Company: BCDRF
Filing Date: 2025-02-28
Form Type: 20-F
Source: 0000891478-25-000054
Chunk: 819

Company: Banco Santander, S.A.
Filing Date: 2025-02-28
Form: 20-F
Chunk 819
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 liabilities, expenses, assets or contingencies of a material relevance to its consolidated equity, financial situation and results. Most exposures in sectors potentially affected by climate change risk, according to market consensus and to the execution of our materiality assessment, are with wholesale clients, whose preliminary reviews, credit approval and credit ratings take such risk into account. Customers’ ratings determine the parameters for calculating loan loss (typically in terms of probability of default or PD). Thus, when climate factors are relevant, in conjunction with other elements of analysis, they have an impact on the loan loss calculations which support capital and provisions. Additionally, potential future losses due to climatic events, such as the floods suffered in Valencia at the end of October 2024, have been considered through an overlay, which is not material compared to total Group loan loss reserves. Additionally, Grupo Santander has participated in different regulatory and supervisory climate stress exercises carried out recently. In particular, in the latest scenario analysis exercise (Fit-for-55) carried out by the European Banking Authority (EBA), the results highlight the resilience of the banking sector to climate-related shocks under the scenarios analysed and, in particular, indicate that first-round losses have a limited impact on the financial system. All this is consistent with the previous top-down stress test exercises carried out by the European Central Bank (ECB), across relevant time horizons. In the aforementioned exercise, the EBA points out the importance to include climate risks in risk management. In this sense, the Group continues working to embed climate and environmental aspects into management, adopting a risk-based approach to those factors, focusing on the most material sectors. We consider the risks stemming from climate and environmental factors in the overall risk management cycle, including a materiality assessment that informs our sustainability strategy. For more information, see the Sustainability Statement in this report. Therefore, based on the best information available at the time these consolidated annual financial statements were prepared, the Group sees no additional environmental or climate change risk having a substantial impact on its equity, financial situation and results in 2024.

Annual report 2024 788

| Contents |     | Auditor's report |     | Consolidated financial statements |     | Notes to the consolidated financial statements |     | Appendix |

Still, this matter is constantly changing, and, like other banks, the Group is working on developing more methodologies to better measure potential loan loss considering the idiosyncrasies of each of the regions in which the Group is present regarding management, best industry practices and regulatory/supervisory requirements.