Company: BCDRF
Filing Date: 2025-03-03
Form Type: 6-K
Source: 0000891478-25-000057
Chunk: 163

Company: Banco Santander, S.A.
Filing Date: 2025-03-03
Form: 6-K
Chunk 163
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236 2024 Pillar 3 Disclosures Report

| Index |     | Introduction |     | Capital |     | Risks |     | Risk taker's remunerations |     | Appendices |

3.

#### Internal climate models
Detailed below is an overview of our internal climate model:

Our internal climate models enable us to quantify the financial impact 9 of transition and physical risks that we monitor through changes in PD and LGD metrics. Our model estimates the direct and indirect impact of macroeconomic and climate variables, market trends and regulatory expectations. This model takes a bottom-up approach by considering each client's financial situation and technology. Where we don’t have specific customer information, we use a top-down approach by sector and geographical location.

The development of internal models allows us a high degree of flexibility and capacity for analysis and adaptation to our portfolios, including its characteristics and maturities, to new economic and regulatory requirements. The main features are briefly described below:

A. Scenarios are based on those published by the NGFS 10 and Representative Concentration Pathways (RCPs), developed by the Intergovernmental Panel on Climate Change (IPCC) which are reference in the sector. Moreover, our Research department embeds and broadens external scenarios to more specific variables by country and sector to achieve thorough vision aligned to our portfolios.

B. Physical risk impact considers the financial impact of acute and chronic risks, as well as long-term changes in

weather patterns to give us a wide range of events that we assess at regional level. For these financial impacts, we use data from an expert reinsurance company, considering scenarios across different time horizons. We include physical risk impact through:

– Chronic: impact on companies' revenue due to chronic physical effects (e.g. change in productivity).

– Acute: increase in costs due to damages to companies' assets from extreme weather events.

C. The impact of transition risk, relates to changes in drivers such as climate policies, technology and investor and consumer sentiment that can affect demand, which affects customers on an individual basis. Therefore, depending on the level of information available, we carry out a bottom-up or top-down approach.

D. Counterparty forecasts, which reflect the changes in the financial ratios included in the credit risk rating models and are based on forecasted revenues and costs under the different scenarios, including physical and transition risk impacts. The projected ratings give us the associated PD to the counterparty. Lastly, the LGD is estimated