Annual Integrated Report

32 2 Annual Integrated Report Table of Contents Introduction Value Creation | Economic Performance Environmental Social Governance Appendices Goals and metrics [2-24; 2-25; 3-3] Portfolio alignment The commitment to achieve net-zero emissions by 2050 demands the quantification of greenhouse gas emissions originating from all stages of our operations. Since 2009, we have been measuring our direct and indirect emissions resulting from energy consumption, as well as indirect emissions associated with employee travel and cash transportation. Our most significant impact, however, lies in the indirect emissions stemming from the activities we finance or invest in. Santander Group Net Zero Goals Benchmark scenarios As part of a global bank, the portfolio alignment of our operations in Brazil will adhere to the approach adopted by the Santander Group. Following the NZBA guidelines, over the past two years, the Group has established decarbonization targets for the most carbon-intensive sectors, including power generation, oil and gas, aviation, steel, and coal. By March 2024, the Group will define new targets for other industries. Additionally, the Group has established a green finance target that incorporates the results achieved in Brazil. For further information, please refer to Banco Santader. Informe Anual 2022 (santander.com). Industry Emissions Metric Emissions base year 2019 2030 Targets Power generation Oil and gas ③Aviation IEA Net Zero 2050 IEA Net Zero 2050 IEA Net Zero 2050 Scope 1 Scope 1+2+3 Scope 1+2 tCO2/MWh mtCO₂ grCO₂/RPK 0.21 23.84 IEA Net Zero 2050 Scope 1+2 tCO2/ton of steel 92.47 1.58 0.11 (-46%) 16.98 (-29%) 61.71 (-33%) 1.07 (-32%) ‣ Steel Coal Gradual elimination and complete eradication of exposure by 2030 to: ⚫ customers whose revenues from coal-based energy generation exceeds 10% coal mining Consistent with the methodology outlined by the Santander Group, which is based on the Partnership for Carbon Accounting Financials ("PCAF"), the financed emissions metrics utilized to set the targets were the following: Santander Group financed emissions Industry Absolute emissions (mtCO₂) Physical emissions intensity Financial emissions intensity (mtCO₂/ EUR billion lent) Overall PCAF score¹ Power generation 0.51 Oil and gas 73.80 mtCO2/TJ 3.10 Aviation Steel 1.81 2.62 92.47 grCO₂/RPK 1.17 1.58 tCO2/ton of steel 1.74 5.41 23.84 0.21 CO₂/MWh 2.67 3.40 3.30 3.00 Agribusiness For Brazil, the agribusiness industry plays a critical role in our decarbonization strategy, not only due to its paramount importance to the country's economy, but also because of its significant contribution to national emissions. The year 2022 marked the start of our efforts to quantify financed emissions in this sector, with the initial challenge of obtaining concrete data from farms. We actively contributed to the publication of the document entitled "An Introductory Guide for Net Zero Target Setting for Farm-Based Agricultural Emissions" prepared by the "Banking for Impact on Climate in Agriculture" ("B4ICA") initiative, in which we shared our progress in measuring emissions on the farms we financed. We participate in the Banking for Impact on Climate in Agriculture ("B4ICA") initiative, coordinated by the World Business Council for Sustainable Development ("WBCSD") in partnership with the United Nations Environment Programme Finance Initiative ("UNEP FI"), the Partnership for Carbon Accounting Financials ("PCAF"), and the Environmental Defense Fund ("EDF"). [2-25; 3-3] Material topics: ESG finance; G4-FS8; Portfolio alignment to achieve net-zero emissions by 2050 Sustainable Finance and sustainable across all units and businesses of the Group, as well as the governance associated with such transactions. Reviewed by Sustainalytics, the SFCS is grounded in international industry guidelines, standards, and principles, such as the taxonomies of the European Union, International Capital Markets Association ("ICMA"), Loan Market Association ("LMA"), FEBRABAN, and UNEP FI. The primary objectives of the SFCS are to transparently monitor and report activities, support the development of sustainable financing products, and mitigate the risk of greenwashing, which refers to environmental rhetoric that is not backed by concrete action. Eligibility criteria have been established for two distinct categories of financial products and services: a) specific-purpose financing; and b) financing linked to sustainable goals. Supported by the SFCS program, the Sustainable Finance team collaborates transversally with Santander's various business segments, intensifying the dialogue with customers on the agenda and identifying business opportunities with a technical and sector-specific approach. Get to know the complete taxonomy on our Sustainability portal. We understand that the transition of businesses towards a low-carbon economy involves companies at varying stages of maturity. Therefore, engagement and value propositions will play a critical role in this journey. WayCarbon, a consulting and technology company acquired by the Santander Group in 2022, will be key in this strategy, supporting our customers through technology and innovation solutions focused on sustainability, environmental asset management, and the development of strategies aimed at eco-efficiency and a low- carbon economy. Moreover, we hosted an inaugural class for a select group of executives from the E3, Corporate, and SCIB segments, in partnership with Santander Academy, to explore companies' decarbonization pathways. This meeting marked the first of a series that will take place in 2023 to level up knowledge on the subject, promote the sharing of best practices, and discuss Net Zero challenges and solutions. 'The PCAF (Partnership for Carbon Accounting) is an initiative that supports banks in assessing and disclosing greenhouse gas ("GHG") emissions associated with financial activities. The program assigns varying scores based on the quality of data utilized by the financial institution, ranging from 1 - highest data quality to 5 - lowest data quality. The quantification of financed emissions relies on financial information from customers, as well as emissions and production data. In cases where public emission data is unavailable, we rely on proxy data (average emissions per sector, country, etc.) to estimate emissions. Once our customers report their emission progress, we apply our attribution factor in accordance with the PCAF approach to determine the emissions that Santander finances. The quantification of emissions and methodologies for establishing science-based decarbonization targets are emerging topics that are advancing swiftly to meet climate goals. We will update and strengthen our methodologies and procedures to incorporate these forthcoming enhancements. Customer engagement will serve as the primary conduit for achieving our reduction targets, providing us with the means to develop a comprehensive understanding of the challenges and needs involved in supporting their transition to low-carbon business models. As one of Brazil's largest banks, we have the responsibility and opportunity to encourage more individuals and companies to act in a sustainable way. Businesses that contribute to the decarbonization of our customers will be essential to attaining our climate ambition. Simultaneously, Brazil's social issues are becoming increasingly relevant and require innovative financial solutions. Our strategy has been fortified in 2022 with the establishment of a specialized structure for Sustainable Finance, which reports directly to the SCIB Vice Presidency. The new structure is responsible for implementing Santander's proprietary Sustainable Finance Classification System ("SFCS"), which establishes criteria for classifying assets as green, social, Sustainable business generation in 2022 These measures demonstrate our commitment to building a financial platform that integrates ESG aspects into its products, empowering our customers in the transition towards a more inclusive and sustainable economy. In 2022, we facilitated R$ 32.2 billion in sustainable businesses, representing the second-highest amount in our history. The 37.5% reduction from 2021 is attributed to the more challenging macroeconomic conditions, particularly in the retail segment and the international capital market (see the "Sustainable Business Evolution" graph below). The SFCS implementation has led us to adopt the classification standards set forth by the Santander Group for designating our assets as green, social, and sustainable. Through this Santander 33