its Committees, the monitoring of the decisions adopted, including the supervision of the implementation of general policies, and the supervision of the management of the Company and its Group.

The Corporate Bodies promote that Sustainability, which includes environmental, social and governance aspects (hereinafter "ESG"), is integrated into all the Group's small businesses and activities, from a global perspective, and that the material impacts, risks and opportunities arising from it are adequately managed. The impacts, risks and opportunities arising from the different aspects of Sustainability that are of material importance to the Bank are taken into consideration in the various decisions approved by the Board of Directors. In particular, they find a place in the Strategic Plan, which incorporates Sustainability as one of the strategic priorities, in the Budget, which sets annual targets for strategic indicators, among others, related to Sustainability, and in the Risk Appetite Framework, which includes mentions of Sustainability in the Risk Appetite Statement, as well as specific metrics related to Sustainability. In 2024, the Corporate Bodies have periodically received specific reports from the Global Sustainability Area, through which they have been able to monitor the different aspects of the strategy related to Sustainability and the objectives established in this area, as well as the main projects and lines of work of the Group in this area.

BBVA has a Remuneration Policy for BBVA Directors approved by the General Shareholders' Meeting on March 17, 2023. The short-term incentive includes financial and non-financial indicators, both with an annual measurement period, which are aligned with the most relevant management metrics and with the Group's strategic priorities. The indicators for calculating the annual variable remuneration include several non-financial or Sustainability-related indicators - Net Promoted Score (NPS), Target Clients, Sustainable Business Channeling, Decarbonization of the Portfolio and Percentage of Women in Management Positions - which together represent 32.8% of the target annual variable remuneration. For the short-term incentive for 2024: Net attributable profit (20%), RORC (20%), Efficiency ratio (20%), Net Promoted Score (NPS) (15%), Target customers (15%), Sustainable business channel (10%). For the long-term incentive: Tangible Book Value per share (TBV per share) (40%), Relative Total Shareholder Return (Relative TSR) (40%), Portfolio decarbonization (15%), Percentage of women in management positions (5%). To promote the achievement of the objectives, the following are included in BBVA's variable remuneration system: Promoting new business through sustainability with Annual Variable remuneration linked to the promotion of sustainable business for all employees, including executive directors and Senior management of BBVA, and incentives linked to sustainable business specific to the commercial network. Achieving net zero emissions: since 2023, long-term variable remuneration has been linked to certain decarbonization target for members of the collective, including executive directors and Senior management of BBVA.

BBVA aims to contribute to the respect for Human Rights. This is why it frames this willpower in the Group's General Sustainability Policy and aligns it with its Code of Conduct. Since 2018, the BBVA Group has carried out two global Human Rights Due Diligence exercises with the aim of preventing, mitigating and remedying potential impacts on human rights (such as human trafficking, forced labor, child labor, freedom of association and collective bargaining and, equal pay or discrimination). Through it, BBVA has analyzed the following aspects: Identification of the main issues or potential impacts of operations. Improvements within BBVA to try to prevent and mitigate these impacts. The availability of channels and processes that facilitate grievance mechanisms. The Group ensures compliance with all applicable laws and respect for internationally recognized human rights in all its relations with employees, customers, shareholders, suppliers and, in general, with the communities in which it conducts its businesses and activities. The policy is aligned with the International Bill of Human Rights, the Guidelines of the Organization for Economic Cooperation and Development (OECD) for Multinational Business, or the fundamental conventions of the International Labor Organization.

The Risk and Compliance Committee supports the Board in integrating Sustainability into the analysis, planning and management of the Group's financial and non-financial risks, and in supervising their execution. The Audit Committee supervises the process of preparing and the content of the information that must be formulated by the Corporate Bodies in matters of Sustainability for publication, as part of the public information of the Group. With regard to the area of ESG public disclosure, the Group has an ESG Reporting Committee. The Committee serves as a coordination and support body at executive level aimed at ensuring that the information to be disclosed on Sustainability matters that is to be formulated by the corporate bodies of the BBVA Group reflects the Sustainability objectives and strategy, risk management model and relevant quality standards. The Committee is led by the Finance area and the following areas participate in it: Global Sustainability Area, Global Risk Management, Regulation & Internal Control, Legal Services, General Secretary, Data, Chair Office, Talent & Culture, and Internal Audit. The information contained in the NFIS has been subject to a limited review by Ernst & Young Auditores, S. L., in its capacity as an independent verification services provider, with the scope indicated in its Verification Report.

BBVA has defined sustainability as one of its six strategic priorities, covering three dimensions: Climate (business opportunities related to global warming: electric transport, energy efficiency, renewable energy, etc.), Natural Capital (business opportunities related to nature: water, land, biodiversity, and waste and pollution), and Inclusive growth (business opportunities related to inclusive economic growth: inclusive infrastructures, financial inclusion, entrepreneurship, job creation, access to basic goods and services). The execution of this strategy is based on the achievement of two main objectives: promoting new business through sustainability with a target of 300 billion euros in sustainable business channeling for the period 2018-2025, and achieving net zero emissions by 2050 with decarbonization targets for 11 high-emission sectors. BBVA Group's value chain has been categorized into three elements: upstream (supply chain providers), own operations (employees and real estate assets), and downstream (banking, insurance, and asset management customers). As a result of the double materiality analysis, no material impacts, risks, and/or opportunities exclusively associated with insurance and asset management activities have been identified.

The General Sustainability Policy identifies BBVA's main stakeholders and other groups (customers, employees, shareholders and investors, suppliers, regulators and supervisors, as well as investment in the community) and the different areas of action. The Board of Directors has incorporated Sustainability as one of the Bank's strategic priorities. The Group has analyzed various sources of information to identify stakeholders within the value chain, including: Sustainability related objectives and how they may affect stakeholders within the value chain, Business model and identification of key dependencies in terms of products or services, Markets and customer segments, Main stakeholder groups with which it interacts, as well as the identification of impacts, risks, and opportunities that could arise from such interaction, Number of employees and their geographical distribution. The double materiality analysis incorporated the principles of the CSRD and ESRS, as well as the implementation guide for the assessment of materiality issued by the European Financial Reporting Advisory Group (EFRAG). In 2024, supervisory activities related to climate risk have become highly relevant. BBVA has actively participated in working sessions with various supervisory bodies, such as the European Central Bank (ECB), the Bank of Spain, the Banking Regulation and Supervision Agency (BRSA) of Turkey and the Mexican authorities.

BBVA has identified material impacts, risks and opportunities in several sub-topics, which in turn correspond to four general topics: 1. Climate change, 2. Own workforce, 3. Consumers and end-users, and 4. Business conduct. Material IROs linked to climate change and customers and end users are mainly concentrated in the downstream phase of the value chain, while those related to business conduct and employees originate in the Group's own operations phase. Climate change is material for BBVA because it has significant effects both on the environment and on its own operations. This consideration aligns with BBVA's strategy, which integrates climate action as one of its fundamental pillars. The key role of banks, and BBVA in particular, in financing the transition to a decarbonized economy has been considered. BBVA recognizes the importance of people as a fundamental pillar of its corporate strategy. The commitment to creating a positive and motivating work environment is material because employees contribute directly to achieving business objectives. Consumers and end users are a fundamental part of the Group activity. Their satisfaction and financial security have a direct impact on the Group's performance and reputation. The Group has identified IROs related to business conduct by considering the sector to which it belongs, as well as other factors such as geographical presence, the type of activity, and the structure of business transactions.

The BBVA Group's 2024 double materiality analysis is based on a review of the results of previous years and on the most accurate and up-to-date information available, integrating tools, standards and processes that are both internal and market benchmarks. The applied methodology has been structured into three phases: context analysis, identification and definition of IROs, and their subsequent evaluation. In the context analysis phase, internal documentation considered includes key policies, such as the general sustainability policy and those related to employees, suppliers, and corporate governance. Externally, information from regulators and supervisory entities has been reviewed, incorporating essential regulations. For identification and definition of IROs, BBVA has incorporated specialized tools including the UNEP-FI Impact Tool, human rights due diligence, Climate Change Risk Assessment, and Reputational and Non-Financial Risk matrices. IROs were defined and classified based on the following criteria: Actual/Potential, Time Horizons (Short-term: Up to 1 year, Medium term: From the end of the first year to four years, Long term: More than four years), Value Chain Phase (upstream, own operations, and downstream), ESRS Subtopic allocation. For evaluation, BBVA applied an internal methodology consistent with both the Implementation Guidance on Double Materiality Analysis issued by EFRAG and ESRS 1. Impact materiality assesses the positive or negative effects through severity (scale, scope, irremediable character) and probability. Financial materiality evaluates effects on the Group's financial position through likelihood of occurrence and magnitude of financial effects.

Following the double materiality analysis, BBVA has identified material topics that require disclosure under the ESRS: Climate change (E1), Own workforce (S1), Consumers and end-users (S4), and Business conduct (G1). Topics identified as not material include: Pollution (E2), Water and marine resources (E3), Biodiversity and ecosystems (E4), Use of resources and circular economy (E5), Workers in the value chain (S2), and Affected communities (S3). As a result of the double materiality analysis, no material impacts, risks, and/or opportunities exclusively associated with insurance and asset management activities have been identified. Consequently, no specific policies, actions, objectives, or metrics covering these activities are disclosed beyond those that inherently encompass them. BBVA, in accordance with the provisions of the ESRS, incorporates transition periods for some information requirements including: The identification and disclosure of certain quantitative aspects relating to the value chain; The anticipated financial effects concerning the material impacts, risks, and opportunities identified in the double materiality analysis; The financial effects related to revenue derived from activities affected by physical and transition risks; Specific characteristics of non-salaried workers; Information concerning public or private protection programs for salaried workers.

BBVA has defined a decarbonization strategy for its portfolio alignment and has developed a management model to monitor decarbonization objectives. BBVA has set decarbonization targets for 11 high-emission sectors with intermediate objectives for 2030 and the goal of achieving net zero emissions by 2050. The sectors covered include: Oil & Gas (upstream), Power generation, Auto (manufacturers), Steel (manufacturers), Cement (manufacturers), Coal (thermal coal mining), Aviation (airlines), Shipping (operators), Real estate (commercial), Real estate (residential), Aluminum (primary manufacturing). In 2024, BBVA has published new decarbonization targets for three additional sectors, aluminum and residential and commercial real estate in Spain. By 2024, 91% of the loan portfolio in high-emission sectors has a Transition Risk Indicator (TRi). BBVA has created a Sustainability Alignment Steering Group (SASG) to make proposals and monitor the alignment objectives of the sectors for which specific objectives have been set and to supervise their compliance. BBVA recognizes a major challenge since meeting the objectives of decarbonization or aligning their portfolios depends, to a large extent, on the actions of third parties, such as customers, governments and other stakeholders.

The Board of Directors has incorporated Sustainability as one of the Bank's strategic priorities and has approved the General Sustainability Policy, which defines and establishes the general principles and management and control objectives and guidelines that the Group must follow in terms of sustainable development. The General Sustainability Policy covers supporting customers in their transition toward more sustainable business models, progressively incorporating sustainability-related opportunities and risks into its strategy, business, processes and risk management, being mindful of the direct and indirect environmental and social impacts of its businesses and activities. BBVA is promoting the creation of new business around sustainability with three priority areas: Promoting the development of financial solutions and customized proposals for customers, Development of differential risk management capabilities, Implementation of control processes. BBVA has Environmental and Social Framework that aims to establish criteria for the identification, assessment and monitoring of certain activities of the following sectors: mining, agro-industry, energy, infrastructure and defense.

BBVA is promoting the creation of new business around sustainability through: 1. Promoting the development of financial solutions and customized proposals for customers to capture business opportunities related to sustainability. For wholesale customers, sectoral solutions are promoted based on innovation and specialized knowledge. For enterprise customers, the Group promotes simple and scalable solutions that enable potential economic savings, for example, in terms of energy efficiency or fleet renewal. For retail customers: customized digital solutions based on data analysis for the mass market, with a focus on energy savings, solutions for mobility or products for financial and social inclusion. 2. Development of differential risk management capabilities: BBVA is focused on increasing business volume by financing the reduction of its customers emissions. Specific risk frameworks have been developed to support new businesses and a plan has been defined to attract new customers based on their level of decarbonization transition. 3. Implementation of control processes: BBVA is working on defining and adapting processes to ensure operational efficiency and adequate internal controls, including solid criteria for classifying sustainable business. The amount allocated to sustainability-related projects totals 52.5 million euros in 2024. Additionally, BBVA invests in funds to support the decarbonization of the economy, which allow the bank to expand its knowledge and finance new technologies.

BBVA has set the objective of achieving net zero emissions by 2050 with decarbonization targets for 11 high-emission sectors: Oil & Gas (upstream), Power generation, Auto (manufacturers), Steel (manufacturers), Cement (manufacturers), Coal (thermal coal mining), Aviation (airlines), Shipping (operators), Real estate (commercial), Real estate (residential), Aluminum (primary manufacturing). The geographical scope of the real estate sector's (commercial and residential) intermediate emissions reduction target for 2030 is Spain. In 2024, BBVA has published new decarbonization targets for three additional sectors, aluminum and residential and commercial real estate in Spain. Additionally, in a philanthropic realm, in 2021, BBVA set itself the goal of contributing to society, aiming to invest 550 million euros in social programs to benefit 100 million people between 2021 and 2025. BBVA Asset Management has intermediate decarbonization targets for their portfolios to 2030, framed within the Net Zero targets to 2050. The scope of these intermediate targets has been established considering the assets included, the metrics used to measure them, the initial level and the 2030 target.

BBVA recognizes the importance of people as a fundamental pillar of its corporate strategy. The commitment to creating a positive and motivating work environment is material because employees contribute directly to achieving business objectives, enhancing customer service quality, and consolidating the corporate culture. The Group addresses these aspects in its strategy and operations, reflecting a commitment to continuous improvement and the strengthening of its human resources. To this end, an inclusive and diverse environment is fostered, professional development programs are promoted, and public monitoring indicators are maintained. These measures are aligned with the corporate values that support the Group's Purpose. The General Sustainability Policy ensures compliance with all applicable laws and respect for internationally recognized human rights in all its relations with employees. The policy is aligned with the International Bill of Human Rights, the Guidelines of the Organization for Economic Cooperation and Development (OECD) for Multinational Business, or the fundamental conventions of the International Labor Organization.

Consumers and end users are a fundamental part of the Group activity. Their satisfaction and financial security have a direct impact on the Group's performance and reputation. This general topic is material and is recognized in BBVA's strategy, based on caring for people, digital transformation and commitment to the environment. The relationship with the customer transcends formal requirements to become a key factor in growth and competitive differentiation. To assess the IROs related to consumers and end users, BBVA takes into account the accessibility and adaptability of its products and services, the protection of personal data, transparency in commercial interactions and cybersecurity. These areas are supported by various corporate policies (for example, privacy and cybersecurity protocols, customer claim channels, etc.). BBVA continuously monitors customer satisfaction, the adoption of digital solutions and the quality of the commercial relationship through key indicators such as the Net Promoter Score (NPS).

The Group has identified IROs related to business conduct by considering the sector to which it belongs, as well as other factors such as geographical presence, the type of activity (e.g., financing), and the structure of business transactions. BBVA's strategy and operations incorporate the concepts of integrity and business ethics through the reinforcement of control mechanisms, including policies and measures adopted to ensure the protection of whistleblowers, as well as the management of reputational and regulatory risks associated with corruption, bribery, and money laundering. The material IROs identified include: Contribution to socio-economic well-being through measures to prevent money laundering and terrorist financing, aligned with the principles of good corporate governance; Risk of legal sanctions, litigation and reputational damage associated with unethical practices, such as corruption, fraud or bribery; Risk of legal or regulatory sanctions that BBVA may suffer as a result of non-compliance with applicable legislation regarding the prevention of money laundering and the financing of terrorism or the use of BBVA products and services for illicit purposes; Risk of legal penalties, litigation and reputational damage associated with inadequate or inaccessible claim mechanisms.

BBVA's strategy and operations incorporate the concepts of integrity and business ethics through the reinforcement of control mechanisms, including policies and measures adopted to ensure the protection of whistleblowers, as well as the management of reputational and regulatory risks associated with corruption, bribery, and money laundering. The Group has identified material risks including: Risk of legal sanctions, litigation and reputational damage associated with unethical practices, such as corruption, fraud or bribery; Risk of legal or regulatory sanctions, significant financial or reputational losses that BBVA may suffer as a result of non-compliance with applicable internal or external legislation and regulations regarding the prevention of money laundering and the financing of terrorism or the use of BBVA products and services for illicit purposes related to money laundering and/or terrorist financing. The Group has also identified a positive impact: Contribution to socio-economic well-being through measures to prevent money laundering and terrorist financing, aligned with the principles of good corporate governance.