BBVA Bancomer/2018 Annual Report

In 2018, BBVA aided with their further development and dissemination as a member of various working groups. BBVA was one of the 11 signatories of the letter sent to the Equator Principles Association, urging that measures be taken to reinforce environmental and social due diligence requirements in project finance. The decision was therefore reached at the annual meeting of the EPs to start work on the fourth version of the Principles so as to bring them in line them with the Paris Agreement, to address and resolve certain difficulties when implementing consultation and informed participation processes, and to reconcile inconsistencies in the standards used to assess environmental and social risks in projects. The Corporate & Investment Banking (CIB) Sustainable Finance and Reputational Risk team is responsible for analyzing the projects, representing the Bank as before its stakeholders, reporting and rendering accounts to senior management, and designing and implementing the management system by lobbying for the adoption of best practices and aiding with training and communication on all matters related to the Equator Principles. During risk analysis and decision-making processes, BBVA assesses and takes into consideration not only financial aspects, but also social, environmental and reputational factors. Project analysis involves subjecting each transaction to a process of environmental and social due diligence that starts with assigning a category (A, B or C) to reflect the project's level of risk. The documentation submitted by the customer and the independent advisors is reviewed, allowing the level of compliance with the requirements established in the EP to be graded in accordance with the project category. Finance agreements incorporate the customer's environmental and social obligations, which a specialist CIB team monitors. To guarantee integrity in BBVA's application of the EP, their management has been integrated within in-house transaction structuring, admission and monitoring processes and is subject to regular checks by the Internal Audit Department. For BBVA Bancomer, the EP is the basis for applying best practices and provides the ideal framework for dialog with customers and stakeholders in relation to all the projects it finances. The Group releases public information (http://bancaresponsable.com/ financiacion-responsable-proyectos/) on the environmental and social management of the projects for which BBVA provides funding and/or advice. Transactions financed under the Equator Principles in Mexico and signed in 2018 Amount funded* by BBVA Bancomer (millions of pesos, MXN) Category Sector of operations Real estate assets Real estate assets B Oil and gas B Renewable energies (4 operations) B Infrastructure-transport (2 operations, of which 1 related to a bond issue) 1,308.32 803.46 481 1,888.21 502.26 1 Initial review • Selection of independent advisor • Project classification 2 Due diligence 3 Approval • • • Review of teh enviromental and social impact assessment Environmental and social due diligence report Sanction by the CIB Reputational Risk Department Inclusion of conditions in the approval of the Risks Committee • 4 Financial close 5 Monitoring B Total Industry 10 Approval Preparation of an Action Plan Environmental and social clauses in the financing contract Financial close *With a USD/MXN exchange rate of $19.24 and a EUR/MXN rate of $22.7 • Monitoring reports by the independent advisor Report on the environmental and social impact of the project 58 R RS anal STAREDGELOPMENT PLAN Queries 870.05 5,853.3 Junky Sw ETE POLICE BBVA Bancomer/2018 Annual Report A A

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