BBVA in 2012

Management of ESG risksBBVA integrates “ESG” variables into its risk management system. The ESG (environment, socialand corporate governance) variables aim to manage extra-financial risks that can affect the creditprofile of a borrower or financing project and may threaten the repayment of the debt. This issummed up in the following lines of action:• Ecorating: BBVA uses the Ecorating tool to value the risk portfolio of companies from anenvironmental point of view. It assigns each customer a level of credit risk according to acombination of various factors such as location, polluting emissions, consumption of resources,potential to affect the environment or applicable legislation. In 2012, BBVA has analyzed theenvironmental risk of 200.771 customers in Spain using the Ecorating tool• Equator Principles. These are global standards for determining, assessing and managing ESGrisks when providing finance and advice for investment projects with a capital cost of overUSD 10m. The criteria emanate from the performance standards of the International FinanceCorporation and have been developed by the most active banks in project finance worldwide.BBVA does not take into consideration this minimum threshold, but rather applies the principlesto all transactions, irrespective of the amount and the destination or allocation of the funds:not only to new projects or significant expansions, but also to project funding, acquisitions,refinancing, etc. As for the scope by product, BBVA extends them to consulting, bridge loans,projects in operation, project bonds, assignment of credit rights and buyer’s credit.• Activity with multilateral banks for regional development. In 2012, BBVA maintained closeinstitutional and business relations with Multilateral Financial Institutions (MFI) which contributeto regional development, including the World Bank, the European Investment Bank (EIB), theInter-American Development Bank (IDB), the Andean Development Corporation (ADC) and theEuropean Bank for Reconstruction and Development (EBRD). These institutions require that therecipients of their funds have in place environmental, social, ethical and corporate governancerisk management systems. The activities carried out during the year include: international tradefinancing, co-financing of projects, financial intermediation transactions, debt issues on localcapital markets and trading floor operations.• Sector policies. Since 2005, BBVA had a policy on the financing of the defense sector whichunderwent a major review in 2011. All of the Group’s areas involved took part in the process,with advice from worldwide experts in the field and dialog with the most relevant stakeholders.The result of this work has been the defense-related policy approved in 2012, which expandsthe scope of the previous one and enhances it in terms of clarity and simplicity, guaranteeingcompliance and traceability in line with the needs revealed by the Bank’s internal audit.128 Risk management