Environmental and Social Loan Policies

Environmental and Social Loan Policies

1. Introduction

Garanti BBVA has developed a specific Environmental and Social Credit Standard (hereinafter referred to as the “Standard”) as part of its commitment to support the Sustainable Development Goals (hereinafter referred to as the “SDGs”) and human rights, recognizing that some of its clients are in sectors with potential environmental and social impact. Garanti BBVA believes that customers who conduct their activities in a “responsible” manner will be more successful in the long term. For this reason, it has incorporated environmental and social considerations into its decision-making process with this Standard. The implementation of this Standard enables us to better understand our customers' activities, manage our stakeholders' expectations and mitigate environmental/social risks. This Standard has been prepared taking into account Garanti BBVA’s General Policy on Sustainability and General Policy on Corporate Social Responsibility and aims to help achieve the SDGs, promote the fight against climate change and strengthen our commitment to human rights.

2.1 Purpose

This document contains the standards of reference, general non-financed activities applicable to the mining, agribusiness, energy, infrastructure and defense sectors. It also covers best practices for the relevant sectors and sets forth prohibitions in terms of clients and projects specific to each of them.

The sectors covered by this have been selected due to their potential impact on nature and communities. The Framework is one of the main tools to identify clients and projects exposed to potential social or environmental controversies and to accompany them in their transition

2.2 Scope of application

This framework¹ is applicable to new clients and new projects (or to extensions of existing ones) from its publication date². For the sake of clarity, when necessary in order not to compromise the viability of a pre-existing project or pre-existing client or their ability to repay their debt, their restructurings and/or refinancings will be allowed.

The norms for the mining, agriculture, energy, infrastructure sectors apply to all legal clients in the Corporate and Commercial segment actively managed with financing products3 at Garanti BBVA. The norms for General Non-Financed Activities & Customers, Decarbonization Targets - Coal Exit and Defense Industry sectors apply to Garanti BBVA's legal clients in all segments, including SMEs.

For the purposes of this Standard, general non-financed activities & clients and nonfinanced activities for mining, agriculture, energy, infrastructure and defense industry sectors have been identified and evaluated under two separate sub-headings as clients and projects. In this scope:

• Clients: Financing will not be provided to prohibited clients in the defense industry sector. In the mining, agriculture, energy and infrastructure sectors, a due diligence process will be applied, which includes a commitment/monitoring plan with measures to understand and improve the current situation of the client or the points at which the relationship with the customer should not be initiated.

For coal operations in the mining and energy sectors, the norms in section 4.8 of this Standard shall be followed.

• Projects⁴: If Garanti BBVA concludes that any of the circumstances described in the sectoral norms or general non-financed activities and customers apply to a project, it will not take part in that project.

3. General Principles

3.1 The Policy underlying this Standard takes into account the following principles:

• Integrity
• Prudence in risk management
• Transparency
• Achieving a profitable and sustainable long-term business
• Creating long-term value for all stakeholders.
• Compliance with applicable law at any given time.

¹With the exception of section 12 "Decarbonization objectives: thermal coal sector provisions ", whose scope is defined therein.
² Although this Framework is applicable to new clients and new projects from its publication date, and not to existing ones as they refer to pre existing contractual relations, it is intended that the process of reviewing existing customer stock (in accordance with the scope set out in this document) is carried out on a best effort basis.
³ This Framework covers the following products and service: corporate loans, structured finance, including project finance, acquisition finance, bridge financing and bond underwriting.
⁴For the purposes of this Framework, projects will be understood as project finance transactions or other financing transactions with a specific purpose in any of the affected sectors.