Sustainability in Garanti BBVA Sustainable Products

Sustainability in

Garanti BBVA

Sustainable Products

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Main Focus Areas

CLIMATE CHANGE INCLUSIVE GROWTH

Helping our customers change their behavior and move towards a greener future

Here are our three business initiatives where we aim to increase the investments needed to manage the climate change challenge:

- Energy efficiency (technology that reduces energy consumption per unit of product)

- Circular Economy (recycling, new materials, responsible use of natural resources, etc.)

- Reducing carbon emissions(renewable energy sources and other clean energy sources, electric vehicles)

Promoting economic growth that leaves no one behind and creates opportunities for all

Here are our three business initiatives where we aim to build inclusive infrastructures and increase the investments needed to support inclusive economic development:

- Providing financial services in line with the needs of society with digital solutions without banking services

- Financing inclusive infrastructures with a focus on essential services and safe, affordable and sustainable transport systems.

- Supporting entrepreneurs

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BBVA Group 2025 PledgeThe BBVA Group has committed to provide EUR 200 billion in financing to combat climate change and support sustainable development by 2025. (2021)

Climate Change

Support for SDGs

Inclusive GrowthAs of 31 March

2021, 59 billionEUR financing was

provided within the scope of this

target.

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Transitionto Low Carbon Economy

Sustainable FinanceE&S Risk Management

Prioritizing renewable energyprojects and ve putting a shadowprice on carbon

Reducing defrostretation

Creating Green Office Standards

Managing water-related risks

Environmental and SocialImpact Assessment Model

Sectoral Principles

Environmental and SocialLoan Policies

Decarbonizationof thePortfolio

Brain storming about thesectoral needs

Creating awareness andincreasing capacity

Innovative financingmechanisms such as; GreenLoan, Sustainability-linkedLoan etc.

Climate Change Action Plan

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Sustainable FinanceADAPTATION TO INTERNATIONAL RULES

EU Green Deal, Taxonomyand Green Bond Principles

ICMA Green, Social andSustainability-linked Bond Principles

LMA Green andSustainability-linked LoanPrinciples

https://www.lsta.org/content/green-loan-principles/

https://www.icmagroup.org/assets/documents/Regulatory/Green-Bonds/LMASustainabilityLinkedLoanPrinciples-270919.pdf

QuickLook-Garanti BBVA Sustainable Finance Solutions6

Environmental Social Governance

Renewable Energy Financing

Rooftop Solar Product for Retail and Commercial

Building Insulation Product for Retail

Green Auto Loan

Green Mortgage

Climate Index

Shopping Loan for Energy Efficiency

Green mode (Upcoming)

SDGs Impact Analysis Tool for Enterprises (Upcoming)

Women EntrepreneursProgram (since 2006)

Gender Loan (First in theWorld in 2019 and in 2020)

Financial Health Advisory

Disabled- Friendly Banking

NET Savings Account & Inclusion Products

Cardless Transactions through ATMs

A BoD member is leadingperiodically held theResponsible Banking & Sustainable FinanceCommittee

Integrated Annual Report (since 2017)

Included in 11 Sustainability Indices in 2020

28 Participation in sustainability relatedinitiatives and memberships

Strategic Priorities in 12 Workstreams

Green / Sustainability Linked Loans (ESG)

Green / Sustainability Linked Bonds (ESG)

3 ESG Related Funds (ESG)

ESG-linked SyndicationLoan (World’s First)

Green IPO (ESG) (World’s First)

First of a kind Green / Sustainable Supply Chain Finance –(upcoming)

Hybrid

EPC Contracto

r

Garanti BBVA

Mobile

RooftopSolar

POS machine

Individuals

ROOFTOP SOLAR - INDIVIDUAL

Innovative Products - Example

Market makerin SF

43 Existing SF Solutions

Allows customers to receive an easy & fast financing for their rooftop solar investments through Shopping Loan Mechanism

We developed an innovative financing mechanism to promote rooftop solar installations

Mobilized 3.6 bnTL to pledge by June 21 YTD

51 bnTL contribution to SF as of Dec’20

Landmark Deals - Examples

TL 151,200,000

May, 2020

USD 700,000,000

ESG-linked Syndicated Loan

May, 2020

Auditor Coordinator

EUR 650,000,000

Sustainability-linked Loan

Sept, 2020

Rating Agency

TL 811,018,951

Green IPO

Apr, 2021

Rating Agency

Bookrunner

Gender Loan

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DetailedLook-Garanti BBVA Sustainable Finance Products

We have been offering since 2017.

We make it available for residences in buildings with B and higher Energy Performance Certificates or international green building certificates such as LEED, BREEAM.

As of the end of 2020, the total disbursement was 520 million TL.

We have been offering since 2017.

We use it for hybrid and electric vehicles.

As of the end of 2020, the total disbursement was 34.7 million TL.

Green Mortgage

Green Auto Loan

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Garanti BBVA Sustainable Finance Products cont’dExisting Green Only Products

Retail Roof SPP

Easy and fast Roof SPP loan with Shopping Loan

Individuals EPC Contractor

Garanti BBVAMobile

Roof SPP

Roof SPP Loan in 5 min

POS machine

Non-Garanti BBVA customers will also be able to use digital on-boarding.

Building InsulationProduct

POS machine

Individuals Garanti BBVAMobile

Insulatedbuilding

Easy and fast buildinginsulation with Shopping Loan

Insulation Loan in 5 min

Non-Garanti BBVA customers will also be able to use digital on-boarding.

Insulationfirm

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Garanti BBVA Sustainable Finance Products cont’d

Sustainability Funds

To the stocks included in the BIST Sustainability Index and the participation shares of the exchange traded funds established to follow the BIST Sustainability Index; A Sustainability Equity Fund that accounts for at least 80% of the portfolio

The purpose of the fund; mainly by including the partnership shares in the BIST Sustainability Index in the fund portfolio; Investing in companies of a certain size in Turkey and gaining capital gains

Current fund size TL 3.8 million

At least 80% and continuously; Garanti BBVA has developed a fund that invests in capital market instruments of domestic and foreign companies operating as producers, developers, distributors and/or founders of clean, renewable and/or alternative energy.

Fund, with the theme of Clean Energy; aims to support investments in companies operating in these types of energy, which are at a very limited level compared to fossil fuels that are harmful to the environment and whose importance is increasing day by day, and to offer reasonable returns to investors who enter the fund with the investments made.

Current fund size TL 106 million

In this fund, which will mainly include foreign assets, at least 80% of the total value of the fund will consist of companies with high performance in ESG issues.

It is invested in funds investing in capital market instruments issued by companies within the scope of the 'BIST Sustainability Index', exchange traded funds based on this index or other mutual funds with the theme of 'Sustainability'.

If abroad, it is invested in the shares of foreign exchange traded funds based on ESG, Sustainability and/or SRI (Socially Responsible Investment) themed indexes created by S&P or MSCI.

Current fund size TL 153,000

Sustainability Equity Fund Clean Energy Mixed Fund ESG Sustainability Fund Basket

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Content to reduce carbon footprint

Orientation to green products

Forwarding to Digital Banking (Digital approval/instruction, e-receipt/receipt, digital numbering instead of g-matic…)

Data will be included:

Bill payments (water, natural gas, electricity)

Credit cart payments

Mobile app usage

Demonstrating the contribution it will make to the nature and its budget with the actions it takes/will take (TL savings, CO2 emission reduction…)

Automatic updates

Product/campaign withadvantages

An infrastructure where we will inform customers about their environmental footprints and share suggestions to reduce this through Garanti BBVA Mobile.

Environmental impacts will be calculated on invoices with automatic payment orders and credit card expenditures.


New Sustainability Products (Green Only)

Green Mode

Carbon FootprintCalculation

Advice & Action Motivating

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Green Only New Sustainability Products

White goods made from recycled materials

White goods manufactured or refurbished using recycled materials

Through shopping loan and Bonus Credit Card

Energy efficiency products

Equipment Purchases

Investments to replace existing equipment

Energy Efficient white goods

Purchases of white goods with energy class A and above

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Green Only Existing Products

Corporate Roof SPP

Energy efficiency product in industry

Mini YEKA loans

SME and CorporateCustomers

SPP Firms(Approved by Garanti

BBVA)

Garanti BBVA Turnkey Roof SPP installation

List of companies to be approved by PF Energy Team Fast and easy SPP loan process for SME and Commercial customers50% advance, 50% post installation

One week

Only Green New Products

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Renewable Energy Financing

USD 244 million for Solar Power Plant (SPP) Projects 326 MW total installed capacity*

As of 31.12.2020* When fully engaged

100% RE financing on new Project Finance

loans since 2014

5.6 billion USD RE financing amount

provided to date

7.2 million tCO2e Total amount of avoided emissions in 2020

Market Leader with 24.7% market share in

RES financing


USD 2.66 billion for Wind Power Plant (WPP) Projects 2,553 MW current installed capacity 2,796 MW total installed

capacity*

US$ 263 million for Geothermal Power Plant (GPP) Projects 337 MW total installed capacity*

USD 57 million for Biomass Power Plant Projects 58 MW total installed capacity*

USD 2.42 billion for Hydroelectric Power Plant (HEPP) ProjectsTotal installed power of 3,014 MW fully operational

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Sustainable Debt

New Sustainability Products

ESG-linked Syndication Loan

KPIs recommended by various banks

Disbursement target in Sustainable Finance

Sustainable Number of Products Target

Sustainable Number of Products Target

Target for water consumption

Digital transformation and customerexperience: NET Promoter Score target

Sustainable Bonds

To the contents of the new Second Party Opinion Report:

10 new green category,

5 new social category,

Opinion in line with the BBVA SDG Bond Framework and ICMA Green and Social Bond Principles will be given by VigeoEiris

We are expanding the scope of our Second Party Opinion Report for our Green and sustainable Bond issuances in 2021 and beyond


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Garanti BBVA Climate Index

Companies with a CDP Climate Change score of B- and above were included in the index.

The index will be updated once a year.The liquidity rule is applied in the selection process.

Stocks with an average daily trading volume of 10 million TL or more in the last 1-year period are included.

Index calculations are made by BIST. Current index value: 975,46

We will be able to develop index-based funds and differentiated products.We will be able to get license fees from companies that want to use the index to develop products.

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Green IPO

It is the first ever green public offering by a green company.

The portfolio to be used in the public offering must comply with the green taxonomy and the positive effect of the portfolio must be confirmed.

The firm received a sustainability rating audit from the international rating agency Vigeo Eiris for the public offering process.

Also added that it has made commitments on environmental and social issues in the prospectus, which is the official document submitted to the CMB in addition to its sustainability rating.

Environmental and

Social Risk

Assessment

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Environmental and Social Loan Policies

ESLP is the first step of the process to be implemented to determine the environmental and social impacts of loans.

Within the scope of the policy, the principles in the three main sections listed below are applied.

Control of Unfunded Activities and Customers

Activities prohibited and restricted by national legislation and international conventions to which Turkey is a party are not financed.

Non-Financial Performance andIdentification of PotentialRisks

In order to eliminate, reduce and manage the Environmental & Social risks of projects with a certain financial limit and feature,

Environmental and Social Risk Assessment Process

OHS Risk Assessment System and

Deforestation Impact Management Process

A detailed evaluation of the projects for which credit will be provided is carried out.

Non-Financial PerformanceManagement

Garanti BBVA's General Loan Agreements and Banking Service Agreements contain commitment clauses on Environmental and Social issues.

Additional commitments related to Environmental, Social, OHS and Afforestation, which are deemed necessary as a result of detailed evaluation, are included in the loan agreement.

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Garanti BBVA Environmental and Social Impact Assessment Process-1

1 2 3 4 5Project Finance Corporate Loans used for a

specific Project or Investment

Bridge Loans Consultancy Refinancing and Purchase Loans used for a specific

Project or Investment

All project financeloans

The majority of the loan should be related to the project in which the borrower has effective operational control.

The total amount of the loan and Garanti BBVA participation (before the syndication sale) is at least USD 50 million and above.

The loan term is a minimum of two years.

The lender anticipates that the main source of repayment of the loan is mainly derived from the project.

Bridge loans with a loan maturity of less than 2 years that are planned to be refinanced by Project Finance or Project-related Corporate Loans

Consultancyservices regardingProject Finance transactions

Projects that meet the following three criteria:

The related Project has been financed in accordance with the Equator Principles framework.

There was no significant change in the scale or scope of the project. The project is not yet completed at the stage of signing the loan agreement.

It applies to the five main financial transactions described below.

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Garanti BBVA Environmental and Social Impact Assessment Process-2 Loan Demand

Environmental & Social Loan

Policies

Not in line with

Policies

(REFUSAL)

Equator Principles financial limit & ESIAM

Sectoral PrinciplesNot in line with

Principles

(REFUSAL)

Project Categorization

(A / B / C)

Environmental & Social Impact Assessment Model

(ESIAM)

Final Action Note 1:

Appointment of Independent

Advisor

(Environmental & Social Action

Plan+ Periodic monitoring)


Optional Action-Appointment

of Independent Advisor(Environmental & Social Action Plan+

Periodic monitoring)


No actions required

Loan Committee

RE- ASSESSMENT APPROVAL REFUSAL

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Garanti BBVA Environmental and Social ImpactAssessment Process-3

The ESIAM Model was established in 2012. In the model, question sets were prepared for 19 different sectors*.The model consists of 3 stages:

1. Defining project category

(A, B, or C)

2. Answering the question sets and determining the risk level

(R1, R2, R3 or R4)

3. Determination of Final Action Rating by category and risk level

(1, 2 or 3)

*Industries: HEPP, TES, WPP, GPP, SPP, Cement-Glass-Ceramic, Petrochemical, Chemistry, Machinery-Metallurgy, Agri-Food, Textile-Leather, Paper, Waste Evaluation, Mining, Petroleum-Natural Gas, Infrastructure, EIH, Housing -Shopping Mall, Tourism

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ESIAP MODEL

1 Deciding on projectcategory

2 Determination of risk levels

3 Determining the Final Action Grade

An independent consultant is appointed. E&S DD Report is requested.

An independent consultant is appointed. E&S DD Report is requested.(optional).

No action is taken.

Garanti BBVA Environmental and Social Impact Assessment Process-3

As Garanti BBVA, we will zero our coal risk until 2040, at the latest, in line with the following actions, with our goal of combating climate change and transitioning to a low-carbon economy.

• The new coal plant will not be financed.

• The new coal mine will not be financed.

• There will be no increase in the limit for coal.

• By 2040 at the latest, all coal exposures, including PF loans, will be closed. (Except NPL.)

Garanti BBVA’s

Pioneering Works

We are the only bank to receive an invitation from Turkey to write the UNEP FI Principles for Responsible Banking.

BSCD Turkey Chairman of the Board

We are a member of the UNGC Turkey Board of Directors

Sustainable Finance Working Group co-chair

We pioneered the creation of the Declaration on Sustainable Finance

Main Sponsor for CDP TurkeyThe first and only member from Turkey to the NBZA

8 signatories from Turkey representing approximately 40% of the asset size

The only bank and the first signatory from Turkey invited to

write the Principles200 signatories worldwide 8 signatories

from Turkey

UNEP FI Principles for ResponsibleBanking

Declaration on Sustainable Finance

We are members of 27 platforms working on sustainability issues.

The first and only member of Net Zero Banking Alliance from TurkeyEngagement Platforms

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Garanti BBVA’s CommitmentsNET ZERO BANKING ALLIANCE

NZBA commitments:

Align their portfolios with a net zero emissions path by 2050

Setting 2030 and 2050 targets with interim targets to be set every 5 years from 2030 within 18 monthsFocus the initial 2030 targets on carbon-intensive sectors where the bank can have the most significant impact

Coal, oil and gas, transportation, etc. Setting sector-level targets for all or most carbon-intensive sectors, such as

Engaging customers for their own transition and decarbonisation, and fostering the transition to a net zero economy

Reporting on an annual basis, emissions in line with best practices and progress against transition strategy and climate-related sectoral policies

Adopting a carbon offset approach

Garanti BBVA has become the first and only Turkish signatory to the United Nations Net Zero Banking Association, which brings together 53 banks from 27 countries that have committed to aligning their lending and investment portfolios with net zero emissions by 2050!

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Garanti BBVA Commitments cont’d

SCIENCE BASED TARGETS & BUSINESS AMBITION FOR 1.5°C Science Based Targets; CDP is a joint venture of the UN Global Compact (UNGC), the World Resources Institute (WRI) and WWF.

The initiative provides a step-by-step guide to the implementation of the objectives. First, businesses are asked to sign a commitment letter stating their commitment to setting a science-based goal.

Companies then have 24 months to fully develop the target. After a goal has been developed, the 'Target Submission Form' should be submitted. This form then verifies whether the target has been formally approved or requires additional work.

In June 2016, we uploaded our letter of commitment to SBTi, which is working to set scientific emission reduction targets in line with the 1.5°C target of the Paris Agreement.

At the beginning of 2021, we announced our absolute emission reduction target in line with the 1.5 degree target within the scope of the Science-Based Targets methodology. We have committed to reduce Scope 1 and Scope 2 emissions by 29% by 2025 and by 71% by 2035.

In 2020, we reduced the emissions caused by our operations by 75% and purchased carbon credits for our remaining emissions, and we achieved our 2035 target as carbon neutral 15 years ago. Now we are working towards more ambitious goals.

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PACTA Metodolojisi

Sector PriorityOil&Natural Gas

CoalEnergy

AutomotiveIron and

SteelCement

R CodePython Code

Katowice Banks: BBVA, Standard Chartered, ING, Societe Generale, BNP Paribas

We will align our loan portfolio with the Paris Climate Agreement

IFRS9 2DII

Sustainability

Indices

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Sustainability Indices

As Garanti BBVA, we are included in 11 Sustainability Indices.

We are the only company from Turkey that has been in place for 6 consecutive years

We are the only bank in Turkey

We are the only company from Turkey to be included in the index for 5 consecutive years.

We are the only bank in Turkey

[email protected]

mailto:[email protected]

Sustainability in Garanti BBVA Sustainable Products

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