2013 Annual Report

150 2013 Annual Report Attachment ECONOMIC PERFORMANCE Materiality The Economic Performance item is material for the Bank because it is associated to our business performance and also because it is deemed to be relevant for our stakeholders. Under this item, we highlight two topics: the generation and distribution of direct economic value and the implications of any climate changes for the Bank's activities. The former is dealt with by the Finance Vice-President's Office, and the latter is disseminated throughout a number of areas such as Retail and Wholesale commercial units, the Sustainability Office and the Social/ Environmental Risk area. Climate changes are relevant because extreme events may lead to business interruptions and impacts on the Bank's operating costs. The risk in financial loss is increased in that insurance models do not include coverage for climate change events. Any events in connection with climate change also lead to high vulnerability in a sector that has a strong presence in the Bank's portfolio, such as agribusiness; this can lead to an increase in operating costs, loss of productivity and crops in the sector; it can also ban some cultures from regions, all this being directly associated to the credit risk, increase in the cost of capital and loss of income. Other risks are related to sectorial regulatory issues, involving clients and suppliers. The application of local regulations on climate change, although not consolidated yet, is advancing; in addition, specific plans for the manufacturing industry are expected going forward, including emission goals for greenhouse gases. International regulations are evolving and represent risks and opportunities for businesses, especially for multinational companies. The potential financial implications are related to the increased credit risk for the clients that may be affected by new regulations, including the increase in the likelihood of credit default, as clients may face operating difficulties or increase in production in connection with the offset of emission goals or the purchase of carbon credits to meet the requirements of new regulations (such as the EU standards for airlines in or out of Europe. As Santander Brazil is a strong player in free energy auctions via the Asset &Capital Structuring (A&CS) area, the advancement of low-emission energy in Brazil may lead to a portfolio increase. Policies and Commitments The Bank has in place an Environmental Policy that deals with our role in preventing climate change. The policy includes a set of practices that reinforces this commitment, summarized in its five pillars: Inventory; Actions for Reduction; Carbon Offset; Carbon-Related Business; and Advocacy and Transparency. There are no special guidelines to drive investments or financing with focus on the mitigation and adaptation in business segments; however, the A&CS area has a specific mandate to invest in wind power. The climate change topic is dealt with in Equator Principles III, of which the Bank is a signatory since 2009. The Bank also has in place the Reduza e Compense (Reduce and Offset) Program; in the program's platform anyone can calculate their own greenhouse gas emissions and offset any such impact via the purchase of carbon credits (for more details please see page 112 of the Annual Report). The Bank also participates in business discussion forums on the topic with the objective of advancing climate-related business practices and policies in Brazil. Among them are the Fórum Clima (Instituto Ethos) and the Fórum Brasileiro de Mudanças Climáticas. This commitment is available both on the Intranet and on the website www.santander.com.br/ co2, http://www.forumempresarialpeloclima.org.br/ 151

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