2. Non-financial Information Report

Pursuant to the Commercial Code and the Capital Companies Law, the consolidated Non-financial information report includes, but is not limited to: the information needed to understand the performance, results, and position of the Group, and the impact of its activity on environmental, social, respect for human rights, and the fight against corruption and bribery matters, as well as employee matters.

Reporting of the non-financial key performance indicators included (KPI) in this consolidated non-financial information report is performed using the GRI (Global Reporting Initiative) guide as an international reporting framework in its exhaustive option as well as Communication from the Commission of July 5, 2017 on Guidelines on non-financial reporting (methodology for reporting non-financial information, 2017/C 215/01). For easier location of these indicators, the tables related to compliance with the requirements of Law 11/2018 and the GRI, with reference to each of the sections of this Non-financial information report where the information is disclosed, are included in the chapter "5.2 Compliance tables" of section "5. Other information".

The information included in the consolidated non-financial information report is verified by KPMG Auditores, S.L., in its capacity as independent provider of verification services.

Additionally, it should be noted that this consolidated "Non-financial information report" includes indicators that are in line with those required by other international standards, as detailed in the section "Alignment of BBVA Group's non-financial information to WEF-IBC and SASB standards” of the chapter “2.4 Additional information”.

2.1 Strategy

2.1.1 Strategic priorities

At the end of 2019, BBVA approved its current strategic plan, which anticipated many of the main global trends that have been accelerated by the pandemic. These trends include the mass digitalization of all sectors and activities, boosted by the change in consumer habits. Beyond the use of digital and remote channels, there has been an unprecedented wave of disruptions encouraged by technology and data. It is an era of real opportunities supported by new technologies such as artificial intelligence, cloud processing, quantum computation, blockchain technology, etc., which are transforming the economy and will have a major impact on economic growth and productivity.

The decarbonization of the economy to limit the effects of climate change is the main and most important disruption of all. The challenge of achieving the net zero emissions target by 2050 requires a drastic modification of habits and behaviour, together with the deployment of non-carbon emission technologies in all sectors, not only energy. Unprecedented levels of innovation and investment are required to achieve this; according to some estimates³ , in the order of 5% of global GDP until approximately 2050.

The acceleration of these trends validates the strategy pursued by BBVA. It is a strategy based on a single purpose: "to bring the age of opportunity to everyone." Thanks to innovation and technology, the Bank provides access to products, advice and solutions that help customers make better decisions on their finances and achieve their life and business goals.

Guided by this purpose, BBVA's strategy is built around six strategic priorities:

1. Improving our clients’ financial health

BBVA aspires to be its clients’ trusted financial partner, helping them to improve their financial health by offering personalized advice based on technology and the use of data.

Money management is one of the greatest concerns for people. BBVA wants to help its customers improve their financial health in two ways:

• -   First, by supporting them in the day-to-day management of their finances, helping them understand and be aware of their income and expenses, management of future needs, capacity to save, etc.
• -   Second, by advising them how to achieve their life and business goals in the medium and long term.

2. Helping our clients transition toward a sustainable future

BBVA wants to help its clients transition toward a more sustainable future with finance, advice and innovative solutions, with the focus primarily on two areas:

• -   Climate action: mobilizing the appropriate resources to manage the challenge of climate change.
• -   Inclusive growth: mobilizing the investments needed to build inclusive infrastructures and support inclusive economic development in an equitable way that leaves no one behind.

BBVA considers that the commitment to sustainability is not only a challenge that requires an urgent response, but also an important opportunity for business. The energy transition, in particular, will require major investments over the coming decades to replace fossil fuels with other cleaner and more efficient sources of energy. This will have an impact on practically all industries, and also on how people move, consume or arrange their homes.

3. Reaching more clients

Scale is increasingly critical in the banking business. BBVA aims to accelerate profitable growth, supporting itself through its own channels and where the customers are (in third-party channels), with a special focus on digital and more profitable segments.

In this respect, the focus of profitable growth for BBVA over the coming years will be activities such as payments, insurance, asset management, value segments such as SMEs and private banking, as well as the activities of Corporate and Investment Banking (CIB).

4. Driving operational excellence

BBVA is committed to providing the best experience possible and is transforming its model of customer relations to adapt to changes in client behavior. To do so, it provides access to its products and services through simple processes. The role of the commercial network is increasingly more focused on transactions of greater added value for customers. Interactions of lower added value are redirected to self-service channels, thus reducing unit costs and increasing productivity.

The transformation of the relational model is accompanied by a change in the operational model, focused on process reengineering in the search for greater automation and improved productivity, as well as speedy delivery to the market of new products and functionalities.

This is without forgetting disciplined management of both financial and non-financial risks and optimized use of capital.

5. The best and most engaged team

The team continues to be a strategic priority for the Group. A diverse and empowered team, with an outstanding culture, guided by the BBVA purpose and values and driven by a model of talent development which provides growth opportunities for all.

6. Data and technology

Data and technology are obvious accelerators to achieve our strategy. The commitment to developing advanced data analysis capacities, together with secure and reliable technology, allows the creation of outstanding high-quality solutions

The use of data and new technologies also generates the opportunity for increasingly global processes which can be used in the different geographies and are easily scalable, thus reducing the unit cost of the processing.

BBVA continues to make progress in the development of an increasingly robust model of security and privacy (cybersecurity, business processes, fraud and data security).

To monitor progress in the execution of the strategic priorities, a set of strategic metrics or key performance indicators (KPIs) have been defined.

These indicators are linked to financial ones , such aso the net attributable profit, the tangible book value per share (TBV) or the efficiency ratio, as well as to non-financial ones, such as those referring to customer satisfaction (NPS), the channeling of sustainable finance or the digital sales.

These strategic KPIs are integrated into the different management processes of the Group, such as the planning and budget process, in the prioritization of resources and investments, as well as for the purposes of the variable remuneration system.

³ OECD/The World Bank/UN Environment (2018), Financing Climate Futures: Rethinking Infrastructure, OECD Publishing, Paris

2.1.2 Our objectives

The goal of executing this strategy is:

• -   To be a larger and more profitable bank.
• -   To be a different bank that stands out for its outstanding value proposition.
• -   To continue to be the leader in efficiency.

In line with the strategic priorities and to monitor closely the level of progress in their execution, BBVA has defined ambitious financial and business targets over the coming years in terms of efficiency, profitability, creation of shareholder value, customer growth and the channeling of sustainable finance. These objectives were communicated on the Investor Day held on November 18, 2021.

2.1.3 Main advances in the execution of the strategy

A larger scale and more profitable bank

BBVA looks to grow by being where the customers are. That is why the Group pays particular attention to attracting customers, whether through its own or third-party channels. The Group attracted 8.7 million new customers in 2021. As a result of the improvement in digital capacities, customer attraction through digital channels has increased steadily over recent years, and in 2021 reached an all-time high at over 3.5 million, accounting for 40% of all new customers.

Digital customers at the close of 2021 accounted for 69.4% of the total, at 41.8 million (up 37% from December 2019). Mobile customers have grown by 42% since December 2019 over the year to 39.7 million and account for 66% of the total. Digital sales now amount to 73% of the total units sold ⁴.

A key aspect to increasing scale and competitiveness is investment and innovation in new technologies and disruptive business models. The Group invests in the development of universal digital banking solutions to respond to the changing needs of customers, with a focus on new and attractive markets. For example, in 2021 the Group completed the launch of its 100% digital business in Italy. It is a milestone that BBVA has achieved with the support of the Bank’s infrastructure in Spain and its mobile app which is a leader in Europe.

To search for profitable growth, BBVA focuses on the acquisition of customers in the high-value and relevant vertical product segments, to boost the Group's results:

• -   Small and medium sized enterprises (SMEs)

In 2021, the income generated in the SME segment has provided 13% of gross income, making it a key segment for the Group. In 2021 the Group has worked to implement measures to improve remote capacity and boost this segment further. Specifically, it has extended its catalog, with a 100% digital product offering in all key products, and has made progress in the development of risk models, allowing it to make more proactive offerings to customers. At the close of 2021 around one out of every three BBVA customers received a proactive offer.

• -   International corporate banking

BBVA Pivot was launched in 2021, renewing the offer of services for multinationals with a digital solution that facilitates the management of the daily activity of companies. This unique solution operates in 15 countries via a centralized system, allowing the activation of cash management services in all necessary markets and via the channel of choice for payments, collections, supply chain finance, unique account position, syndicated loans, settlement of expenses and cards, etc. The service operates for companies active in South America (Argentina, Peru, Colombia, Uruguay, Venezuela and Chile), Spain, Turkey, Belgium, France, Portugal and the United Kingdom, and also in Mexico, the United States and Hong Kong.

• -   Payments

BBVA wants to be a key partner for retailers, allowing them to sell more and more securely. This implies having payment solutions in the real world, but also with accessible and innovative e-commerce solutions. To do so, BBVA offers not only traditional payment products, but also high-value solutions at the point of sale (buy now, pay later or BNPL), and finance linked to revenues from the point-of-sale (POS) terminal.

In Mexico, BBVA has Openpay, the biggest cash payment processing platform in the country with the broadest cover. In addition, Openpay is available in Colombia and Peru, and will be soon in Argentina.

In the segment of individuals, BBVA has also made innovative products available to its customers. One example is the Aqua card, a more secure and smarter card, with no embossed numbers and a dynamic card verification value (CVV) that offers the highest level of security in online purchases.

• -   Insurance

BBVA has strengthened its capacities by reaching agreements with the main global insurance groups to enable its customers to receive modern products and services. In 2021 some alliances were strengthened in Spain and Peru and new agreements were reached in Argentina, Mexico and Colombia. The Group's aim is to have the best capacities in each geographical area for its customers.

• -   Private banking

BBVA offers its Private Banking customers personalized, comprehensive and increasingly global specialized advice with an innovative value offering, in which ESG factors play a very important role. As a result, in 2021 BBVA was named best private bank in the world in responsible investment by Global Finance. Moreover, in 2021 the Private banking unit in Spain was recognized as the best private bank in the world in digital customer service by PWM/Financial Times Group.

In addition, BBVA continues with its firm commitment to the entrepreneurial ecosystem by:

• -   Investments through risk capital vehicles such as Propel Venture Partners and Sinovation Ventures, which help position the Bank in new markets with potential for significant growth. Propel, with an independent management located in San Francisco, is a vehicle for investment and also a way of gaining knowledge of the fintech ecosystem. It has invested in over 40 companies, 6 of which have reached the status of unicorn and 2 of them (Coinbase and Docusign) have had successful stock market launches. Sinovation is a leading manager in China focused on developing the next generation of high-technology Chinese companies based on artificial intelligence.
• -   BBVA thus offers support to companies with high growth potential in innovative sectors related to new technologies in all markets in which it operates, with specific products, advice and finance to cover their needs across the whole life cycle.

A different bank that stands out for its differential value proposition

BBVA offers its customers a unique value proposition, providing advice for making the best financial decisions and helping them in their transition towards a more sustainable future. This value proposition gives a premium experience which has a direct impact on customer satisfaction.

In fact, BBVA occupies the leading positions in the NPS⁵, as reflected in its retention figures, which show a positive trend in the levels of customer drop-outs (retail and SMEs), and a greater commitment from digital customers, whose drop-out rate is 7.4% lower than that of non-digital customers.

As of December 31, 2021, BBVA was once more leader in the retail NPS indicator in Spain and Mexico. In Turkey, it ranks second, maintaining its position with respect to 2020. In Argentina the plans implemented in 2020 and driven by Senior Management have reversed the situation of the previous year and recovered customer perception and trust. In Colombia, Peru and Uruguay, it has lost its leadership, but plans have been implemented to recover it.

In 2021, BBVA has placed a special focus on helping small and medium-sized companies recover from the impact of the pandemic, with a close and personalized service model that has positioned BBVA as the leader in the segment in Mexico, Turkey, Colombia, Peru and Uruguay, as well as Spain second, improving its position.

Meanwhile, in the commercial NPS indicator BBVA maintained its leading position in two countries: Mexico and Peru, maintaining second position in Argentina and Colombia. In Spain, BBVA has dropped from second to third position.

At the cutting edge of digitalization

Digitalization has been one of the pillars of the BBVA strategy for more than a decade, and during this time its value proposition has evolved. Initially, the Group focused on improving customer service through digital channels to make self-service systems available which allow transactions to be carried out and contracts arranged in a simple and agile way with a single click. Later on, the Group focused on the development of the necessary capacities to increase digital sales and attract new customers through remote channels. The Bank now also aims to advise its customers via data and artificial intelligence, to ensure they make the best financial decisions. In 2021 BBVA has worked to continue developing global financial health solutions.

The scope of financial health is tackled from two angles: day-to-day control; and the achievement of medium- and long-term objectives:

• First, supporting customers in their day-to-day financial concerns, helping them to have a greater understanding and awareness of their income and expenses, with solutions (such as classification and prediction of expenses, and even financial wealth) and proactive notifications in with respect to relevant events which, as far as possible, allow them to have greater control of their savings. A significant number of these solutions are already available in the BBVA geographical areas.
• And second, by advising them how to achieve their medium- and long-term goals. People's needs change over time: from the purchase of a home to saving for your children's university or planning retirement, there are long-term objectives that require support until they are achieved. Giving the advice needed to achieve these objectives is also within the scope of financial health.

Help in day-to-day control is relevant for all customers, regardless of their income and expenses. Generic rules geared to control income and expenses or review debt levels are relevant bases for managing the day-to-day of all customers, who are always given personalized recommendations. According to the financial status of the customers, the advice on the customers' financial health is also personalized.

As well as offering a personalized experience, BBVA wishes to be a trusted partner for its customers by supporting them with a proactive experience. Its goal is for customers to have peace of mind, so when an important event occurs which impacts their finances, the Bank informs them automatically.

In addition, through proactive experiences (over 50 available at the end of 2021), customers receive simple proposals which allow them to solve or mitigate these challenges if possible: for example, to make a transfer from another account if a credit card payment is expected to lead to an overdraft in the main account.

All this has made the Bank a leader in digital experience in Europe for the fifth consecutive year, according to the recent report “The Forrester Digital Experience Review TM: European Mobile Banking Apps, Q3 2021." This report identifies the leaders in mobile banking functionality and user experience, and shares the best practices from which professionals can learn. BBVA is the only Spanish bank which is a leader in the digital mobile banking experience.

Pioneers in sustainability

BBVA incorporates sustainability as part of its daily activities and everything it does, not only in relations with customers but also in internal processes. In other words, the definition and execution of the strategy, which includes sustainability and climate change as one of its priorities, cuts across the whole organization.

In 2021 BBVA created the Global Sustainability area to boost its strategy, raising sustainability to the highest executive level in the Organization. The area reports to the Chief Executive Officer and the Group Executive Chairman on matters referring to the Group's sustainability strategy.

Sustainability represents a business opportunity and is a key lever for BBVA's growth. BBVA's unique offer of sustainable products, together with its capacity for advice, give the Group a competitive advantage over other entities.

In 2021, out of the total new origination of business at Group level, 12% of new businesses have been linked to sustainability. Between 2018 and 2021, BBVA channeled a total of €85,817m into sustainable activities⁶. Of these, around 20% were an incremental business for the Bank.

This represents 43% of the target for channeling initially set in its Commitment 2025, which BBVA has doubled in 2021 to €200 billion through 2025.

FUNDS MOBILIZED THROUGH THE 2025 PLEDGE (MILLIONS OF EUROS) ⁽¹⁾

ASSETS UNDER MANAGEMENT WITH SOCIALLY RESPONSIBLE INVESTMENT (SRI) CRITERIA (BBVA ASSET MANAGEMENT. MILLIONS OF EUROS)

Climate change

In 2021, BBVA has led the issuance of green, social, sustainable bonds and bonds linked to environmental indicators for clients in several countries, which have represented a total volume disintermediated by BBVA of €6,683m. In addition, BBVA has continued to be very active in the field of sustainable corporate loans and in the financing of sustainable projects.

In 2021, BBVA achieved its commitment in Spain of offering a sustainable alternative to all its products in the retail segment. Also in Spain, in 2021 BBVA became the first entity to use data analytics to calculate the carbon footprint of all its individual customers and companies, obtaining an approximate estimate of CO₂ emissions into the atmosphere based on gas and light bills and payments for fuel.

Inclusive growth

In 2021, BBVA mobilized €4.737m as financial inclusive growth, of which €2.868m were allocated to financing social infrastructure and €1,869m were dedicated to financial inclusion and entrepreneurship.

Additionally, the Group has also strengthened its community engagement to support inclusive growth in countries where it operates, for which €550m will be allocated directly and through its support to foundations between 2021 and 2025. For more information about the commitment to the community, see the section "Community Commitment" in the chapter "Our stakeholders" in this report.

Alignment of activity to achieve net zero emissions in 2050

With respect to the alignment of its activity, BBVA has been neutral in net emissions from its direct activity since 2020 (on the management of direct impacts, see the section "Direct environmental impact management" of the chapter "Report on climate change and other environmental and social questions" in this report). The Bank has also pledged that its indirect activity, in other words through its loan and investment portfolio, will also be neutral in net greenhouse gas emissions by 2050. In April 2021, BBVA was one of the founding members of the Net-Zero Banking Alliance (NZBA).

To this end, in 2021 BBVA has continued to make progress in decarbonizing its portfolio. It has announced its intention of reducing its exposure to coal-related activities to zero, and stopping the finance of companies in these activities by 2030 in developed countries and by 2040 in the rest of the countries where it operates.

It has also set intermediate goals to decarbonize its portfolio in four emission-intensive industries, such as electricity generation, automotive, steel and cement: these sectors account for 60% of global emissions. To do so, the Bank will focus its efforts on supporting customers with finance, advice and innovative solutions in a joint effort of decarbonization. For more information, see the section "Identification, Measurement and Integration of climate change into risk management" in the "Report on climate change and other environmental issues" of this report.

A global benchmark

In 2021, BBVA has obtained the highest score (89 points) among world banks⁷ in the DJSI, which measures the performance of the largest companies by market capitalization in economic, environmental and social matters. The Group has achieved the highest score (100 points) in the sections on financial inclusion, environmental and social information, development of human capital, materiality and tax strategy.

BBVA has also been included for the fourth consecutive year in the Bloomberg Gender Equality Index, which represents recognition of its commitment to create trusting work environments, where all employees' professional development and equal opportunities are guaranteed, regardless of their gender.

BBVA is a member of the main sustainability indices (see the section "Sustainability indices").

All this is recognition of BBVA's work over more than 20 years, with its active involvement in various supranational initiatives. BBVA seeks to continue leading the international agenda on inclusion and the fight against climate change by manifesting its commitment to a number of initiatives (see the section "Participation in international initiatives").

BBA is committed to transparency. That is why, together with this non-financial information, it publishes an annual TCFD (Task Force on Climate-Related Financial Disclosures) report following the recommendations of the Financial Stability Board (FSB), as well as additional disclosures on sustainability in line with two of the most advanced market standards: the expanded WEF-IBC metrics, and the Sustainability Accounting Standards Board (SASB) Mortgage Finance and Consumer Finance standards.

Continue to lead in efficiency

BBVA works to optimize its model of customer relations and acquisition, with the aim of reaching more customers at a reduced cost. The Group aims to make available to its clients a self-service model, and thus respond to changes in consumer habits, which are increasingly digital. This is demonstrated in the growth of 24% in digital transactions on the 2020 figure, while transactions in branches fell by 20%.

This new reality implies serving more customers and generating more growth, optimizing the cost structure, with a direct and positive impact on the productivity of networks and efficiency. In this way, in 2021 the ratio of customers to branches increased by 22% and sales per network employee increased by 25% on 2019. Moreover, the Agile methodology which has been steadily implemented in the Group over recent years enables the quick and efficient creation of improved products and services for our customers. By way of example, the functionalities made available to customers via the mobile app in Spain have tripled since 2016. Another example is that the number of days it takes a work team to design a functionality, from starting the design to implementation, has fallen by 50% in Mexico over the same period. This way of banking leads to more productive and more engaged teams.

Likewise, BBVA aims to lever globalization and develop more efficient products and solutions which provide answers to customer needs. To this end, the Group has focused in recent years on increasing the reuse of technological developments and digital solutions across countries. Two examples are the mobile app for retail customers in which it has reused 75% of the programming code; and the mobile app for companies, which has been developed in less than a year by reusing 80% of the components.

This focus on operational excellence has led us to consolidate our leading position in terms of efficiency for one more year. The efficiency ratio stood at 45.2% at the close of 2021 (53 basis points better than in 2020, in constant terms) while the average of our European competitors was 62% at the close of September 2021 (the latest data available).

Optimum capital allocation is another key component of operational excellence. Here, BBVA prioritizes capital allocation to the most profitable business opportunities. Moreover, the Bank has a model through which it allocates capital individually for each operation, and the allocation is linked to a system of dynamic pricing. Thus, for each loan granted by the Group, the transaction must exceed the minimum thresholds of previously determined capital return. This distinct way of banking, where the search for profitability is present in the transaction, has had an immediate effect on the Bank's figures. Specifically, the adjusted return on risk-weighted assets (RORWA) a the close of 2021 was 2.01%, 85 basis points above the level at the close of the previous year. For more information, see section “Alternative Performance Measures (APMs)” within the chapter “Other information” of this report.

⁴ Data excludes the United States, Paraguay, Chile and Venezuela.

⁵ The internationally recognized Net Promoter Score (NPS, Net Recommendation Index) methodology, measures customers’ willingness to recommend a company and therefore, the level of satisfaction of BBVA’s customers with its products, channels and services. The index is based on a survey that measures on a scale of zero to ten whether a bank’s customers are promoters (a score of nine or ten), passives (a score of seven or eight) or detractors (a score of zero to six) when asked if they would recommend their bank, a specific channel or a specific customer journey to a friend or family member. This information is vital for checking for alignment between customer needs and expectations and the initiatives that have been implemented, establishing plans that eliminate detected gaps and providing the best experiences

⁶ As a benchmark for meeting its objectives under its Pledge 2025, BBVA uses the activities included in the section "Additional information on the Group's sustainability standards and frameworks" the Green Bond Principles and the Social Bond Principles, the Sustainability-Linked Bond Principles of the International Capital Markets Association, as well as the Green Loan Principles, Social Loan Principles, Sustainability-Linked Loan Principles of the Loan Market Association and best market practices.

⁷ Shared ranking position.

2.2 Our stakeholders

BBVA seeks to have a positive impact on the lives of people, companies and the society as a whole through its activity. For this reason, the Group has a responsible banking model and is committed to creating long-term value for all stakeholders.

A banking model governed by the following general principles:

• -   Generation of positive impact on society.
• -   Respect for the dignity of people and the rights that are inherent to them.
• -   Investment in the community.
• -   Involvement as an agent of social change.

This way of doing banking responsibly is extended to all the entities that are part of the Group and its principles are integrated into the relationship that BBVA maintains with all its stakeholders (customers, employees, shareholders and investors, suppliers, regulators and supervisors and society), as well as in its relationship with the environment and social development, its fiscal responsibility, the prevention of conduct contrary to regulations, human rights and its participation in international initiatives.

This is reflected in the different policies of the Bank and especially in the Corporate Social Responsibility Policy (hereinafter, CSR). The CSR Policy was approved in 2008 and last updated by the Board of Directors in 2020 with the aim of adapting it to the Bank's strategy and is available for consultation on the Group's shareholders and investors website

2.2.1 Materiality analysis: the most relevant issues for stakeholders and BBVA

To generate value for its stakeholders, BBVA carries out a regular analysis called the "Materiality analysis" which helps prioritize the most relevant issues for both, stakeholders and BBVA. The materiality analysis was carried out in 2020, and its main conclusions were valid for 2021. It includes the point of view of the stakeholders in the main countries in which BBVA operates: Spain, Mexico, Turkey, Argentina, Colombia and Peru ⁸.

The results of the analysis are reflected in the following matrix:

The four material issues with greatest importance now and over a longer time horizon, for both stakeholders and BBVA's business strategy, are as follows:

• -   Climate change: Climate change is among the main concerns for stakeholders, and they hope that BBVA will contribute to an ordered transition toward a low-emission economy. This requires an adequate management of risks and opportunities.
• -   Solvency and financial results: Stakeholders expect BBVA to be a robust and solvent bank, thus contributing to the stability of the system. They also expect BBVA to generate good results over time. In other words, they demand a sustainable business model in the current ecosystem.
• -   Easy, fast and do it yourself (DIY) service for customers: Stakeholders expect BBVA to continue to put technology and digitalization at the service of customers and the business, so they can operate in a simple and agile way at any time and in any place (mobile banking, fully digital contracts, etc.).
• -   Financial health and personalized advice to customers: Stakeholders expect the Bank to get to know its customers and propose personalized solutions and recommendations to manage their finances better and achieve their vital objectives, all this proactively and with an increasing level of automation.

The information on how these relevant issues were handled by the Group in 2021 is explained in the different chapters of this management report.

For more information on the methodology and objectives as well as the level of progress in the material issues for BBVA and its stakeholders, see "Other information on Materiality" in the "Additional information" chapter of this report.

⁸ In 2021, the United States was still within the scope of consolidation, given that the subsidiary remained in BBVA during the first half of the year.

2.2.2 Customers

The Bank puts customers at the heart of its activity and aims to establish a responsible relation with them, helping them to make better financial decisions to achieve their life and professional objectives.

In this sense, there are some basic pillars linked to the Group's compliance system with which BBVA aspires to be the partner of trust for its customers, in both management and control of their finances, based on personalized advice and with the aim of improving the financial health of its customers.

Information security must also be a key pillar to guarantee the operational resilience of any organization. That is why the Group has established policies, procedures and controls for the security of global infrastructures, digital channels and payment methods, with a holistic approach based on intelligence in the face of challenges.

Customer experience

Consumers are increasingly demanding, and expect agile and personalized attention. BBVA is working to satisfy their needs and exceed their expectations with the aim of guaranteeing a new standard in customer experience.

Customer satisfaction

As commented above, BBVA occupies the leading positions in the Net Promoter Score (NPS), as reflected in its retention figures, which show a positive trend in the levels of customer drop-outs (retail and SMEs), and a greater commitment from digital customers, whose drop-out rate is 7.4% lower than that of non-digital customers.

The internationally recognized Net Promoter Score (NPS, Net Recommendation Index) methodology measures customers’ willingness to recommend a company and therefore, the level of satisfaction of BBVA’s customers with its products, channels and services. The index is based on a survey that measures on a scale of zero to ten whether a bank’s customers are promoters (a score of nine or ten), passives (a score of seven or eight) or detractors (a score of zero to six) when asked if they would recommend their bank, a specific channel or a specific customer journey to a friend or family member. This information is vital for checking for alignment between customer needs and expectations and the initiatives that have been implemented, establishing plans that eliminate detected gaps and providing the best experiences.

The Group’s consolidation and application of this methodology over the last ten years provides a common language both internally and with customers that facilitates everyone’s involvement and the integration of the voice of customers in everything the Bank does, from the beginning. This has led to a steady increase in customers’ level of trust, as they recognize BBVA to be one of the most secure and recommendable banking institutions in every country where it operates.

Transparency, Clarity and Accountability (TCR)

The relationship of the Bank with its customers must be based on transparency, clarity and responsibility. That is why BBVA integrates these three principles (TCR) systematically into the design and implementation of the main solutions, deliverables and experiences for its customers. The objective pursued is to help them make good life choices, and to maintain and increase their trust in the Bank.

Three work lines have been developed to turn these principles into reality:

• -    Implementing the TCR principles in new digital solutions through the participation of TCR experts in the conceptualization and design of these solutions, especially in massive impact digital solutions for retail customers.
• -   Incorporating the TCR principles into the creation and maintenance of key content for customers (product sheets, contracts, sales scripts. responses to customer letters, communication regarding COVID-19, etc.).
• -   TCR awareness-raising and training throughout the Group, through a virtual community, on-site workshops and online activities. Since 2014, more than 30,000 training interactions have been carried out online, of which 1,820 were in 2021.

In 2021, the Group has placed particular emphasis on designing TCR solutions for people who have some type of visual, hearing, motor or cognitive disability, making progress in making all the digital solutions available in the different countries. With this aim, a process has been defined so that new global designs and developments are accessible, extending them globally as they are reused in the different geographical areas. BBVA has organized global accessibility sessions with more than 1,300 people attending.

BBVA has an indicator to measure its TCR performance: the Net TCR Score (NTCRS), which is calculated following the same methodology. Based on the same survey, the NTCRS measures the degree to which customers perceive BBVA as a transparent and clear bank in comparison with its peers, in the main countries where the Group operates.

According to December 2021 data, BBVA is a leader in NTCRS in Spain, Mexico, Peru and Uruguay, and in second place in Turkey, third in Colombia and fifth in Argentina. The Group is working on plans to improve customer perceptions⁹ in Colombia and Argentina.

Behavior with customers

BBVA has a Code of Conduct that establishes guidelines for conduct with customers in line with the values of the Group. It has also established policies and procedures for governance which establish the principles to be followed when assessing the characteristics and risks of products and services, as well as defining their conditions for their distribution and monitoring. Thus, based on customer insight, their interests should be taken into account at all times, and products and services should be offered in accordance with their financial needs. Moreover, any customer protection regulations applicable must always be complied.

BBVA has also implemented processes geared toward the prevention, or, when this has not been possible, the management of potential conflicts of interest that may arise in the marketing of its products.

In 2021, BBVA has continued to evolve and strengthen its internal regulation, as well as the frameworks of mitigation, control and monitoring within the scope of protection of the customers, also considering the priorities of regulators and supervisors. In this respect, the following main lines of action should be highlighted:

• -    The update of standards in customer protection at Group level, covering also aspects related to the creation and distribution of sustainable products, within the framework of the protection of vulnerable customers and the processes of granting loans and credit responsibly.
• -   The changing indicators in customer conduct, to identify early the possible indications of inadequate sales practices, applying for this purpose advanced data analysis techniques
• -   Monitoring of the measures promoted by the regulators and governments on occasion of the crisis derived from the pandemic, as well as those proposed for exit from it, advising the business units on their implementation and carrying out the corresponding monitoring.

Moreover, the Bank has continued to work to incorporate the vision of customer protection into the development of new products and businesses, both retail and wholesale, from the moment of its design and creation.

Customer security and protection

For BBVA security of information is one of the key aspects of its digital transformation. Information security is organized into three fundamental pillars: cybersecurity, data security and security in the business and fraud processes. For each of them, a program has been designed with the aim of reducing the risks to which the Group is exposed. These programs, which take into account security industry best practices established in internationally accepted security standards, are periodically reviewed to evaluate the progress and the effective impact on these risks.

In 2021, the measures adopted have been strengthened to guarantee effective protection of the information and assets which support the Entity's business processes from a global perspective and an integrated approach, i.e. considering not only the technological area but also the areas of people, processes and security governance.

Among these measures are those designed to: (I) ensure end-to-end protection of business processes, considering logical and physical security, privacy and fraud management; (II) ensure compliance of the principles of security and privacy by design for new products and services; and (III) improve access and authentication control for customers associated with the provision of online services, both from the point of view of security and customer experience.

Below are some of the initiatives carried out during the year that are now implemented in the Group to improve customer security and protection:

• -   Use of biometrics to sign transactions on the BBVA app, which improves the user experience and prevents SIM duplication and smishing attacks.
• -   Strengthening security measures implemented in all the business processes with greatest risk of fraud.
• -   Implementation of behavioral biometrics and malware protection for digital clients to reinforce analytical and fraud detection capabilities in mobile channels.
• -    Use of advanced analytics models to protect the funds of BBVA customers.
• -    Enhancement of the section with security advice to make customers aware of the main cybersecurity risks they are exposed to, so that they can prevent or act against possible threats.

In addition, robust customer authentication mechanisms have been employed in e-commerce and the security of cards has been improved to prevent possible fraudulent use of their data. One example is the Aqua card, which is the first card without a number or printed CVV, and with a dynamic CVV.

Additionally, BBVA has continued performing the training and awareness initiatives related to security and privacy, including training actions and awareness campaigns for BBVA’s employees, clients and society in general.

Other lines of action also include periodic performance of global and local simulation exercises in order to raise the level of training and awareness of key BBVA personnel and ensure an immediate and effective response in case of a security incident.

Governance

BBVA has implemented a model of governance for information security, including the work of the Information Security Steering Committee, responsible for the approval and monitoring of the information security strategy execution and the effective implementation of the different programs designed for each of the three pillars that compose it.

Also, the Corporate Security function is organized by a system of committees and working groups to manage the different areas related to information security: security in transactions, security associated with technology, physical security, security in business processes, security related to personnel, etc.

There are also committees responsible for information protection and fraud management, where both the Corporate Security function and the rest of the areas involved in the Bank participate.

Lastly, BBVA has a Technology and Cybersecurity Commission, whose functions include the supervision of technology and cybersecurity strategy and cybersecurity risk management. This Commission assists the Board of Directors in monitoring the technological risks to which the Bank is exposed, current cybersecurity and technology trends, and any relevant technological security event that could affect the Group.

Data protection

The main initiatives performed in this area are related to the adoption of measures to ensure that all BBVA´s information assets are properly protected, limiting their use to related processes and controlling access to them, considering the security guidelines established by the Group. All the initiatives are performed guaranteeing compliance with the security and privacy regulatory requirements applicable, especially those related to personal data protection.

All activities related to the data protection program are reviewed by the Data Protection Committee, where all relevant stakeholders of the organization are represented.

During 2021 there has been no incident that has had a significant economic impact on the BBVA Group.

For more information about personal data protection, see the section “Personal data protection” in the "Compliance" chapter of this report.

Cybersecurity

The COVID-19 pandemic has increased the scope of social engineering attacks through e-mail, SMS, instant messaging systems and social media. It has also contributed to the emergence of new risks and challenges for companies, like the ones related to security in telework, security in cloud environments and the increase in the attack surface. As a result, as cyberattacks evolve and become more sophisticated, BBVA has strengthened its prevention and monitorization efforts.

The Global Computer Emergency Response Team (CERT) is the Group’s first line of detection and response to cyberattacks aimed at global users and the Group’s infrastructure, combining information on cyber threats from our Threat Intelligence Unit. The Global CERT, which is based in Madrid, operates 24/7 and provides services in all countries where BBVA operates, under a scheme of managed security services.

In 2021, the monitoring capacity of the systems has increased, in particular with respect to the critical assets which support business processes. Incident prevention, detection and response capabilities have also been strengthened through the use of integrated information sources, improved analytical capabilities and automated platforms. Moreover, work is being done on the development of new artificial intelligence and machine learning models which can predict and prevent cyberattacks against bank infrastructure, providing a more secure experience for customers.

Measures implemented have improved information security management from a predictive and proactive approach, based on the use of digital intelligence and advanced analytical capabilities. The main objective of these measures is to ensure an immediate and effective response to any security incident that may occur, with the coordination of different business and support areas involved, reduce the possible negative impact and, if necessary, report in a timely manner to the corresponding supervisory or regulatory authorities.

BBVA also routinely reviews, reinforces and tests its security processes and procedures through simulation exercises in the areas of physical security and digital security. Specialized teams periodically perform technical security tests in order to detect and correct possible security vulnerabilities.

In 2020 and 2021, the Group detected an increase in the number of attacks in a number of countries, accentuated by the presence of organized crime groups specialized in the banking sector.

Security in business processes and fraud

Cybersecurity processes are always undertaken in close coordination with fraud prevention processes, so there are considerable interactions and synergies between the relevant teams. As part of the efforts to monitor fraud and to actively support the deployment of adequate anti-fraud policies and measures, a Corporate Fraud Committee has been created to oversee the evolution of all external and internal fraud types in all countries where the Group operates.

Among the functions of this committee are: (I) actively monitor fraud risk and mitigation plans; (ii) assess their impact on Group businesses and customers; and (III) monitor the relevant fraud facts, events and trends.

Both the Bank and the rest of the Group's subsidiaries have cybersecurity and fraud insurance policies, subject to certain loss limits, applicable deductions and exclusions, as the case may be.

Business Continuity

In 2021 and 2020, Business Continuity continued to be reinforced from a holistic perspective, paying special attention to the Group’s resilience. As a result thereof, a shift from a model basically geared to ensuring the uninterrupted delivery of products and services in situations of great impact which are infrequent but plausible, toward a model in which the organization has been provided with the ability to absorb and adapt to situations with an operational impact due to disruptions of various kinds (pandemics, cybersecurity incidents, natural disasters or technological failures), has been consolidated. This has been reflected in an intense activity by the Business Resilience Office, which together with the Crisis Management Committees and Group Continuity has played a very important role in the management of the crisis resulting from COVID-19 in the numerous areas it has impacted.

Customer care

BBVA has a complaints model based on two key aspects: the agile resolution of claims and, most importantly, the analysis and eradication of their causes at root. This model constitutes a contribution of great value for improving customer experience.

In 2021 the Group’s claims units worked to reduce attention times which, due to the health provisions imposed by the global COVID-19 pandemic, were significantly affected in 2020; as well as the proactive identification of potential new problems and the eradication of the root causes of the most common types of claims. All this with the aim of generating peace of mind and consolidating customer trust, giving a swift resolution to their problems, through a simple and agile experience and with a clear and personalized response.

MAIN INDICATORS OF CLAIMS (BBVA GROUP)⁽¹⁾

The country that registers the largest number of claims before the banking authority per 10,000 active customers is Colombia.

CLAIMS BEFORE THE BANKING AUTHORITY BY COUNTRY (NUMBER FOR EACH 10.000 ACTIVE CUSTOMERS) ⁽¹⁾

The Group’s average claim resolution time was 5.46 days in 2021, which represents a reduction in all countries compared with 2020 (higher times as a result of the health provisions that were established as a result of the pandemic).

AVERAGE TIME FOR SETTING CLAIMS BY COUNTRY (NATURAL DAYS) ⁽¹⁾

Claims settled by the First Contact Resolution (FCR) model, which consists in the resolution of the claim at the time it is filed, account for 10% of total claims, thanks to the fact that the management and handling of these claims aims to reduce resolution times and increase the service quality, thus improving the customer experience.

CLAIMS SETTLE BY FIRST CONTACT RESOLUTION (FCR. PERCENTAGE OVER TOTAL CLAIMS)

The justified claims related to violations of privacy and loss of customer data filed before the corresponding banking authorities in the countries, account for 0.05% of the total claims as a result of preventive policies and risk control measures.

The total volume of claims in 2021, which breakdown is shown in the following table, represents a reduction of 2% in the volume of claims with respect to the figure in 2020, as a result of the improvements in the claims management process in the Group.

TOTAL VOLUME OF CLAIMS (BBVA GROUP. MILLIONS)

For more information on the Customer Care Service and the Customer Ombudsman see the section "Additional information on customer complaints" in the chapter "Additional information" of this report.

⁹ Own work. The study has considered the main peers of BBVA in Argentina, Colombia, Spain, Mexico, Peru, Turkey and Uruguay.

2.2.3 Employees

The team is one of the accelerators of growth and a strategic lever for the Group. BBVA has a diverse and empowered team with a distinct culture, which is guided by the corporate purpose and values.

As of December 31, 2021, the BBVA Group had 110,432 employees located in more than 25 countries, 53% of whom were women and 47% were men. The average age of the staff was 37.7 years. The average length of service in the organization was 10.7 years, with aturnover of 6.5% in 2021.

BBVA Group's workforce fell by 10% in 2021. Among the main changes were the exit of BBVA USA and of the rest of the Group's companies in the United States included in the agreement following their sale to the PNC Financial Services Group, Inc on June 1, 2021 and restructuring plan of the Bank in Spain.

Culture & Values

BBVA’s values and behaviors are the action guidelines for the Group in its day-to-day decision-making and help it accomplish its purpose "to bring the age of opportunity to everyone." The values and behaviors are the hallmark of everyone working in the Group and define the DNA of BBVA.

The values form part of the main levers for the Bank’s transformation and in the Talent & Culture processes: from the selection of new employees to the procedures for allocating roles, people development, training, and incentives for achieving goals

The values also boost commitment at BBVA. The Group carries out annually the Employee Commitment Survey¹⁰, managed by Gallup. In 2021, 93.1% of employees participated. The most outstanding aspect is the significant improvement of the Grand Mean, the strategic KPI with which the progress of the strategic priority "The best and most committed team" is measured and which is obtained by averaging the twelve main questions of the survey. Thus, in 2021 a value of 4.26 out of 5 has been achieved, which represents an improvement over last year (4.25 points).

By age groups, this year's results were: 4.42 points out of 5 among employees under 25 years of age; 4.34 points for the range of 25 to 34 years; 4.23 points from 35 to 44 years old; 4.22 points from 45 to 54 years; and 4.15 in the case of employees over 55 years of age. By gender, the result has been the same between men and women (4.27).

Similarly, BBVA's employee engagement index, which is calculated by dividing the percentage of engaged employees by the percentage of actively disengaged employees, improved in 2021 to 10.50 (10.17 in 2020).

BBVA has been granted with the Gallup Exceptional Workplace Award for being one of the 40 best organizations in the world which has worked most on engagement in 2021. Moreover, the most notable aspect is that 76% of teams have launched action plans to improve engagement (over 24,000 plans).

BBVA has expressed its will to reinforce its corporate culture of social and environmental engagement, facilitating the conditions for its employees to carry out volunteer work. For further information on volunteer work, see the "Volunteer work" section below in this chapter.

People Management

BBVA continues to boost its employees' commitment and performance, accompanying its transformation process with a variety of initiatives in questions related to staff, such as:

• -   Transformation and development of the employee relations model: fostering a more accessible model and driving enterprise, empowerment and responsibility; providing the different areas in the Group with the advice to boost talent management based on their objectives and the employees with support for the development of their professional careers; the search for opportunities and the reinforcement of their role with more personal advice from the employee's supervisor
• -   Maintenance of the Agile model of organization with the digital factories formed by multi-disciplinary teams which share the same objective and work with autonomy and capacity for execution with the aim of improving quality, productivity, the launch period and commitment
• -   Launch of a solution to improve the mass training of employees. This solution represents a radical transformation for the employees of their training experience, introducing modern learning techniques based on an attractive training journey, and allowing them to manage this enormous challenge while generating the incentives for them to adopt it.
• -    The strengthening of a corporate culture of collaboration and entrepreneurship, which revolves around the set of values and behaviors described above and which generate certain identity traits that differentiate it from other entities.

Professional development

In 2021, work continued on BBVA's model of professional development by the consolidation of an ecosystem in which the employees have available certain elements through three different modules that allow them to know themselves better, improve, grow and explore new pathways.

Talent attraction

BBVA aims to offer its employees a unique value proposition, through a common brand, in line with a global and digital company. In 2021, BBVA has launched a talent attraction program whose aim is to hire key talent with the potential to support BBVA Group's transformation process and provide an outstanding program for their training and international development.

Thanks to brand positioning actions and the promotion of professional opportunities available at BBVA through various channels, it was possible to attract over 175,000 candidates in 2021. All this is carried out under a global reference model for attracting talent, with clear policies that strengthen transparency, trust and flexibility for all stakeholders involved in the process.

BBVA also has a global scorecard to measure compliance levels with each of the internal mobility policies, ensuring follow-up and commitment to compliance in each of the geographical and global areas in which BBVA operates.

In 2021, 13,810 professionals joined the Group following this initiative to attract, select and incorporate profiles with new skills necessary for BBVA in its transformation process.

RECRUITMENT OF EMPLOYEES BY GENDER (BBVA GROUP. NUMBER)

Development

The professional development model is based on a 360º assessment process. For the first time, in 2021 employees know their position on the BBVA Group talent map; in other words how they compare with other professionals who occupy similar positions to theirs. This allows them to identify their development plan and access the tools that BBVA makes available to them to help them achieve their objectives.

Moreover, BBVA's professional development has been enriched in 2021 through the incorporation of tools that allow employee growth: Project Review linked to the implementation of Agile organizational models and an internal coaching program. These tools complement those already in place in the professional development model, such as Open Mentoring, BBVA Campus, Mobility and Opportunity, whose impulse has been a priority in 2021.

The percentage of vacant positions filled with internal candidates stood at 56.7% in 2021 (69.4% in 2020) and signals the commitment to the global policy of prioritizing internal versus external talent. 2020 was a very restrictive year in terms of both internal and external hiring. There was a freezing in Central Areas for 9 months in almost all countries to limit movements facing the COVID crisis. In 2021, activity was resumed in most countries, promoting internal movements stopped the previous year.

Training

BBVA's training model gives employees a leading role in their own development and provides them with the autonomy to decide their learning pathways. In this way, the employees no longer have to wait to be invited to a training action; they now have the means to decide themselves on their learning pathways and how to grow professionally. This commitment to decentralization allows the employees themselves to generate knowledge and share it with their colleagues. Sessions of this type have involved the participation of 86,878 employees from all geographies to assess the usefulness of the content.

The solidity and level of implementation of the training model across the Group is allowing to be proactive and guarantee that knowledge (internal or external) is obtained which the Bank needs at any time and continuously for the growth of its professionals.

In 2021, with the aim of reinforcing this commitment, BBVA launched a program to accelerate the acquisition of new competencies and develop the competencies needed within the same post or profile (up/reskilling). In this way, employees will be able to focus on their growth in knowledge that is a priority for BBVA.

To meet this challenge, BBVA's training model has been transformed to continue boosting a culture of "learning skills" which allow professionals to have the capacities required at any time and thus improve their employability. In the context of a changing environment, it is not only necessary to be flexible and adaptable to change; it is also essential for employees to update their knowledge all the time (continuous learning).

As a result, BBVA has been recognized in recent years as an extremely innovative entity in the training world, with a deep-rooted culture of online learning (in the last 4 years, over 70% of the training has been online and in 2021 it was 74%) and a wide-ranging digital training offer for its employees channeled through its global training platform BBVA Campus.

This training platform provides employees with over 20,000 training resources (MOOCs, podcast, videos, blogs, practice communities, portals structured by knowledge area, simulators, etc.), specific experiences geared at specialized technical profiles and links to external training platforms of recognized prestige at global level or courses offered by key educational institutions.

For this reason all employees have been offered 14 expeditions through The Camp (one for each strategic knowledge area), structured into 3 different levels of increasing specialization, providing a response to Strategic People Planning, on which the capacities required by the Group for the bank of the future have been defined.

Through these expeditions, the professionals have focused on extending their knowledge and training on more strategic subjects for the Group. In 2021, more than 83,271 professionals have completed 1,169,700 hours of training on subjects related to sustainability, cybersecurity, data, Agile, design and the behavioral economy. The average satisfaction score is 4.7 (out of 5).

Another extremely relevant line of training for professionals has been the knowledge required for the transformation of the business, transforming their current and future capacities. It is also worth noting that BBVA continued to boost the certification of its professionals' knowledge in 2021. Thanks to internal or official external certifications, employees have been able to accredit specialized knowledge in the main business subjects.

Specifically, training in sustainability has taken a leading role in helping to boost knowledge related to this strategic priority across the whole Group. In 2021, 179,012 hours of training were completed (165% more than in 2020) and over 57,210 professionals have participated in a sustainability-related training initiative. Moreover, 5,516 employees have exceeded the EFPA-ESG (European certifier) and IASE ISF1 (international certifier) certifications.

BASIC TRAINING DATA (BBVA GROUP)

TRAINING DATA BY PROFESSIONAL CATEGORY AND GENDER (BBVA GROUP. 2021)

TRAINING DATA BY PROFESSIONAL CATEGORY AND GENDER (BBVA GROUP. 2020)

EMPLOYEE TRAINING 2021 (BBVA GROUP. NUMBER, PERCENTAJE)

Diversity, inclusion and different capacities

At BBVA, diversity and inclusion are firmly aligned with its purpose and consistent with its values. BBVA is committed to diversity in its workforce as one of the key elements in attracting and retaining the best talent and offering the best possible service to its customers. In 2018 a global diversity plan was designed with several lines of action, focused mainly on gender diversity, but without forgetting other aspects of diversity such as ethnic, inter-generation, different capacities and sexual orientation. Since then, the plan has been improved and updated.

With respect to gender diversity, a number of initiatives have been developed since 2018 whose aim is to facilitate the professional growth of women in BBVA and accelerate their access to positions of responsibility. Among these initiatives implemented in 2021 are:

• -   Setting gender diversity targets at area and country level. A target has been set for the percentage of women to be promoted to categories of greater responsibility over the next five years. This target is supported by a specific diversity plan developed by each of the areas, which is revised quarterly and must ensure compliance with the plan.
• -   New initiatives favoring female talent that speed up the professional growth of women in BBVA, ensuring equity and neutrality in the selection and professional growth processes.
• -   Improved capacity to identify the women in BBVA with the greatest potential through the Talent Map tool. Within this line of work are the extension of the Rooney Rule to more levels of the Organization, improvement of training, mentoring targeted at women with high potential and the introduction of the gender component in the succession plans (line-up plan) to positions of high responsibility.
• -   Continuing work on a flexible working environment in which men can assume their family responsibilities to the same extent as women, and where maternity does not represent a professional obstacle for women (the Work Better, Enjoy Life initiative). A hybrid work model has been implemented for this purpose to balance personal and professional life better. Paternity leave has also been extended in a number of geographical areas

Initiatives include the creation of the Employee Resource Group (hereinafter, ERG), a form of intrapreneurship in which employees themselves decide to get together to promote diversity and foster personal relations between people with common interests; and the support to a variety of organizations and initiatives working for diversity and equal opportunities between men and women, such as participation in the fight against the gender gap in science, technology, engineering and maths, or collaboration with initiatives such as Inspiring Girls, the Girls' Olympiad in Informatics and Technovation for Girls.

In terms of gender diversity, women represent 33% of the members of the board of directors of BBVA, S.A.,26.8% of senior management and 36.1% of management positions, 31.5% of technology and engineering positions and 57.4% of business and profit generation positions (31.6%, 43.4%, 32.2% and 57.4%, respectively, in 2020).

As for LGTBI+ diversity, a guide was prepared in 2021 called "Trans Diversity, Meeting Point." It is a manual which includes guidelines and protocols focused on supporting transexual or transgender employees or customers. BBVA was elected president of the Business Network for Diversity and LGTBI inclusion (REDI), the first business association in Spain created to promote an inclusive and respectful environment in organizations. Over 95 Spanish companies form part of this organization. In 2021, two global events were held for BBVA employees related to diversity and inclusion: the International LGTBI+ Pride Day and the Diversity Days, which are internal days held for the second year in a row to share the significant progress made in terms of diversity and inclusion and to create a learning space.

BBVA's leadership in diversity issues has led to it being included for the fourth consecutive year in the Bloomberg Gender-Equality Index, a ranking that includes the 100 global companies with the best gender diversity practices. The Bank has also been finalist in the Euromoney awards as Best Global Diversity and Inclusion Bank; and in the LinkedIn Talent Awards in the Diversity Champions category. Moreover, Gartner published a study praising the Bank's global strategy in terms of diversity and inclusion.

Regarding the statement "BBVA always values diversity" in the Employee Engagement Survey, managed by Gallup, in 2021 the Bank obtained a score of 4.53 out of 5, slightly more than the 2020 results (4.52).

All the Group companies in the different countries have protocols for preventing sexual harassment, expressly stating their rejection of any conduct of a sexual nature or with a sexual connotation that has the purpose or effect of violating a person's dignity, and they undertake to apply this agreement as a means of preventing, detecting, correcting and punishing this type of conduct within the company.

With respect to different capacities, BBVA has expressed its commitment to the social integration of individuals with different capacities. It has an ERG related to different capacities which organizes talks to raise awareness of this issue.

There are numerous initiatives in all the geographical areas to boost the inclusion of people with disabilities, such as grants to students and programs for the incorporation of people with different capacities, with the collaboration of specialized organizations and companies, as well as educational centers and universities.

For example, in Spain BBVA has alliances with the leading Spanish organizations in the disability sector with the aim of promoting accessibility, fostering labor integration and increasing knowledge and awareness of the needs and potential of disabled people. There are two pilot projects: first, one which employs people with mental disabilities in reception and support tasks in BBVA buildings in Madrid; and second, a neurodiversity pilot project which integrates people with autism spectrum disorder (mainly Asperger) into engineering teams.

As of December 31, 2021, BBVA had 589 people with different capacities on the Group's staff (526 in 2020¹¹), of whom 175 are located in Spain, 18 in Mexico, 354 in Turkey 36 in South America and 6 in Portugal.

EMPLOYEES BY COUNTRIES AND GENDER (BBVA GROUP)

PROMOTED EMPLOYEES BY GENDER (BBVA GROUP)

EMPLOYEES AVERAGE AGE AND DISTRIBUTION BY AGE STAGES (BBVA GROUP. AGE AND PERCENTAGE)

AVERAGE LENGTH OF SERVICE BY GENDER (BBVA GROUP. AGE)

EMPLOYEES DISTRIBUTION BY PROFESSIONAL CATEGORY AND GENDER (BBVA GROUP. PERCENTAGE)

EMPLOYEES DISTRIBUTION BY TYPE OF CONTRACT AND GENDER (BBVA GROUP. PERCENTAGE)

EMPLOYEE DISTRIBUTION BY TYPE OF CONTRACTS AND AGE STAGES (BBVA GROUP, PERCENTAGE)

EMPLOYEE DISTRIBUTION BY PROFESSIONAL CATEGORY AND TYPE OF CONTRACT (BBVA GROUP. PERCENTAGE)

In 2021, the average annual number of full-time indefinite contracts, part-time indefinite contracts and temporary contracts was 94.1%, 1.6% y 4.3% (2020: 94.9%, 1.4% and 3.7%, respectively).

DISCHARGE OF EMPLOYEES BY DISCHARGE TYPE AND GENDER (BBVA GROUP. NUMBER)

DISMISSALS BY PROFESSIONAL CATEGORY AND AGE STAGES (BBVA GROUP. NUMBER)

VOLUNTARY RESIGNATIONS (TURNOVER) ⁽¹⁾ AND BREAKDOWN BY GENDER (BBVA GROUP. PERCENTAGE)

EMPLOYEES DISTRIBUTION BY PROFESSIONAL CATEGORY AND NATIONALITY (BBVA GROUP. PERCENTAGE)

RECRUITMENT OF EMPLOYEES BY AGE (BBVA GROUP. NUMBER)

TOTAL TURNOVER RATE ⁽¹⁾ AND DISTRIBUTION BY GENDER (BBVA GROUP. PERCENTAGE)

TOTAL TURNOVER RATE ⁽¹⁾ AND DISTRIBUTION BY AGE (BBVA GROUP. PERCENTAGE)

Work environment

BBVA continues to make progress in its transformation process, anticipating and redefining the aspects which are key for motivating and protecting its teams, and making it easier for them to work together. Below are the actions and/or policies implemented by the Group in the area of employee conditions and rights, the work/life balance and occupational health and safety.

Work organization

In 2021, in a context of a profound transformation marked by an enormous competitive pressure, low interest rates, the accelerated adoption of digital channels by clients and the entry of new digital actors, and with the aim of guaranteeing the competitiveness of the Organization and the sustainability of future employment, work was done on the search for formulas to allow the Group to reduce its cost structure.

In this respect, a collective bargaining process open to dialog began with the workers' legal representatives, with the aim of reaching the best possible agreement for all parties, to reduce the workforce in Spain through a collective redundancy procedure. The agreement was approved by 72.69% of the labor union representatives. It affected 2,935 people and included support measures to minimize or lessen the effects of the workforce reduction. These measures included conditional voluntary redundancy as a preferential mechanism for those affected, a process of internal outplacement within BBVA, possibility of access to a 5-year leave, measures to protect the most vulnerable groups, an external outplacement plan to protect and promote outplacement or self employment, and compensation for dismissal adjusted by age groups.

Digital disconnection

The right to digital disconnection is included in the internal regulations and policies of each country agreement, and recognized as a fundamental element for achieving better organization of working time in order to respect private and family life, to improve the balance between personal, family and working life and to contribute to the optimization of workers' occupational health.

In Spain this right is embodied in measures such as avoiding communications outside working hours, at weekends or public holidays, and calling meetings within working hours. In Mexico work continued in 2021 on various communication campaigns to promote respect for disconnection; in Colombia an agreement was reached with the workers' legal representatives which includes the right to labor disconnection within the framework of local legislation, boosting measures in accordance with a communication strategy.

Extension of maternity and paternity leave

In Spain, during maternity or paternity leave, the Group supplements financial provisions up to 100% of normal salary and extends from half an hour to one hour the reduction in working hours provided for by law for the care of the lactating infant up to the age of 9 months.

In Mexico and Colombia, the leave available for the birth of a child was extended by 20 working days and 10 working days, respectively, in addition to the days under local legislation.

In Turkey, mothers who return to work after maternity leave have two hours a day of lactation leave until the child reaches the age of one year. They can use up this leave daily, combine the hours in one day's leave a week, or combine all the hours and prolong their maternity leave by approximately one month. Mothers can also choose to extend their maternity leave with unpaid leave. With respect to paternity leave, the Group has extended paid paternity leave by five extra days, in addition to the legally established five.

In Argentina, paternity leave has been extended by 30 calendar days for employees, and in the case of a premature birth, the mother has the right to paid leave for the same number of days as the birth was premature. Moreover, in the case of a birth or adoption of a minor with a disability, the paternity and maternity leave is extended by 60 calendar days. In the case of a premature birth, the employee will have the right to a special paid leave.

In Uruguay, paternity leave has been extended by 3 working days, in addition to the 10 applicable by law; and maternity leave has been extended by 22 calendar days, which combined to the 98 days under law, makes a total of 120 calendar days. In addition, mothers may choose for different forms of telework for a period of 6 months after their return to work.

PARENTAL LEAVE 2021 (BBVA GROUP. NUMBER, PERCENTAGE)

The retention rate of employees who took parental leave in Spain in 2021 was 89.63%, being 90.65% in men and 88.52% in women.

Freedom of association and representation

In accordance with the different regulations in force in the countries in which BBVA is present, the working conditions and the rights of the employees, such as freedom of association and union representation, are included in the rules, collective conventions and agreements signed, in their case, with the corresponding workers' legal representations. Dialog and negotiation are part of how to address any dispute or conflict within the Group, for which there are specific procedures for consultation with labor union representatives across different countries, including the issues concerning labor health and safety.

In Spain, workers' representatives are elected every four years by personal, free, direct and secret ballot, and are informed of the relevant changes that may occur in the organization of work in the Entity, under the terms provided in accordance with the legislation in force.

Also, the banking sector collective agreement is applied to 100% of the workforce, except for members of senior management and top-level positions, complemented by the company collective agreements which build upon and improve the provisions of sector agreement, and which are entered into by the workers' legal representatives. In 2021, the banking sector entered into a new collective agreement which incorporated significant improvements for all the people making up this sector. It regulates aspects such as registration of working hours, digital disconnection and the update of salary tables and social benefits, boosting the construction of labor environments that promote equal opportunities, with an emphasis on the work/life balance, diversity, inclusion and digitalization.

In Mexico, freedom of association and local representation are respected. In accordance with the parameters indicated in the reform of the Federal Labor Law in 2019, the Bank has a process to comply with the requirements on collective matters that were incorporated for labor union organizations consisting of free, secret and direct voting. By the end of the year, 100% of the workforce was covered by a collective agreement.

However, the law in the United States and Turkey does not require the same application of agreements to the workforce.

In Peru and Argentina, freedom of association and commitment to labor rights are respected, and dialog and collective negotiation are greatly valued when it comes to reaching consensus and conflict resolution. In the case of Argentina, 100% of the workforce is covered by the collective agreement, except for members of senior management and top-level positions, maintaining a seamless communication with the internal trade commissions at the local level and with the sectors of the banking association at the national level.

In other countries such as Colombia, Venezuela, Uruguay and Portugal the Group’s employees are covered by some form of collective agreement, with 100% of the workforce covered.

Occupational health and safety

BBVA considers the promotion of occupational health and safety to be one of its basic principles and fundamental goals which is addressed through the continuous improvement of working conditions.

The occupational risk prevention model in a number of the Group's countries, such as Spain, Mexico, Turkey, Colombia, Venezuela, Peru and Uruguay, is regulated by laws, conventions and agreements, such as the Law on Occupational Risk Prevention and the collective labor health agreement for the consultation and participation of workers in BBVA on occupational risk prevention matters in Spain, national legislation in relation to the approval of the assessment of the Occupational Health and Safety Policy and the Internal Health and Safety Regulation in Peru, the Political Constitution of the United States of Mexico, the Federal Labor Law, Regulations and Official Mexican Laws. Employees have the right to consult and participate in these areas through labor union representation or stakeholders on the different committees. The consultations on these matters are explained and those related to occupational health and safety are dealt with, tracking all the occupational risk prevention activity.

In Spain, the Bank has a preventive policy applicable to 100% of its staff, which is carried out primarily by the Occupational Risk Prevention Service. This service has two lines of action: a) the technical-preventive line, which involves, among other activities, carrying out of assessments of occupational risks (which are periodically updated), the preparation of action plans to eliminate or minimize the risks detected, monitoring of the implementation of action plans, and implementation of emergency and evacuation plans, training in health and safety, and coordination of preventive activities; and b) occupational medicine, which involves carrying out staff medical examinations, providing protection for particularly sensitive employees and equipping workplaces with appropriate ergonomic equipment, as well as carrying out preventive activities and campaigns to maintain and improve workers' health and contribute to the development of a culture of prevention and the promotion of healthy habits.

With the preventive and corrective measures resulting from these processes, the Prevention Service designs the action plans to eliminate risks or minimize them. Each of them details the actions to be implemented, as well as those responsible for their resolution and the timelines for it, which will depend on the quantification of the risk. Through an application, those involved in the implementation of the measures receive indications of the measures to be carried out, and report on their execution once complete.

Also, the preventive policy includes and covers the regulatory requirements and recognized standards for external staff who work in the Bank, for which one coordination procedure has been established for services and the other for works activities. In the case of coordination of activities with service suppliers, external companies are informed of the security and emergency measures present in the work centers. Companies are asked for documentary evidence of compliance with the Occupational Risk Prevention (PRL) regulations. In the case of coordination of activities with works suppliers, the procedure describes the different actions and steps to be followed in the coordination of health and safety and coordination of Business Activities according to the different types of works to be executed in BBVA branches, offices and work centers.

For the supervision and control of its employees' health, the Medicine Area of the Occupational Risk Prevention Service Work focuses on drafting medical protocols, carrying out medical examinations for staff, protecting particularly sensitive employees and adapting job positions with specific ergonomic material; as well as carrying out preventive activities and campaigns with the aim of maintaining and improving the health of the workers and contributing to the development of preventive culture and healthy habits.

Moreover, the corresponding apps have been developed allowing employees to manage their appointments from their work stations, complete the tests required through the tool and download the report of the health exam, always complying with all the requirements of the General Data Protection Regulation (GDPR) on this matter.

Mexico has a health and safety management system which is applied to 100% of the employees and all the work centers it has available. The workers' health services are available in the main headquarters, and the Medical Service has also implemented an initiative for remote and on-site assistance for all the collaborators and their beneficiaries registered in the Medical Service or in the higher medical expenses policy.

Colombia has an Occupational Health and Safety Management System which complies with current legal requirements and ensures a safe working environment for the workers. Also, through the National Risk Prevention Strategy all the organization's work centers are covered at national level and the different occupational health and safety needs are managed.

With respect to external personnel in the Group's facilities, there is a Contractors' Program which requires any hiring of staff from outside the company to include a certification of their Occupational Risk Insurer with the percentage of compliance with minimum standards applicable of the Occupational Health and Safety Management System.

In Argentina, the technical preventive controls are carried out with specialized consultants who work continuously advising and accompanying the corresponding areas so that the necessary preventive or corrective measures may be carried out with the aim of complying with all regulatory requirements.

In Spain there has been a gradual return in 2021 to medical checkups and the rest of the preventive activities which had been suspended by COVID-19. Worth noting with respect to the actions undertaken to deal with the pandemic is the role of the Prevention Service. From the start, in Spain measures have been established relating to the organization of work and secondments, as well as guides and protocols for action for employees, following the indications of the health authorities.

In 2021, measures were maintained to adapt the work centers so that they had the necessary control resources available, and thus eliminate or minimize the risk of contagion. Among these measures are: the installation of signage on hygienic procedures, methacrylate screens, facial screens, disinfection kits for employees in branches, and Personal Protective Equipment (PPE) and face masks for employees at certain work centers such as the Data Protection Center (CPD).

The distribution of masks, hydroalcoholic gels and gloves has also continued in branches offering services for the public, and a safety distance has been established between the work stations, while the branches have been provided with signage that indicate positions for people to guarantee the safety distance. Moreover, the specific cleaning procedures in the work centers have continued, including those carried out routinely and those performed as a result of positive cases.

The indication to telework has been maintained for the vulnerable group until September 1, when they were considered appropriate for on-site work, given the great progress made in the vaccination of the Spanish population against COVID-19. However, pregnant women have been maintained in this group; they are given the choice of whether or not to work on site.

With respect to the tests for detecting the virus, PCR and serological tests continued beyond what was established by the health authorities for employees who through the daily surveys declare they have symptoms compatible with infection by COVID-19, are positive, or have had close contact with positive cases.

In confirmed cases of COVID-19 infection, health status of the affected employees has been subject to special tracking, both those who were in their homes, as well as those hospitalized. The families of the employees whose health status was most serious is also monitored.

OCCUPATIONAL HEALTH (BBVA, S.A. NUMBER)

In Mexico, 92% of all the employees responded to the daily health survey and to minimize the risk of contagion, hydroalcoholic gels, masks, wall thermometers and disinfection kits have been provided. Collaboration agreements have been concluded to carry out studies to detect COVID-19 among Group employees, and with suppliers of home and hospital care at critical times during the pandemic to ensure infected workers are treated. A medical team made of up 54 doctors has been created to track suspicious COVID-19 cases and infections, and 1,100 fortnightly tests have been carried out to detect COVID-19 among people who occupy mobility posts.

In Turkey, the Bank has also gradually resumed its medical checkups and other preventive activities, and a number of studies have been carried out in the area of managing emergencies, such as exhaustive practice drills and updates in emergency training. BBVA was for the second time awarded the Occupational Safety Award by the British Safety Council, one of the most respected authorities in the world on occupational health and safety. It also received the Best Country Award for its performance in the corporate management of occupational health and safety, making it the first and only bank to have received these awards in Turkey.

In Colombia there has been a gradual return to the corporate headquarters, depending on the specific risks in each location, and not including personnel considered vulnerable. This has been done through a hybrid system of work which has mitigated the risk, ensuring business continuity and improving the organization of work. Actions have also been implemented to contain COVID-19, in particular participation in the Private Vaccination Plan, thus ensuring the vaccination of over 91% of the workforce. In addition, compliance with the National Risk Prevention Strategy involved the development of occupational risk promotion and prevention in each work center. Three workshops focused on emotional management were run and employees were provided with the tools to focus better on their daily activities and reduce their states of anxiety.

In Peru, through the Occupational Health and Safety and BEX COVID teams, the Bank has applied the prevention and health care protocols, implementing programs to carry out tests detecting possible positives and tracking confirmed COVID-19 cases.

In Venezuela, the COVID-19 containment plans and protocols have been reinforced, maintaining the tracking of suspicious and positive cases, providing medical care at home (with delivery of medicines), together with remote medical and psychological assistance, and running a vaccination campaign for employees. The Group's Occupational Health Portal has also been kept up to date with respect to COVID-19 information, procedures and guides, demonstrating real efficiency as a communication channel during all this exceptional period.

In all the above, the Group's goal has been to preserve the health of its employees and families, customers and society in general, and to implement plans to update and improve data-driven decision-making. As in the case of 2020, the BBVA work centers and environments have been kept safe.

By countries, in 2021, 25,502 technical-preventive actions were carried out in Spain, 40,384 in Mexico, 7,168 in Colombia, 2,710 in Argentina, 3,919 in Peru, 24 in Venezuela, 414 in Uruguay, 427 in Turkey. In terms of preventive actions to improve work conditions, 23,930 actions were carried out in Spain, 40,384 in Mexico, 5,939 in Argentina, 866 in Colombia, 21 in Peru, 414 in Uruguay, 128 in Venezuela and 494 in Turkey. For its part, in the USA neither technical-preventive actions nor preventive actions have been carried out to improve working conditions in 2021.

VOLUME AND ABSENTEEISM TYPOLOGY OF EMPLOYEES (BBVA GROUP)

In 2021, BBVA recorded a total of 167 cases of work-related accidents involving medical leave across the entire Group (only one out of every 100 cases of leave are due to accidents), most of them involving commuting accidents, which is 13% less than the previous year. Additionally, in 2021, there were no deaths due to work-related accidents in the Group.

Spain itself did not register any case of occupational disease. The number of accidents was 114, of which 41 entailed medical leave and 73 did not, indicating a very low rate of work-related accidents, with levels below the sector average. Thus, the Bank's severity index is 0,04 (0.03 men and 0.05 women) in 2021, while the frequency index is 0.89 (0.64 men and 1.12 women). In the case of accidents with medical leave, the main types of injuries have been sprains and strains, superficial injuries and foreign bodies in the eyes and closed fractures.

BBVA considers that occupational health and safety training is one of the main channels for raising awareness and the skills of employees to carry out their activity with better health and safety protection. For this reason training actions have been planned in coordination with the training teams in the geographical areas. In Spain, online courses are available for all the workforce through the E-Campus platform and on-site courses are given by trainers from external entities who are highly specialized in each specific subject of the training, with specialists from the Prevention Service also taking part in the training of some groups. The Training Plan has courses such as online introductory and advanced occupational risk prevention courses, road safety courses, specific courses for members of the emergency equipment teams, first-aid courses, courses on handling defibrillators, practical fire prevention courses for EPIEs and emergency management, and courses on Personal Risk Situations. A decision was also made on what training is considered mandatory. In Mexico, Civil Protection courses and various Occupational Risk Prevention courses are taught. On the occasion of COVID-19, the training of some groups was encouraged to carry out the training of Monitors for Healthy Return. In Turkey, various occupational health and safety training courses are given to employees, some dealing with general occupational health and safety issues and others dealing with a specific risk, such as working at height or telecommuting. In other countries, such as Peru, Uruguay, Venezuela, Chile and Portugal, employees also have mandatory e-learning courses on occupational health and safety which promote this specific training.

Remuneration

BBVA has a General Remuneration Policy, which applies to all Group employees, including Senior Management (the “BBVA Group General Remuneration Policy”) and a Remuneration Policy for BBVA Directors, both designed in the framework of the specific regulations applicable to credit institutions, considering the best practices and recommendations in remuneration matters both locally and internationally.

These Policies are based on the same principles and are oriented towards the recurring generation of value for the Group, the alignment of the interests of its employees and shareholders with prudent risk management and the development of the strategy defined by the Group. The Remuneration Policies are part of the elements designed by the Board of Directors as part of BBVA's Corporate Governance System to promote adequate management and supervision of the Group, and are based on the following principles: the creation of long-term value; the achievement of results based on a prudent and responsible assumption of risks; the attraction and retention of the best professionals; to reward the level of responsibility and career path; to ensure internal equity and external competitiveness; to ensure pay equality between men and women; and to ensure the transparency of the remuneration model.

These principles are developed in such a way that the Policies:

• -   Contribute to BBVA Group’s business strategy and to the achievement of the goals, values, interests, value creation and long- term sustainability.
• -   Are consistent and promote sound and effective risk management, not offering incentives to encourage taking risks that exceed the level set by the Group, consistently with the risk strategy and culture of BBVA Group.
• -   Are clear, comprehensible and transparent and simply drafted, allowing easy understanding of the different elements that make up the remuneration and conditions for its concession, consolidation and payment. To this end, they clearly distinguish between the criteria for the establishment of fixed remuneration and variable remuneration.
• -   Are impartial in terms of gender, reflecting an equal compensation for the same functions or functions of equal value, and does not establish any difference or discrimination for reasons of gender.
• -   Include measures to avoid conflicts of interest, encouraging independence of criteria of people who participate in the decision- making process and management supervision and control, and establishing remuneration schemes
• -   Aim for a remuneration not based exclusively on quantitative criteria, also taking into account appropriate qualitative criteria that reflect compliance with applicable regulations.

The remuneration system generally applicable to all BBVA Group staff comprises the following:

• -   A fixed remuneration, constituting a relevant part of the total compensation, which takes into account the level of responsibility, the functions performed and the professional career of each employee, the principles of internal equity and the value of the function in the market.
• -   A variable remuneration constituted by those payments or benefits additional to the fixed remuneration, monetary or not, that revolve around variable parameters. This remuneration must be linked, in general, to the achievement of previously established objectives. All Group employees have a corporate variable remuneration model, which is complemented by sales incentive models, specific to certain business area groups. For all of them, some financial and non-financial indicators of the Group are defined, which are aligned with the strategic priorities and serve as management parameters to determine the payment of variable remuneration based on the degree of compliance with BBVA's strategy.

In 2021, the level of achievement of the Group's indicators has resulted in 122%, based on the result obtained from each of the financial and non-financial indicators. The level of achievement of the Group's financial indicators for incentive purposes is detailed below:

ANNUAL VARIABLE REMUNERATION (AVR) (MEASUREMENT PERIOD 2021) (BBVA GROUP. 2021) - FINANCIAL INDICATORS

For non-financial indicators, the objectives are determined for each of the countries. The Group's level of achievement of each non- financial indicator for incentive purposes is detailed below:

ANNUAL VARIABLE REMUNERATION (AVR) (MEASUREMENT PERIOD 2021) (BBVA GROUP. 2021) - NON-FINANCIAL INDICATORS

In 2021 a new indicator related to sustainability was incorporated (Mobilization of sustainable finance) to calculate the annual variable remuneration, directly associated with the activity carried out by the Group in compliance with its commitments to the market on climate change and in line with the strategic priority of helping customers in their transition to a sustainable future. The Group is driving the incorporation of metrics related to sustainability and ESG risks in the variable remuneration schemes of its employees, BBVA Senior Management and the BBVA executive directors.

Below are tables showing the average remuneration of employees in BBVA Group as a whole, and individually, of BBVA, S.A. employees located in Spain, where the Group's headquarters are located, and in Mexico, Turkey, Colombia, Peru, Argentina, Venezuela, Chile and Uruguay:

AVERAGE REMUNERATION ₍₁₎ BY PROFESSIONAL CATEGORY⁽²⁾, AGE STAGES AND GENDER (BBVA GROUP. EUROS)

AVERAGE REMUNERATION BY PROFESSIONAL CATEGORY₍₁₎ GENDER AND COUNTRIES WITH SIGNIFICANT OPERATIONS (EUROS)

The differences observed in the average remunerations of certain professional categories arise from factors such as the length of service and their composition; they are not representative of the wage gap. This is due to the fact that only four professional categories are being used, and in each of them very diverse positions with very different remunerations are included. Therefore, the average remuneration of each category is affected by issues such as the different distribution between men and women in the most valued positions, or the higher proportion of women in countries where the average remuneration is lower.

The main differences produced in the different bands reported between years in average remuneration in BBVA Group are due to exchange-rate variations in 2021 in the main geographical areas in which the Group operates, as well as the removal from the perimeter of BBVA USA.

In the case of executive directors and members of BBVA Senior Management who held their positions on December 31, 2021, the information on their remuneration is included in Note 54 of the accompanying Consolidated Financial Statements. The remuneration paid to executive directors is individualized and itemized, while for the members of Senior Management the amounts are presented as an aggregate. The average total remuneration of Senior management in 2021 was 1,425 thousand euros for men and 1,244 thousand euros for women.

Wage gap

The BBVA Group's General Remuneration Policy is impartial in terms of gender, reflecting an equal compensation for the same functions or functions of equal value, and does not establish any difference or discrimination for reasons of gender. The remuneration model takes into account the level of responsibility, the functions carried out and the professional career of each employee, ensuring internal equity and external competitiveness, as well as equal remuneration for men and women.

The wage equality ratio can be obtained from the average remuneration tables above. The ratio is expressed as a percentage, and calculated as the difference in total average remuneration between men and women with the same professional category, over the total average remuneration of men. However, this ratio does not take into account the concept of a position of equal value in the Group.

BBVA's remuneration model defines certain job positions on which remuneration pivots. Each of these positions has a single theoretical value determined by a variety of factors, such as level of responsibility, complexity of the function, impact on results, etc. In the same way, each position has a unique defined value linked to the achievement of pre-defined objectives.

The concept of a position of equal value is reflected in the calculation of the wage gap that compares the total remuneration received by men and women who occupy positions of equal value in the Group.

For each of the aforementioned positions, the median of the total remuneration received by all the men and women who occupy said positions is calculated. The wage gap for the position is calculated as the percentage resulting from dividing the difference between the median salaries of men minus the median salaries of women by the median salaries of men. BBVA Group's salary gap is calculated as the weighted average of the gaps obtained in each of the positions.

The total remuneration considered includes the fixed remuneration and the objective annual variable performance-linked remuneration (target bonus). Items such as allowances, social benefits, etc. are not included in the calculation, as their amount is very unrepresentative within the total remuneration of employees, and whose award criteria and amounts are clearly defined, not discriminating between men and women.

As of December 31, 2021 and 2020, the salary gap by professional categories of equal value is as follows¹²

WAGE GAP (PERCENTAGE)

In 2021 a number of initiatives were launched to support gender diversity, with the aim of balancing the professional possibilities between men and women: setting gender diversity targets at area and country level, supported by a specific diversity plan; more active work to incorporate more women into the talent selection processes; and a flexible working environment in which men can assume family responsibilities to an equal extent as women, so that this does not represent a professional obstacle for women.

Additional information related to remuneration

Annual total compensation ratio

The annual total compensation ratio is calculated for the employees of BBVA, S.A. located in Spain, as the place where the Group's headquarters are located, and in Mexico, Turkey, Colombia, Peru, Argentina, Venezuela, Chile and Uruguay, as the ratio between the annual total compensation (fixed remuneration plus accrued variable remuneration and contributions to pensions) of the highest paid person in each of the geographical areas and the median annual total compensation (fixed remuneration plus accrued variable remuneration plus pension contributions) of all employees earning full-time annualized remuneration, excluding the best-paid person.

The annual total compensation ratios for 2021 are as follows:

ANNUAL TOTAL COMPENSATION RATIO

In 2021, the annual total compensation ratio increased on the 2020 figure in all geographic areas. This is because in 2020, the best paid person in each geographic area had relinquished their variable remuneration corresponding to the 2020 financial year, which reduced the annual total compensation for the year.

Percentage increase in annual total compensation ratio

The percentage increase in annual total compensation ratio is calculated as the ratio between the increase in annual total compensation (fixed compensation plus accrued variable compensation and contributions to pensions) of the best paid person in each of the geographical areas and the percentage increase in the median total annual compensation (fixed compensation plus accrued variable compensation and pension contributions) of all employees in the same geographical area, using full-time annualized compensation, excluding the best paid person.

The annual total compensation of the highest paid person in 2021 increased more than the increase in annual total compensation of the rest of employees in all the geographical areas, because the best paid person in each of the areas had relinquished their variable remuneration for 2020.

In the case of BBVA, S.A. in Spain, for 2021, the increase in the annual total compensation of the best paid person is 5.2 times higher than the increased median annual total compensation of the rest of the employees; in Mexico the figure is greater by 2.7 times, in Turkey 3.4 times, in Colombia 10.4 times, in Peru 6.7 times, in Argentina 2.7 times, and in Uruguay 5 times.

Ratio of standard entry-level wage by gender compared to local minimum wage

The standard initial category is the lowest full-time employment category. In BBVA, this category is established by level and by nature of the function to be performed, and does not distinguish by gender.

The minimum local salary is the minimum legal amount established in each of the geographic areas which each employee has a right to be remunerated for services rendered. It is worth noting that this minimum salary has been assumed as the Living Wage by the international UN body, the International Labor Organization (ILO).

The salary ratio of the standard initial category is calculated as the quotient of the salary of the initial category between the minimum salary in the geography.

As shown in the table below, in the main geographic areas where the Group operates, the entry-level remuneration is higher in BBVA than the local legal minimum wage in these nine geographic areas:

RATIO OF STANDARD ENTRY LEVEL WAGE BY GENDER COMPARED TO LOCAL MINIMUM WAGE

Percentage of employees receiving regular performance and career development reviews

Performance assessment is a continuous process carried out over the year, which analyzes the level of performance of each of the BBVA Group employees, based on the level of execution of some previously established targets.

In general, this process applies to all the employees of the Group.

Percentage of total remuneration of the employees covered which is variable and linked to the volume of products and services sold

In compliance with the applicable regulations on customer protection, BBVA Group's General Remuneration Policy reflects the requirements and principles applicable to personnel that engage in activities related to the sale of products and provision of services to customers.

In this respect, the design and implementation of the remuneration these employees in BBVA Group ensures the protection of customer interests and the quality of the services provided, to ensure that:

• -   it fosters responsible business conduct and fair treatment of customers;
• -   incentives are not established that may induce staff to put their own interests or those of BBVA Group first, to the possible detriment of the interests of their customers;
• -   remuneration is not primordially or exclusively linked to the sale of a product, or a category or specific type of product, such as products that are more lucrative for the entity or employee, when there are others more in line with customer needs; and that this objective is not set as that with greatest weight in the remuneration package; and
• -   an appropriate balance is maintained between the fixed and variable elements of the remuneration.

Description of the remuneration structure of the originators of loans

BBVA Group does not have a specific remuneration structure established for originators of loans. Its remuneration structure is that defined in BBVA Group's General Remuneration Policy for the other employees. The Policy has been approved and designed in compliance with applicable regulations on customer protection, taking into account alignment with best market practices and having included elements designed to reduce exposure to excessive risks, aligning remuneration to the business strategy, objectives, values and long-term interests of the Group.

Pensions and other benefits

BBVA has social welfare systems, differentiated according to the geographical areas and coverage it offers to different groups of employees, not establishing differences due to gender or personal aspects of any other kind. In general, the social welfare system is a defined contribution system for retirement. The Group’s Pension Policy is compatible with the Company’s business strategy, objectives and long-term interests.

Contributions to the social welfare systems of the employees of the Group will be carried out within the framework of the labor regulations, and of the individual or collective agreements of application in each entity, sector or geographical area. Calculation criteria on which benefits are based (commitments for retirement, death and disability) reflect fixed annual amounts, with no temporary fluctuations derived from variable components or individual results being present.

With regard to other benefits, the Group has a local implementation framework, according to which each entity (in accordance with its sector of activity and the geographical area in which it operates), has a package of employee benefits within its specific remuneration scheme, not establishing differences due to gender or personal aspects of any other kind.

In 2021, the Bank in Spain made a payment of €26m (€27.2m in 2020) in savings contributions to pension plans and life and accident insurance premiums, of which €14.3m corresponded to contributions for men and €11.7m for women (in 2020, €15.2m and €12.0m, respectively). This payment accounts for more than 95% of Spain’s pension expenditure, excluding special systems. On average, the contribution received by each employee was 1,049 euros in 2021 (1,186 euros for men and 918 euros for women), compared with 1,076 euros in 2020 (1,224 euros for men and 932 euros for women).

Volunteer work

In its CSR Policy, BBVA expresses its determination to reinforce its corporate culture of social and environmental engagement, facilitating the conditions for its employees to carry out volunteer work. This policy is applied in all countries in which the Group is present.

The BBVA's corporate volunteer work initiatives promote employee collaboration to generate a relevant social impact, enhance a sense of pride in belonging, its satisfaction and productivity, as well as positioning BBVA as a model company for corporate voluntary work, thus increasing its attractiveness for both existing and potential employees.

In this respect, voluntary work constitutes a key element for development the approaches and lines of work in Engagement with the Community 2025 (explained in the "Contribution to society" chapter in this report). This is in line with the Agenda for Sustainable Development 2030, which has explicitly recognized voluntary work as a vehicle for the sustainable development and voluntary work groups as actors for achieving the seventeen SDGs. BBVA also boosts cooperation and collaboration through commitments and alliances for sustainable and inclusive development (SDG 17).

The volunteer work activities are aligned with the BBVA purpose and values that guide its actions.

Overall, 9,066 BBVA employees participated in the volunteer work initiatives promoted by the different Group subsidiaries in 2021, having dedicated more than 26 million hours (69% during working hours and 31% outside working hours). The time dedicated by employees in 2021 is equivalent to a contribution of €277 thousand.

In addition, BBVA promotes an engaged, diverse and egalitarian organization interested in matters such as its employees' safety. Other information on the Group's performance with respect to our employees in 2021 appears in the chapter "Society" in this report.

¹⁰ A total of 69,155 BBVA Group employees (36,326 identifying as women and 32,817 as men) took part in the last Gallup survey in the fourth quarter of 2021. By age range, 4% of employees who participated in this survey were under 25, 36% were 25 to 34, 31% were 35 to 44, and 23% were 45 to 54, while 6% were over 55.

¹¹ 2020 data differ from the one reported in the Non-financial information report of 2020 due to additional amendments.

¹² The median is used for this calculation, since this statistical indicator is less affected by the presence of biases in the distribution of extreme values and better represents the real situation of the Group.

2.2.4 Shareholders & investors

BBVA is engaged in ongoing dialog with its shareholders and investors to ensure they are aware of the issues that may be of interest to them when exercising their voting rights and making decisions. BBVA's Investor Day was held in 2021 as part of the Bank's commitment to its shareholders and investors.

BBVA publishes continuous, periodic and relevant information in a timely fashion, promoting transparency and truthfulness in the information reported to shareholders and investors and equal treatment between shareholders, and establishing channels of communication, participation and dialog with shareholders and investors.

The Annual General Meeting (hereafter AGM) in 2021 received an AENOR certification for sustainable events for the fourth year in a row. The certification demonstrates that BBVA has planned the design, organization and development of the Annual General Meeting taking into account the potential environmental, social and economic potential of the event. Likewise, it demonstrates BBVA's commitment to the sustainability criteria required by the UNE-ISO 20121 standard on the management of sustainable events. The award of this demanding and prestigious certification puts BBVA among the leading organizations in this respect in Spain.

In addition, the 2021 AGM was certified as carbon-neutral for the second year in a row. BBVA offset 41.6 tons of CO₂ of emissions in this event through a contribution to the environmental project for the conservation of Amazonia in Madre de Dios, Peru.

Finally, at the 2021 AGM and with the aim of mitigating the effects of COVID-19, BBVA made a contribution to a non-profit social project in Spain. The 14,000 shareholders who took part in the process voted to choose one area of impact from the four spheres of activity to which a donation of €300,000 should be targeted: social inclusion, education, health and dependency. The winning projects received a fixed and variable amount depending on the votes obtained.

2.2.5 Society

BBVA promotes the development of the societies and communities where it operates through community investment initiatives and activities and acts as a driver of opportunities for people to make reality its purpose of “to bring the age of opportunity to everyone”.

Contribution to society

Community Commitment

In 2021, BBVA presented its Community Commitment, by which €550m will be allocated between 2021 and 2025 to social initiatives supporting inclusive growth in the countries where the Group operates. This commitment is a response to the most important social challenges and aims to contribute to a sustainable and inclusive recovery. The plan is structured around three main scopes of action to comply with specific Sustainable Development Goals (SDGs): reducing inequality and promoting entrepreneurship (SDGs 8 and 10), providing opportunities for all through education (SDG 4) and supporting research and culture (SDGs 9 and 11). BBVA also boosts cooperation and collaboration through commitments and alliances for sustainable and inclusive development (SDG 17).

In 2021, the BBVA Group allocated €106.3m to investment in the community, with 44.2 million beneficiaries. This figure accounts for 2.28% of the adjusted net attributable profit and is 25% down on 2020, when there was an extraordinary contribution for COVID-19 of €35.7m.

BBVA puts this community contribution commitment into practice through its local banks and foundations, as well as supporting other foundations such as the BBVA Foundation (FBBVA) and the BBVA Microfinance Foundation (FMBBVA). The foundations play a key role in this respect through their community investment.

The FBBVA focuses its activity on generating knowledge. Expanding the frontiers of inherited knowledge is one of the most effective ways to successfully address the problems that affect society today, such as the environment, sustainable development, health, demographic changes, globalization, social integration and innovation with the goal of creating opportunities for society as a whole.

The FMBBVA was established in 2007 by BBVA under the framework of its corporate social responsibility to support vulnerable entrepreneurs through a commitment of €200m and its more than 160 years of experience. It is now the biggest contributor to development in Latin America and the second biggest in the world, according to the Organization for Economic Cooperation and Development (OECD). It is also the foundation that contributes more to development for gender equality than any other in the world, according to the OECD, with a direct impact on SDG 5.

The figure below shows the investment in the community for the year within the framework of the Community Commitment, as well as a comparison with respect to the previous year by geographical area and foundations.

COMMUNITY COMMITMENT (MILLIONS OF EUROS AND PERCENTAGE)⁽¹⁾

The targets for 2025 and the progress made during the year with respect to investment and beneficiaries of the Community Commitment by focus of action are shown next.

GOALS AND PROGRESS RELATED TO THE DIRECT BENEFICIARIES OF THE COMMUNITY COMMITMENT ⁽¹⁾ (MILLIONS OF EUROS AND MILLION PEOPLE. 2021)

Next comes a breakdown of investment and the beneficiaries in 2021 by focus of action, as a percentage:

COMMUNITY COMMITMENT INVESTMENT BY LINE OF ACTION. 2021

BENEFICIARIES OF THE COMMITMENT TO THE COMMUNITY BY LINE OF ACTION. 2021

The lines of action of the Community Commitment are shown next:

Focus 1: Reduce inequality and promote entrepreneurship

The arrival of the COVID-19 pandemic in 2020 led to an unprecedented social and economic crisis. Among the challenges faced by society are the worrying increase in poverty, vulnerability and inequality. At the same time, the lack of jobs has aggravated the existing social challenges. This reality requires a global response to develop initiatives geared to promote a sustainable and inclusive recovery.

In 2021, €15.5m were allocated to initiatives designed to reduce inequality and promote entrepreneurship, impacting on SDG 8 and SDG 10. A total of 13.7 million people have benefited directly from this focus of action.

The lines of action of this focus are geared to:

• -   Reduce social and economic equality through initiatives that provide access to basic goods and services necessary to guarantee the social welfare of people, and in particular of the most vulnerable groups; provide training in financial education to empower the population and improve people's financial resilience; and train people in digital skills to improve aspects such as financial inclusion, employability and digital security. In 2021, BBVA invested €7.52m and benefited 2.28 million people directly. In particular, it has trained 709,644 people in financial education, field of action in which BBVA has a long-term commitment, investing €94.7m and benefiting 16.5 million people in a variety programs since 2008. In addition, 1.57 million people have benefited directly from initiatives to combat inequality.
• -   Support vulnerable entrepreneurs with financial and non-financial solutions and provide advice and skills training for their business through the activity of the FMBBVA. In 2021, the FMBBVA supported 2,733,199 vulnerable entrepreneurs through digital solutions to make their business grow (through loans and other products) and strengthen their skills to access the best opportunities. More than 8.3 million people have benefited indirectly from the support given to these entrepreneurs. To date, a volume of €1,114m in microcredits has been paid out, and from 2021 to 2025, a commitment has been made to deliver a further €7 billion to support a total of 4.5 million entrepreneurs.
• -   Support other entrepreneurs and SMEs through initiatives to contribute to their consolidation and/or growth and to the development of capacities such as innovation, digital transformation and sustainable management of their businesses. Moreover, in 2021 BBVA allocated €1.5m to entrepreneurship initiatives which benefited 14,115 entrepreneurs and SMEs through initiatives such as BBVA Momentum in Mexico, Women Entrepreneur in Turkey and Mi Primera Empresa in Argentina, which have also provided content to 280,558 people who have accessed them.

Focus 2: Create opportunities for all through education

Education is the driving force for growth in society and a source of opportunities to contribute to the inclusive growth in the countries where BBVA operates

The pandemic has increased existing educational inequalities and demonstrated the existence of great challenges in the area of education, such as digitalization and adaptation of the educational systems, universal access to quality education and the fostering of free and accessible educational resources.

In 2021, BBVA invested €58.4m in educational initiatives benefiting 22.3 million people. Specifically, BBVA has contributed to the quality education of 409.064 people. The activities of this focus have a direct impact on SDG 4.

The lines of action of this focus are geared to:

• -   Close the digital education gap and adapt schools to guarantee educational continuity. In 2021, a total of €1m was allocated to initiatives geared to promote connectivity, provide access to digital devices and training in digital skills in the world of education, benefiting directly 72,514 people. Notable among these initiatives is the Connected Education program in Spain, in collaboration with Fad, which benefited 14,336 people in 2021, including students, teachers and other participants in the educational community.
• -   Support access to quality education, offering grants for access to education, programs to develop values and skills, collaboration with public educational systems and programs to support higher education and professional training. In 2021, €44.4m were invested in this line of action, and 301,820 people benefited directly from grant programs in Mexico, Uruguay and Venezuela; educational programs in Argentina, Colombia and Peru; teacher training programs in Turkey; and FBBVA educational programs.
• -   Offer a quality, accessible and useful education for all. In 2021, €13m was invested in this line of action, benefiting directly 34,979 people, and more than 21.9 million people had access to current content related to education, finance, sustainability, science and innovation, etc., through programs such as "Aprendemos Juntos" (Learning Together), FBBVA open education programs and financial education and BBVA Research blogs.

Focus 3: Support research and culture

The promotion of research provides a response to the economic and environmental challenges and boosts respect for culture and local values. BBVA has a long record of fostering research and culture, in particular through the activity of FBBVA.

In 2021, BBVA allocated €27.1m to help provide access for 8.2 million people to research and culture, impacting SDG 9 and SDG 11.

The lines of action of this focus are geared to:

• -   Support researchers and creators in the field of science, culture and the economy through grants, recognitions and financial assistance. In 2021, 224 people received financial assistance for the development of their research or cultural creations. The direct promotion of scientific research is one of the levers of the FBBVA, along with the dissemination of knowledge generated through conferences and digital spaces, and the recognition of talent through awards such as the BBVA Foundation Frontiers of Knowledge Awards. Among the initiatives promoted in 2021 by FBBVA in this area are the Leonardo Grants (59), and grants for scientific research projects (39). Other programs of note are the Beca de Arte art grant in Mexico and support for researchers in financial education through grants in BBVA's Center for Education and Financial Capabilities. Additionally, 1.13 million people have had access to the knowledge generated with these investigations.
• -   Increase the publicity given to research through events and other acts to bring the most advanced knowledge within the reach of all and at the service of society. In 2021, 5.2 million people have accessed these contents in a variety of spaces for the dissemination of knowledge and culture.
• -   Support cultural institutions through collaboration with key organizations for the promotion of cultural activities to make access to them possible by the whole of society. In 2021, the FBBVA enhanced the cultural creation of excellence through cycles of concerts at its headquarters in Madrid and Bilbao. It also collaborates with the Guggenheim Museum Bilbao, the Juan Miró Foundation and the Thyssen-Bornemisza Museum (through its digital program), as well as the Teatro Real, Gran Teatre del Liceu, ABAO Bilbao Ópera, the Orquesta Sinfónica de Madrid and the Reina Sofía School of Music for the training of performing artists. There are also programs for preserving the architectural heritage in Peru and activities for cultural promotion through SALT (the platform founded with the aim of promoting the spread of culture, art, research, etc.) in Turkey. In total, 1.87 million people have benefited from these cultural activities.

Other contributions to society

BBVA's community support extends to other important activities, such as volunteer work (more information in the section “Employees” of the chapter "Our stakeholders" of this report), support for foundations and non-profit organizations and the promotion of corporate responsibility through participation in a number of working groups and the acquisition of commitments and alliances for sustainable and inclusive development (SDG 17). (More information in the section "Participation in international initiatives" in the "Climate change report" chapter of this report).

In relation to contributions to foundations, associations and other non-profit entities, the global amount of contributions to foundations and non-profit organizations in 2021 was €19.08m. In 2021, the BBVA Group¹³ made:

• -   289 donations to foundations and non-profit organizations for an amount of €10.84m, including both one-off contributions and those which contribute to social programs.
• -   324 contributions, of a non-social nature, to foundations, associations, lobbies, think-tanks and other non-profit entities for an amount of €8.24m.

Compliance

The Group is firmly committed to the development of all its activities and businesses in strict compliance with current legislation at all times and in accordance with strict standards of ethical behavior. To achieve this, the cornerstone of the BBVA compliance system are the Code of Conduct, which is available on BBVA's corporate website (www.bbva.com), internal control model and the Compliance function.

The Code of Conduct establishes the duty of respect for applicable laws and regulations for all its members in an integral and transparent manner, with the prudence and professionalism that correspond to the social impact of financial activity and to the trust that shareholders and customers have placed in BBVA.

BBVA's Compliance function is a global unit, integrated into the second line of defense, which is entrusted by the Board of Directors with the function of promoting and supervising, independently and objectively, that BBVA acts with integrity, particularly in areas such as prevention of money laundering and financing of terrorism, conduct with clients, conduct in the securities market, prevention of corruption, protection of personal data and other aspects of corporate conduct.

The Compliance function has its own statute, approved by the Board of Directors after analysis by the Risk and Compliance Committee, the most recent update of which was approved in 2021 by the aforementioned Corporate Bodies, in order to keep it aligned at all times with the external and internal regulatory framework, as well as with the changes in the organizational structure of the Group and with the tasks and responsibilities of the members of the function, aligned with the expectations of the different interest groups.

Mission and scope of action

The tasks of the Compliance function include:

• -   promoting a culture of integrity and compliance within BBVA, as well as the knowledge by its members of the external and internal rules and regulations applicable to the above matters, through the development, advisory, dissemination, training and awareness programs, fostering the proactive management of compliance and conduct risk; and.
• -   defining and promoting the implementation and total ascription of the Organization to the risk management frameworks and measures related to these issues.

In order to perform its functions adequately, Compliance maintains a configuration and systems of internal organization in accordance with the principles of internal governance established under the European guidelines for this matter. Its configuration, and development of the activity is attached to the principles established by the Bank for International Settlements (BIS), as well as the reference regulations applicable to Compliance and Conduct issues.

In order to reinforce these aspects and, specifically, the independence of the control areas, BBVA has the Regulation & Internal Control area, which reports to the Board of Directors through the Risks and Compliance Committee, and in which the Compliance unit is integrated. Its activity is periodically supervised by the Risks and Compliance Committee and is subject to the supervisory oversight of the authorities with competence in this area.

Organization, internal government and management model

The Compliance function is handled globally at BBVA, and is composed of a corporate unit, with a transversal scope for the entire Group that is directed by a global manager and by local units which, sharing the mission entrusted to them, perform their duties in the countries where BBVA carries out its activities that are directed by local managers of the function.

The functions carried out by the various Compliance officers relies on a set of departments specialized in different activities which, in turn, have their own designated officers. Thus, among others, the function is addressed by individuals responsible for each discipline related to Compliance and Conduct Issues, for the definition and articulation of the strategy and the management model of the function, or for execution and continuous improvement of the area ́s internal operational processes.

The main functions of BBVA's Compliance units include the following:

• -   Carrying out a compliance and conduct risk assessment inherent to the Group’s activity.
• -   Drafting and implementing internal regulations on its matters.
• -   Establishing systems, technological tools and data for risk management.
• -   Advising the Organization on Compliance and Conduct matters to manage the risks derived from them.
• -   Establishing mechanisms for the monitoring and verification of compliance with internal regulations that allow the measurement of the management of Compliance and Conduct risk and its adequate verification.
• -   Management of whistleblowing channels in the different jurisdictions.
• -   Periodically reporting information related to Compliance and Conduct issues at the different levels of the Organization.
• -   Representing the function before regulatory bodies and supervisors in matters of compliance.

The scope and complexity of the activities, as well as the international presence of BBVA, give rise to a wide variety of regulatory requirements and expectations of the supervisory bodies that must be met in relation to risk management associated with Compliance and Conduct Issues. This makes it necessary to have internal mechanisms that establish transversal management programs for this risk in a homogeneous and integral manner.

For this purpose, Compliance has a global model for managing said risk, which, with an integral and preventive approach, has evolved over time to reinforce the elements and pillars on which it is based and to anticipate the developments and initiatives that may arise in this area.

This model starts from periodic cycles of identification and assessment of compliance risk, upon which its management strategy is based. This results in the review and updating of the multi-year strategy and its corresponding annual action lines, both of which are aimed at strengthening the applicable mitigation and control measures, as well as improving the model itself. These lines are incorporated into the annual Compliance plan, the content of which is reported to the Risks and Compliance Committee.

The basic pillars of the model are made up of the following elements:

• -   A suitable organizational structure with a clear assignment of roles and responsibilities throughout the organization.
• -   A set of policies and procedures that clearly define positions and requirements to be applied.
• -   Mitigation processes and controls to enforce these policies and procedures.
• -   A technology infrastructure focused on monitoring and designed to guarantee the above objective.
• -   Communication and training systems and programs implemented to raise employee awareness of the applicable requirements.
• -   Indicators that allow for the supervision of global model implementation.
• -   Independent periodical review of effective model implementation.

Throughout 2021, work continued on strengthening the documentation and management of this model. Among these actions taken were a review and update of aspects of Compliance within the Group's risk appetite framework (RAF) and the review and update of the global types of Compliance and Conduct risk at both a general level and across the various geographical areas. The framework for conduct and compliance indicators also continues to be strengthened in order to improve the early detection of this type of risk.

The effectiveness of the model and of compliance risk management is continuously subject to various different and extensive annual verification processes, including the testing activity carried out by the Compliance units, BBVA's internal audit activities, the reviews carried out by prestigious auditing firms and the regular or specific inspection processes conducted by the supervisory bodies in each of the geographies.

Moreover, in recent years, of the most relevant axes of application of the compliance model has focused on the digital transformation of BBVA. For this reason, in 2021 the Compliance unit continued to maintain governance, supervision and advisory mechanisms for the activities of the areas that promote and develop innovative business initiatives and projects in the Group.

Conduct with customers

BBVA's Code of Conduct establishes standards for behavior with customers. For more information on the Group's conduct with its customers and the actions promoted by Compliance in this area, see the section "Behavior with Customers" in the "Customers" chapter of this report.

Prevention of money laundering and terrorist financing

Anti-money laundering and prevention of terrorist financing (AML) is an indispensable requirement for preserving corporate integrity, and one of its main assets: the trust of the people and institutions with which it works on a daily basis (mainly customers, employees, shareholders and suppliers) in the different jurisdictions where it operates.

The Group also pays particular attention to compliance with the AML regulation and the restrictions imposed by national or international organizations on operations with certain jurisdictions and individuals or legal entities, to avoid sanctions and significant economic fines imposed by the competent authorities of the various geographical locations in which the Group operates.

As a result of the above, as a global financial group with branches and subsidiaries operating in numerous countries, BBVA applies the compliance model described above for AML risk management in all the entities that make up the Group. This model takes into account the regulations of the jurisdictions in which BBVA is present, the best practices of the international financial industry regarding this matter, and recommendations issued by international bodies such as the Financial Action Task Force (FATF).

This management model is constantly evolving. Thus, the risk analyses carried out annually tighten controls and establish, where appropriate, additional mitigating measures to enhance the model. In 2021, the regulated entities of the Group carried out this AML risk assessment exercise under the supervision of the corporate AML area.

The BBVA Code of Conduct establishes the basic guidelines for action in this area. In line with these guidelines, BBVA has established a series of corporate procedures that are applied in each geographical area, including the Corporate Procedure of Action for the Establishment of Business Relations with Politically Exposed Persons (PEPs), the Corporate Procedure of Action for the Prevention of Money Laundering and the Financing of Terrorist Activities in the Provision of Cross-Border Correspondent Services, and the Standard that establishes the Operational Restrictions with Countries, Jurisdictions and Entities designated by National or International Organizations. All applicable standards are available for consultation by employees in each geographical area.

During 2021, BBVA has continued with the deployment of the new monitoring tool implemented in 2020 in Spain and Turkey, which allows more advanced functionalities, completing the implementation in Mexico, Portugal, Italy, Malta and Cyprus and starting said implementation in Peru, Colombia and Argentina. Similarly, the Group has incorporated new technologies (machine learning, artificial intelligence, etc.) into AML processes in order to (i) enhance the capabilities of detecting elements of risk, (ii) increase the efficiency of said processes and (iii) strengthen analysis and research capacities.

In 2021, BBVA Group resolved 141,850 investigation files that resulted in 78,421 reports of suspicious transactions sent to the corresponding authorities in each country, mainly in jurisdictions such as Spain, Mexico, Turkey, Colombia, Argentina and the United States.

In the area of training related to AML, each of the BBVA Group entities offers an annual training plan for its employees. This plan, defined according to the needs identified, establishes training actions such as face-to-face or e-learning courses, videos, brochures, etc. for both new hires and employees. Likewise, the content of each training action is adapted to the target group, including general concepts derived from the applicable internal and external AML regulations, as well as specific issues that affect the functions performed by the target group of the training. In 2021, 97,106 attendees participated in AML training activities; this figure includes 12,759 employees belonging to the most sensitive groups from the perspective of AML, who received an enhanced level of training.

The AML risk management model is subject to continuous independent review. This review is complemented by internal and external audits carried out by local supervisory bodies, both in Spain in other jurisdictions. In accordance with Spanish regulations, an external expert performs an annual review of the Group's parent company. In 2021, this external expert concluded that BBVA does indeed have an AML model to monitor the risk of being used as a vehicle for money laundering or terrorist financing. In turn, the internal control body, which BBVA maintains at the holding level, meets periodically and oversees the implementation and effectiveness of the AML risk management model within the Group. This supervision scheme is also replicated at the local level, through the committees corresponding to each geography.

It is important to mention BBVA ́s collaboration work with the different government agencies and international organizations in this field: Attendance at the meetings of the Executive Committee Financial Crime Strategy Group of the AML & Financial Crime Committee and the Financial Sanctions Expert Group of the European Banking Federation, member of the task forces on KYC/RBA (Know Your Customer/Risk-based Approach) and Information Sharing of the European Banking Federation, member of the AML Working Group of the IIF, participation in initiatives and forums aimed at increasing and improving the exchange of information for AML purposes, such as the Europol Financial Intelligence Public Private Partnership (EFIPPP), as well as contributions to public consultations issued by national and international bodies (European Commission, FATF-GAFI, European Supervisory Authorities, among others).

Conduct on securities markets

The BBVA Code of Conduct includes the basic principles for action aimed at preserving the integrity of the markets, setting the standards to be followed aimed at preventing market abuse, and guaranteeing transparency and free competition in the professional activity carried out on the market by the BBVA collective.

These basic principles are specifically developed in the Policy on Conduct in the Field of Securities Markets ("the Policy"), which applied to all the individuals who form part of BBVA Group. Specifically, this policy establishes the minimum standards that are to be respected with the activity carried out in the securities markets in terms of privileged information, market manipulation and conflicts of interest. The Policy is supplemented in each jurisdiction by a rule or Internal Code of Conduct (ICC) aimed at the target group with the greatest exposure in the markets. The ICC develops the contents established in the Policy, adjusting them, where appropriate, to local legal requirements.

Both BBVA's Policy and ICC are widespread throughout the Group. In order to manage this regulation, BBVA has tools which are in continuous development and have been implemented throughout practically the entire Group for over a decade. The management of the ICC has meant that the degree of adhesion to it is close to 100% of the individuals in question.

In 2021, Compliance has supervised more than 59,000 operations on the own account of employees subject to the RIC in the securities markets, a group that at the end of that year amounted to more than 7,000 people.

In relation to the process of monitoring operations in the securities markets, in 2021 around 300 suspicious operations have been reported to the different local supervisors in the geographies in which BBVA has activity in the Markets. Likewise, through the communication monitoring process, more than 3,000 communications have been analyzed through voice and electronic channels from the market areas.

The internal regulations on market abuse have also been reviewed, highlighting the updating of the Buyback Program Procedure, the Regulation on activities related to Financial Indices, the Procedure on Investment Recommendations and the Procedure for the Control of Privileged Information. This last procedure has been adapted to the needs of safeguarding privileged information derived from the new remote work environments.

In this context of preventing market abuse, the technological infrastructure for the detection of operations suspected of market abuse has continued to be strengthened, with a special focus on trading activity.

Also in 2021, the training program on market abuse was enhanced with the launch of a specific global course on insider information and market manipulation, which complements the various training activities carried out by the Group on market conduct. Approximately 5,000 Group employees completed this training.

Likewise, training was also improved for employees operating in derivatives with customers affected by the US Dodd-Frank Act under the license of Swap Dealer. This training has been mandatory from January 31, 2021, and is provided by the competent supervisory authority (the National Futures Association).

In relation to the Unites States regulation known as the "Volcker Rule" BBVA has adapted its compliance program to the new simplified version of the rule ("Volcker 2.0"), which continues to maintain the highest international standards. In 2021, annual training on the Volcker Rule was undertaken by a group of 1,500 employees in the Group, which represents almost all of the group affected by the regulation.

In addition, the financial instrument repurchase procedure was updated in order to adapt it to the Group's new Control Model, ensuring strict compliance with European market abuse regulations.

Personal data protection

In the area of personal data protection, BBVA Group has deployed all its activity in three core areas: the personal data of customers, employees and suppliers.

For these purposes, BBVA has differentiated local policies for each of these axes, and they are subject to continuous review and updating, based on the applicable national and international regulations, as well as the Group's Data Protection Principles. In this way, BBVA has in the different geographies, in accordance with its own local legislation, data privacy policies or notices where the way in which the Group's entities collect, process and protect the personal data of its customers is disclosed, suppliers, and employees, as well as the rest of the people who provide their personal data to the corresponding Group company.

BBVA has a global unit for the Protection of Personal Data and local units in the countries where BBVA carries out its activity, in charge of overseeing these issues in the Group. Since 2020, these units have been integrated into the Compliance area, having consolidated their integration during 2021.

This has materialized in the adaptation of the Compliance programs regarding the protection of personal data, which include updating both internal regulations and management frameworks aimed at complying with legal requirements regarding data protection at the BBVA Group level.

During 2021, the Personal Data Protection unit has continued to promote the supervision and control processes in all the countries of the Group to find out the degree of application of the data protection regulations in each country and, where appropriate, promote the actions necessary for its proper functioning. This has been carried out, fundamentally, through the reinforcement of protocols and actions to verify processes and activities with an impact on the protection of personal data, as well as through the follow-up and resolution of the recommendations resulting from internal and external audits. carried out in this field.

For its part, the BBVA Code of Conduct establishes that data protection breaches may lead to the adoption of disciplinary sanctions in accordance with labor legislation.

Other standards of conduct

One of the main mechanisms for managing the Compliance and Conduct risk in the Group is the Whistleblowing Channel, where the members of BBVA as well as other third parties not belonging to BBVA can communicate confidentially and, if they wish, anonymously any behavior that does not comply with the Code or that violates applicable legislation, including complaints related to human rights. The Compliance function aims to ensure that complaints are handled diligently and promptly, guaranteeing the confidentiality of the investigation processes and the absence of retaliation or any other adverse consequence in the case of reports made in good faith communications. The Code of Conduct, is available 24 hours a day, 365 days a year.

During the 2021 financial year, the BBVA Group has implemented a global Whistleblowing Channel tool provided by an external provider in most of those areas where it is present. This online platform is accessible to all employees through the corporate intranet and third parties outside BBVA can access it through a public link available on the BBVA Group website (www.bkms-system.com/ bbva). This new tool raises the standards of security, confidentiality and anonymity for whistleblowers and thus ensures their protection. In 2021 the Group received 1,748 complaints, mainly referring to categories of conduct with co-workers (56.6%) and conduct with the company (32.6%). Some 47% of the complaints processed during the year ended with disciplinary action being taken.

The work carried out in 2021 by the Compliance area included ongoing advice on applying the Code of Conduct. Specifically, the Group formally received 615 individual written and phone queries, focused on aspects such as resolution of potential conflicts of interest, management of personal assets and the development of other professional activities. In 2021, BBVA continued with its work of communication and dissemination of the Code of Conduct, as well as the training on its contents. To date, a total of 104.476 employees have taken part in this training program.

Regarding the area of defense of competition, in July 2019 the BBVA Competition Policy was approved, which, extended to the entire Group, represented progress in the development of standards of conduct in this area. The policy deepens in principle 3.14 of the BBVA Code of Conduct on free competition and covers the most sensitive risk areas identified by national and international organizations; horizontal agreements with competitors, vertical agreements with non-competing companies, as well as possible abusive practices. Various training actions in this area have been carried out during 2020 and 2021, including the training given to members of the Group's Board of Directors in October 2021.

Another key element in the management of Conduct risk in BBVA is the Group's General Anti-Corruption Policy (approved by the Board of Directors of BBVA S.A. in September 2018), which develops the principles and guidelines contained, primarily, in Section 4.3 of the 2015 Code of Conduct. It conforms to the spirit of national and international standards on the subject, taking into consideration the recommendations of international organizations for the prevention of corruption and those established by the International Organization for Standardization (ISO). In May 2020 this Policy was reviewed and its update approved by the Board of Directors of BBVA S.A. and communicated again to all employees and member of the Group ́s main governing bodies. The general guidelines of the BBVA’s General Anti-Corruption Policy are available to both business partners and other third parties on BBVA’s shareholders and investors website.

Additionally, BBVA has an internal regulatory body that complements the General Anti-Corruption Policy in the matter that it regulates.

Among the most prominent policies are:

• -   General Policy on Conflicts of Interest,
• -   Policy on the Prevention and Management of Conflicts of Interest at BBVA (customer area),
• -   Policy on Events and the Acceptance of Gifts Related to major sporting events,
• -   Corporate Travel Policy, and
• -   Corporate Event Management Policy.

Likewise, regarding other internal developments, the following stand out:

• -   Management model for corporate and travel expenses for personnel,
• -   Management model for expenses and investment,
• -   Code of Ethics for Suppliers,
• -   Rules for the Acquisition of Goods and Contracting of Services,
• -   Rules relating to gifts for employees from persons/entities outside the Bank,
• -   Rules for delivery of gifts and organization of promotional events,
• -   Rules for authorizing the hiring of consultancy services,
• -   Rules for wholesale credit risk and retail credit risk,
• -   Corporate rules for managing donations and contributions to non-profit organizations,
• -   Corporate rules for managing commercial sponsorships,
• -   Requirements for establishing and maintaining business relations with politically exposed persons (PEP),
• -   Procedural manual (treatment and registration of communications in the whistleblower channel),
• -   Corporate rules for managing the outsourcing life cycle,
• -   Disciplinary regime.

The BBVA anti-corruption framework is not only composed of the aforementioned regulatory body, but also, in compliance with the crime prevention model, has a program that includes the following elements: (I) a risk map; (II) a specific governance model; (III) a set of mitigation measures aimed at reducing these risks; (IV) procedures for action in the event of the emergence of risk situations; (V) training and communication programs and plans; (VI) indicators aimed at understanding the situation of risks and their mitigation and control framework; (vii) a whistleblower channel; and (VIII) a disciplinary regime.

In relation to the evaluation of the risk of corruption in the Group, different types of operations have been evaluated (I) 587.909 operations out of a total of 599,851 (98%) in relation to the PBC risk (to see the number of communications made to the corresponding authorities, consult the previous section on “Prevention of Money Laundering and Financing of Terrorism”); (II) Regarding the risk of internal fraud, a total of 260,665 operations have been analyzed out of a total of 260,667 (99.99%).

In addition, in recent years risk assessments have been carried out in the area of anti-corruption in the banks of the main geographical areas in which the BBVA Group has a presence. Based on the overall result of this analysis, it has been concluded that the corruption risk control framework in the BBVA Group is adequate.

In relation to the training program on the prevention of corruption, during the 2020 financial year, the training of managers and employees of the BBVA Group in the Anti-Corruption Policy was promoted globally through different initiatives based mainly on practical cases. In this sense, the launch of a corporate online course in most of the jurisdictions in which BBVA is present stands out. At the end of the 2021 financial year, this course had been taken by a total of 71,470 (87.5%)¹⁴ employees, broken down as follows:

PARTICIPANTS IN THE ANTI-CORRUPTION COURSE BY GEOGRAPHICAL AREA (BBVA GROUP. NUMBER, PERCENTAGE)

On the other hand, the total number and percentage of members of the Boards of Directors of the main entities that make up the Group who have received anti-corruption training at the date of publication of this report is 90 (100%), broken down by the following way:

MEMBERS WHO HAVE RECEIVED ANTI-CORRUPTION TRAINING (BBVA GROUP. NUMBER, PERCENTAGE)

Additionally, in line with international standards on the prevention of corruption, a tool for registering gifts and events (Register your Gifts and Events) has been implemented in Spain during the 2021 financial year, the main objective of which is to make transparent and report receipt of this type of personal benefits by BBVA employees. During the 2022 financial year, it is expected that the use of this tool will be extended to most of the geographical areas in which the BBVA Group is present.

Moreover, the framework for preventing conflicts of interest was reinforced in July 2020, complementing the existing internal regulation through the issuance of a new general policy, applicable to the entire Group, which reinforces the principles and main measures that all BBVA members must assume and follow in order to identify, prevent and manage conflicts of interest. The policy has been established in the context of the principles under which BBVA Group operates, which include integrity, prudent risk management, transparency, the achievement of long-term sustainable business and compliance with applicable legislation. It also addresses several different aspects, such as specific measures that help prevent the emergence of conflicts, general guidelines for action should they emerge, and governance and monitoring mechanisms at various different levels of the organization. During the 2021 financial year, different awareness-raising actions have been carried out regarding conflicts of interest in BBVA.

Crime prevention model

Since the introduction in Spain of the criminal liability regime of legal persons, BBVA has been developing a criminal risk management model, based on the general internal control model, with the aim of specifying measures directly aimed at preventing the commission of crimes through an appropriate structure of governance for this purpose. The crime prevention model is structured around three elements: a prevention system, a governance structure and a periodic review of its application.

The prevention system is aimed at (i) identifying the activities carried out in BBVA that represent a risk of the legal entity incurring criminal liability; (ii) identifying the elements of control, prevention and mitigation of said risks; and (iii) developing a specific risk management program for each type of crime likely to attract liability for BBVA. In this sense, a specialized control area (“assurance providers”) is designated for each of the identified criminal risks, as part of the criminal risk management program. For each of the identified criminal types, it draws up a map of risks and a series of mitigation measures and action plans.

The purpose of the governance structure is the supervision and control of the model, the identification of the responsible units and the periodic information to the BBVA governing bodies of the results of the monitoring of the system and of the incidents or possible relevant non-compliances.

This model, periodically subject to independent review processes, is configured as a dynamic process in continuous evolution, so that the experience in its application, the modifications in the activity and in the structure of the Entity and, in particular, in its control model, as well as the legal, economic, social and technological developments that occur, are taken into account in a way that contributes to their adaptation and improvement.

In this context, from 2017 onward, BBVA has been awarded the AENOR certificate, which accredits that its crime compliance management system complies with the UNE 19601:2017 standard.

Fiscal transparency

BBVA operates in compliance with its tax obligations and avoids any practice which represents illicit avoidance of its obligations to pay tax or prejudice to the public treasury.

BBVA's guiding principles on fiscal matters

The principles that guide BBVA's fiscal action are not detached from its responsible and sustainable way of understanding finance and banking. In the tax area, in addition to providing legitimate added value to investors, BBVA's actions must also address other stakeholders and must align with the values and commitments that it has undertaken with society in order to bring the age of opportunities to everyone.

As such, the principles that guide its actions are as follows:

• -   Integrity: in the fiscal sphere, integrity is defined as the observance of the letter and spirit of the law and the maintenance of a cooperative and good faith relationship with the various tax administrations.
• -   Prudence: in the fiscal context, BBVA always assesses the implications of its decisions beforehand, including, among other assessments, the impact that its activity may have in the geographical areas in which it operates.
• -   Transparency: in the tax area, BBVA provides information on its activity and its approach to taxation to customers and other stakeholders in a clear and accurate manner.

BBVA's fiscal strategy

The corporate principles described above served as a basis for the articulation of BBVA's Fiscal Strategy, which was approved by the Board of Directors and made public on its website (www.bbva.com).

In summary, BBVA's fiscal strategy establishes:

• The commitment to pay any applicable taxes in all countries in which it operates.
• The alignment of its taxation with the effective performance of economic activities and value generation. The presence in tax havens is only possible as a consequence of the effective performance of economic activities.
• The application of reasonable interpretations of tax rules and the provision of agreements to avoid double taxation.
• The establishment of a transfer pricing policy for all transactions between related parties and entities, governed by the principles of free competition, value creation and assumption of risk and benefits.
• Addressing the fiscal challenges that the digital economy poses by incorporating an online presence into its value-added assessments.
• The payment of taxes as an important part of the contribution to the economies of the jurisdictions in which it operates.
• The promotion of a reciprocal cooperative relationship with the various tax administrations, based on the principles of transparency, mutual trust, good faith and loyalty.
• The promotion of transparent, clear and responsible reporting of its main tax figures, informing stakeholders of the payment of taxes.
• When preparing any financial product, it takes into account the tax implications for the customers and provides them with the relevant information required to meet their tax obligations.
• The internal control mechanisms and rules necessary to comply with the prevailing tax code and its principles.

The main characteristics of the BBVA Group's fiscal strategy are:

• -   BEPS compliance

  This is inspired by the results of the Base Erosion and Profit Shifting (BEPS) Project reports promoted by the G20 and the OECD, which aim to align value generation with appropriate taxation where said value is generated. They also reflect the commitment to comply with and respect both the letter and the spirit of tax regulation in the jurisdictions in which the Group operates, in accordance with Chapter XI of the OECD Guidelines for Multinational Enterprises.

• -   Geared toward compliance with the SDGs

  BBVA's vision shares the views of the European Economic and Social Committee's opinion ECO/494 of December 11, 2019, on taxation, private investment and the SDGs. For BBVA, paying taxes is key to achieving these objectives; in particular, it is clearly associated with the first goal (no poverty); the eighth (decent work and economic growth); the tenth (reduced inequalities between and within each country); and the seventeenth (partnerships for the goals), although BBVA's commitment extends to all of the goals. In this sense, for BBVA, it is not only a question of contributing with the necessary resources in accordance with current legislation so that the tax authorities may exercise their policies aimed at complying with the SDGs, but it has also adopted a proactive attitude of cooperating with these authorities and have incorporated responsibility in the field of taxation as an essential element of its activities.

• -   Committed to protecting human rights

  BBVA is concerned with the promotion, protection and assurance of an effective exercise of human rights including in the area of taxation, and we have fully embraced the Guiding Principles on Business and Human Rights. Taxation is linked to human rights insofar as, through the redistributive action of states, it makes it possible to provide economically disadvantaged persons with the means to effectively exercise their rights. BBVA is committed to paying taxes, and ensures that these taxes are paid in the jurisdictions in which they are collected, aligning its contribution with the effective performance of its economic activity. The Group also collaborates with the tax administrations of the jurisdictions in which it operates.

  The Group maintains transparent, clear and truthful communication on tax matters with various NGOs that are equally committed to human rights, while internally, it participates in auditing activities for implementing the Guiding Principles developed by BBVA Group's Responsible Business area, and monitors the performance of the plans it has launched in this sphere.

In the BBVA Group, the Board of Directors is responsible for approving its fiscal Strategy. Although the Strategy is intended to be permanent, it will be updated when necessary to better express the Group's fiscal orientation and commitments.

The Strategy is universal and affects all of BBVA's business units and employees, regardless of the region in which they are located. It is developed through a body of fiscal policies that are reviewed annually both internally and by an independent third party to ensure that they reflect best market practices and are fully aligned with the Group's strategy.

In compliance with United Kingdom regulations, BBVA makes its fiscal strategy public for its branch in that jurisdiction. This strategy reproduces the Group-wide strategy with the adaptations required by United Kingdom regulations, and is also subject to third party review and verification.

In addition to the above, it should be noted that Section 4.6.1 of BBVA's Code of Conduct requires its members to carry out their professional activity in such a way that BBVA adequately complies with its tax obligations, avoids any practices that involve illicit tax evasion or harm to the public treasury. The implementation of the Code is monitored by the Group's Compliance area, which has its own whistleblowing channel.

BBVA is fully committed to transparency in tax matters and voluntarily publishes its overall tax contribution annually in the Tax Policy section of the shareholders and investors website. As a financial institution, BBVA also complies, through the corresponding areas, with reporting obligations to tax authorities arising from the Foreign Account Tax Compliance Act (FATCA), the Common Reporting Standard (CRS), the U.S. Qualified Intermediary (QI), and the country-by-country report. In 2021, BBVA Group has also adapted its internal processes to comply with the requirements established by Directive 2018/822, of 25 May, 2018, amending Directive 2011/16/EU, as regards mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements (known as DAC6).

Fiscal risk management and control

BBVA Group has set up a Fiscal Control Framework that complies with requirements on tax risk management and control introduced for listed companies by Law 31/2014, amending the Capital Companies Act to improve Corporate Governance.

The BBVA Group's Fiscal Control Framework is in turn based on its Fiscal Strategy and is applicable to all the jurisdictions in which BBVA operates and to all the Group's various different areas and businesses. This allows BBVA Group to carry out an integrated management of its fiscal positions and risks in a manner consistent and in conjunction with other risks.

BBVA Group's Fiscal Control model is configured around three core lines of action:

• Specific plans are carried out annually to identify, mitigate and control fiscal risk within BBVA Group. The Head of the Group's Tax Department periodically informs the Audit Committee of the most relevant tax information.
• Controls for fiscal risk management are subject to the annual cycle of review of internal control areas in order to evaluate their suitability and effectiveness.
• The Group's Internal Audit area conducts periodic tax compliance reviews.

A series of specific tax risk indicators have also been developed, which are integrated into the Group's general risk management and control model, to help establish and manage the Group's risk profile in tax matters.

BBVA's fiscal function carries out the process of evaluating and monitoring these indicators, which allows for:

• -   Properly identifying fiscal risks.
• -   Assessing the impact of the materialization of fiscal risks.
• -   Developing redirection measures that allow dynamic fiscal risk management.
• -   Reporting and generating relevant information on the evolution of tax risks for the Group's governing bodies.

Finally, the BBVA Group Control Framework is subject to annual review by a third independent firm.

Cooperation with tax administrations

As advocated by the Group's Fiscal Strategy, BBVA maintains a cooperative relationship with the tax administrations of the countries in which we operate based on the principles of transparency, mutual trust, good faith and loyalty.

In particular, and with regard to Spain, it is subject to the Code of Best Tax Practices (Código de Buenas Prácticas Tributarias, CBPT) adopted by the Large Corporations Forum (of which it is a member) on July 20, 2010. As a sign of commitment to and compliance with the CBPT principles, the Group has once again voluntarily submitted to the Spanish Tax Agency the Annual Fiscal Transparency Report for Companies Adhering to the CBPT, together with its Corporate Income Tax declaration for the previous year, which included its performance and proposals to strengthen best practices on fiscal transparency, adopted in a plenary session of the Spanish Large Corporations Forum on December 20, 2016, or companies adhering to the Code.

In the aforementioned Transparency Report, the most significant criteria used to prepare the Corporate Income Tax Declaration are voluntarily explained to the Central Delegation of Major Contributors, and meetings are subsequently held with the tax authorities in order to further elaborate on any details that may be required. All of the above is before corresponding inspectorate actions commence.

In addition, in 2021 and within the framework of the cooperative relations that BBVA has with the Tax Authority, a Self Assessment Report of the Data Reported in the Country-by-Country Statement corresponding to 2019 has been submitted to the Agency. In the process of analyzing these data, BBVA Group has evaluated risks of a fiscal nature on the basis of indicators and ratios of a financial character identified by the OECD in its document OECD (2017), BEPS Action 13 - Country-by-Country Reports: Manual on the effective use for the assessment of tax risk.

BBVA also adopted the Code of Practice on Taxation for Banks, a United Kingdom initiative that provides for the approach expected from financial institutions in terms of governance, tax planning and engagement with the British tax authorities, in order to promote the adoption of best practices in this area, which is published on the HM Revenue & Customs (HMRC) website.

BBVA is also a financial institution that collaborates in the collection processes of the geographies that so request.

Finally, in order to obtain legal certainty and ensure that its understanding of the tax code is in line with the spirit of the law, BBVA consults the tax authorities on any aspects that are controversial or raise doubts, when deemed necessary.

Participation in technical-fiscal discussion forums

BBVA participates, among other organizations, in the Spanish Banking Association's Tax Committee, and collaborates with this association in the finance working groups of the European Banking Federation. BBVA also participates in the main fiscal committees of the banking and trade associations of the jurisdictions in which it operates. The sector's positions are coordinated through all these organizations.

In this respect, there are no significant differences in fiscal matters with respect to the positions reported by said organizations and those maintained by BBVA.

Dialog with other stakeholders on fiscal matters

BBVA is aware of how important taxes are for the progress and sustainability of the societies in which it operates, which is why it maintains mutually constructive dialog with various NGOs, universities, think tanks and other tax-related forums, in relation to the Group's fiscal contribution. As a result of this dialog, BBVA has incorporated new transparency standards made public in the Total Tax Contribution (TTC) Report, has been recognized as a transparent financial entity by the Fundación Compromiso y Transparencia (Commitment and Transparency Foundation) and has promoted initiatives that allow its extension to other multinationals such as the European Business Tax Forum.

This way of understanding and approaching taxation has allowed BBVA to position itself as a model in the area of taxation, according to the DJSI.

Total tax contribution

BBVA is committed to transparency in paying taxes and this is the reason why, for yet another year, the Group voluntarily breaks down the total tax contribution in countries in which it has a significant presence.

The BBVA Group's Total Tax Contribution (TTC), which includes own and third-party payments for corporate tax, VAT, local taxes and fees, income tax withholdings, Social Security payments, and payments made during the year due to tax litigation in relation to the aforementioned taxes. In other words, it includes both the taxes related to the BBVA Group companies (taxes which represent a cost to them and affect their results) and taxes collected on behalf of third parties. The TTC Report gives all the stakeholders an opportunity to understand BBVA's tax payments and represents a forward-looking approach and commitment to corporate social responsibility by assuming a leading position in tax transparency.

GLOBAL TAX CONTRIBUTION (BBVA GROUP. MILLIONS OF EUROS)

Tax information by country

TAX INFORMATION BY COUNTRIES (MILLIONS OF EUROS)

The total gross margin of the Group that appears in this table does not match that existing in the consolidated profit and loss account since the total gross margin in this table also includes the gross margin generated, up to the time of its sale, by the US companies sold, whose "Profit before taxes" and "Corporate income tax expense" are classified under "Profits (losses) after taxes from discontinued operations".

In 2021, BBVA Group did not receive any significant public aid allocated to the financial sector intended for the promotion of banking activity. This statement is made for the purposes of article 89 of Directive 2013/36/EU of the European Parliament and of the Council of June 26 (on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms) and its transposition to Spanish legislation by means of Law 10/2014 on Monitoring, Supervision and Solvency of Credit Institutions of June 26.

In addition, below is a breakdown of the information for the main countries in which BBVA operates:

TAX INFORMATION BY AREAS 2021 (MILLIONS OF EUROS, NUMBER OF EMPLOYEES)

The total gross margin of the Group that appears in this table does not match that existing in the consolidated profit and loss account since the total gross margin in this table also includes the gross margin generated, up to the time of its sale, by the US companies sold, whose "Profit before taxes" and "Corporate income tax expense" are classified under the heading "Profits (losses) after taxes from discontinued operations".

TAX INFORMATION BY AREAS 2020 (MILLIONS OF EUROS, NUMBER OF EMPLOYEES)

Banking activity in Spain is mainly carried out through BBVA, S.A., which has a twofold dimension: on the one hand, it is the head of banking business in Spain; and on the other, it is the parent company/holding company of BBVA Group. The main segments of activity developed in Spain include commercial and SME banking, insurance and CIB activities.

In general terms, Spanish companies are integrated into a tax group, constituting for these purposes a single taxpayer in Corporation Tax. The nominal tax rate in Spain is 30%; however, there are certain effects and singularities of a fiscal and accounting nature due to the double dimension mentioned above, which may cause its effective tax rate to be different.

For these purposes, its tax rate stands out in 2021, much higher than 30% due to the tax effects generated in the Corporate Income Tax Expense as a result of the sale of the banking business in the United States.

BBVA Group's operations in Mexico are conducted through the BBVA Mexico Group, which is the country's leading financial institution and one of the driving forces behind the BBVA Group. Its main segments of activity include commercial and SME banking, insurance and CIB activities.

The nominal tax rate in Mexico is 30% and its effective tax rate is somewhat below it, since there are certain effects and singularities of a fiscal and accounting nature that can cause its effective tax rate to be different from 30%, being the most relevant in 2021, the fiscal adjustment for inflation that contributes to the drop in said rate.

BBVA Group's operations in the United States have been conducted, firstly, through BBVA USA, based in the Sunbelt region of the United States, with its main segments of activity being commercial and corporate banking, as well as CIB activities; as well as operations conducted through the New York branch, which focuses on investment banking.

However, on June 1, 2021, once the necessary authorizations were obtained, BBVA completed the sale of 100% of the share capital of its subsidiary BBVA USA Bancshares, Inc., which in turn was the holder of all the share capital of the bank BBVA USA, in favor of The PNC Financial Services Group, Inc. BBVA Group will continue to engage in institutional and wholesale business in the United States through its broker-dealer BBVA Securities Inc. and its branch in New York. BBVA also maintains its investment activity in the fintech sector through its participation in Propel Venture Partners US Fund I, L.P. The Profit net of Corporate Tax and accrued Corporate Tax appearing in the above table includes the figures of the business unit which is the object of the transaction until its execution.

The nominal federal tax rate in the United States is 21%. In 2021, the effective tax rate is slightly lower due to the sale transaction referred to above, which significantly alters the Group's activity mix in the United States.

BBVA Group's operations in Argentina are conducted through BBVA Argentina, one of the country's leading financial institutions. Its main segments of activity include commercial and SME banking, insurance and CIB activities.

As a result of a tax reform approved in the 2021 financial year itself, the nominal tax rate in Argentina is 35% (initially, it was planned to be 30%). Despite its consideration as a hyperinflationary economy and the consequent restatement of its financial statements, which usually significantly distort the country's tax pressure, the effective tax rate is lower than the nominal rate, mainly due to the tax adjustment for inflation.

BBVA Group's operations in Colombia are conducted through BBVA Colombia, one of the country's leading financial institutions. Its main segments of activity include commercial and SME banking, insurance and CIB activities.

The nominal tax rate in Colombia is 34% (financial sector), while the effective tax rate is somewhat lower. In this sense, there are certain effects and singularities of a fiscal nature (such as income exempt from social interest loans, as well as some from the insurance field) that can cause your effective tax rate to be different from the nominal one.

BBVA Group's operations in Peru are conducted through BBVA Peru, one of the country's leading financial institutions. Its main segments of activity include commercial and SME banking, as well as insurance and CIB activities.

The nominal tax rate in Peru is 29.5% and its effective tax rate is somewhat higher. In fiscal year 2021, the weight of non-deductible expenses/income is greater than that of exempt income (i.e. exemption from interest on deposits in the Central Reserve Bank and interest on Public Treasury bonds).

The Group's activity in Turkey is mainly conducted through Garanti BBVA Group, of which BBVA is the largest shareholder. Garanti BBVA Group is a pioneering bank in Turkey, a leader in the use of technology applied to banking businesses. Its main segments of activity include commercial and SME banking, insurance and CIB activities.

As a result of a tax reform approved in 2021 itself, the nominal tax rate in Turkey is 25%, which will become 23% in 2022 and 20% in subsequent years. At the beginning of the year, the planned nominal rate was 20%. In 2021, the effective tax rate was somewhat lower than the nominal rate of 25%, mainly due to the positive effect of regularizing its deferred tax assets (DTAs), net of deferred tax liabilities. to the new tax rates applicable depending on the moment in which they are expected to reverse.

Likewise, the Group also operates in Chile, Venezuela, Uruguay, Bolivia, Brazil and Curaçao carrying out, as in the rest of the jurisdictions, the activity of retail and commercial banking. The combined relative weight of these countries in the Group's accounts is very limited; representing less than 2% of the Group’s total consolidated income before tax generated in 2021.

The average nominal rate is 26.20%. The joint effective tax rate is 25.20%, practically the same.

Additionally, the main banking and financial institutions in the rest of Europe and Asia are in Switzerland, the Netherlands, and Romania. There are also branches located in Frankfurt, Brussels, Paris, Milan, London, Portugal, Taipei, Tokyo, Hong Kong, Singapore, Shanghai, Malta and Cyprus, whose main activity is in the field of CIB. The overall relative weight of these countries in the Group's accounts is very limited, representing less than 5% of the Group's total consolidated income before tax generated in 2021.

The average applicable nominal rate would amount to 23.01%. In 2021 the effective tax rate has risen to 20.47%, practically in line with the average nominal rate calculated for these jurisdictions.

The perimeter of the geographical areas described above can be consulted in Appendix I of the Consolidated Annual Accounts.

Offshore financial centers

BBVA Group maintains an express policy on activities in entities permanently registered in offshore financial centers, which includes a plan for reducing the number of these establishments.

Issuers of securities

As of December 31, 2021, BBVA’s permanent establishments registered in offshore financial centers considered tax havens by both the OECD and Spanish regulations are securities companies: BBVA Global Finance, Ltd., Continental DPR Finance Company, Garanti Diversified Payment Rights Finance Company and RPV Company.

BBVA Group has four issuers registered in Grand Cayman, two of which belong to the Garanti Group.

BRANCH AT OFFSHORE ENTITIES (BBVA GROUP. MILLIONS OF EUROS)

Supervision and control of the permanent establishments of BBVA Group in offshore financial centers

BBVA Group has established risk management policies and criteria for all its permanent establishments in offshore financial centers, as it has for the rest of the entities within the Group.

The BBVA Internal Audit area performs risk-based reviews of BBVA Group's permanent establishment in offshore financial centers. In addition, every year a special risk-based review is performed of compliance with Spanish legislation applicable to the transfer of funds between the Group’s banks in Spain and its companies established in offshore financial centers.

In 2021, both the Internal Audit Area and the BBVA Compliance Department monitored the action plans derived from the audit reports.

For 2021, as far as external audits are concerned, all of BBVA Group's permanent establishments registered in offshore financial centers have the same external auditor (KPMG), except for Continental DPR Finance Company.

Commitment to human rights

BBVA is committed to compliance with all applicable laws and to respect for internationally recognized human rights. This commitment applies to all of the relationships that BBVA establishes with its customers, suppliers, employees, and with the communities in which it conducts its business and activities.

BBVA has had a commitment to human rights since 2007, which was updated in 2020. It seeks to ensure respect for the dignity of all people and their inherent rights.

BBVA's human rights commitment is part of the Group's CSR Policy and is aligned with its Code of Conduct. This commitment takes the UN Guiding Principles on Business and Human Rights as a reference. Its purpose is to guide the Group in its strategic vision and its operations, as well as its relationship with its stakeholders.

In 2021, BBVA has adopted an active role within the framework of future EU legal initiatives. As part of its participation in the Working Groups on Sustainable Finance of the European Banking Federation (EBV) and the Association of Financial Markets of Europe (AFME), BBVA has contributed to the drafting of responses to public consultations made to the European Commission. In this context it is worth highlighting the response to the consultation launched by the European Sustainable Finance Platform on the development of a social taxonomy, a project whose objectives include criteria that guarantee the support and respect of companies for human rights. BBVA also forms part of the EBF advisory group on diversity and inclusion.

BBVA identifies the social and labor risks derived from its activity in the different areas and countries in which it operates in order to manage their possible impacts through processes designed specifically for this purpose, or through already existing processes which integrate the human rights perspective. For more information on the Equator Principles, see the chapter "Management of indirect environmental and social impacts" in this report.

Moreover, the methodology for assessing the risk to BBVA's reputation mentioned in the "Reputational Risk" section within the chapter “Risk management”, is an essential companion to this management, since assessing reputational risk highlights the fact that issues related to human rights have the potential to affect the Group's reputation.

Due diligence process

In line with the UN Guiding Principles on Business and Human Rights, in 2021 BBVA began a new process of human rights due diligence to prevent, mitigate and repair potential human rights impacts. Using a preventive approach, the potential impacts on human rights of the operations have been identified, together with possible improvements in the mechanisms within the Entity to prevent and mitigate them, making the adequate channels and procedures available in order to ensure that, in case of any violation, the appropriate mechanisms are available to ensure all necessary remedies.

The main objectives of this exercise were:

• -   Update and include new issues to identify and asses the risks analyzed in the previous year.
• -   Assess the adequacy of the claims measures and mechanisms for managing these risks (in accordance with the provisions of the UN Guidance Principles on Business).
• -   Renewal of the Action Plan on Human Rights to prevent and/or mitigate potential negative impacts.
• -   Alignment of the process with the current risk operational risk management model and regulatory recommendations to ensure that the due diligence process constitutes a continuous and dynamic process. For more information, see the "Operational risk" section in the chapter "Risk management" of this report.

This global due diligence process carried out in all the global areas of BBVA has been replicated in Spain, Mexico, Turkey, Argentina, Colombia, Peru, Uruguay and Venezuela. For each country, priority has been given to issues with greatest impact and frequency resulting from local social and governmental practices and from the interviews held with the management areas and global Risk Control Specialists.

Identification, assessment and testing

Taking as a starting point the issues analyzed in the previous due diligence process in 2018, and incorporating the recommendations and expectations of analysts and investors and other emerging issues, an internal taxonomy has been created of 28 issues, grouped into 6 themes covering aspects related to forced labor, child labor, freedom of association and collective bargaining, wage equality and discrimination.

• Employment conditions: fair recruitment and remuneration, labor rights and relations, and health and safety.
• Projects and products: impact on human rights derived from lending activity.
• Supply chain: fair recruitment conditions, supplier monitoring and responsible purchasing policies.
• Customer wellbeing: accessibility and service, security and respect.
• Respect for communities: environmental protection and inclusive business.
• Cross-cutting issues: data protection and the impact of new technologies on human rights.

For each of these 28 issues, an assessment has been made of:

• -   Inherent risk: based on the two parameters of seriousness of impact and frequency of occurrence for each issue. For this purpose, public information on the industry and the Entity itself was used, as well as the various international frameworks of reference, in particular the UN Guidance Principles.
• -   Residual risk: to assess the mitigating aspects available to BBVA to manage each issue, based on: (I) policies, (II) procedures/controls, (III) claims mechanisms, and (IV) monitoring indicators.

In this phase of identification and assessment, the potential negative impacts on stakeholders were taken into account, such as the employees themselves (with a focus on women), suppliers and subcontractors, customers, and the indigenous population and local communities.

Subsequently, within the framework of the current Non-Financial Risks Model, the global Risk Control Specialists for each issue checked the results of the assessment and the adequacy of the action plans as mitigants. This test had a twofold objective: first, to move steadily toward an alignment of the two models (due diligence of human rights and the Non-Financial Risk Model); and second, achieve a greater systemization of the process.

Prevention and mitigation: Action Plan

The results of the global due diligence process determined that in general the management and mitigation measures for each of the issues have a medium-high level of effectiveness. However, areas of improvement have been detected in four areas:

• Strategy. One of the areas for improvement detected has been to strengthen the structure of management, monitoring and control of the risks associated with human rights. As a result, in 2021 the alignment with the Non-Financial Risks Model has been reinforced, and a half-yearly system to monitor the effects of the Action Plan will be carried out. Work will also begin on the integration of the management of these risks in ordinary processes.
• Stakeholders. The active participation of key stakeholders in the due diligence process has been identified as an area to be enhanced. An active process of participation with these groups will be carried out to meet this requirement.
• Reporting and disclosure. BBVA is committed to disclose essential (ESG) factors regarding its business, in a consistent, reliable and standardized manner. In addition to GRI, BBVA discloses information on human rights according to two of the most advanced standards in the market: Measuring Stakeholder Capitalism of the World Economic Forum's (WEF) International Business Council (IBC) and the Sustainability Accounting Standards Board (SASB). In this way, BBVA responds to the expectations of analysts, investors and other stakeholders.
• Processes. Action plans have been established in each of the 6 thematic areas:
  • -   Employment conditions: In 2021, the commitment to non-discrimination between employees has been strengthened. The non-discrimination variable will be included in the internal analytical model of existing data in the Group to contribute to the selection and recruitment processes. Moreover, work has been done on global labor disconnection guidelines which will include express measures on digital disconnection, methods and contact times in calls, emails and other channels. The guidelines are applicable in all geographical areas and communication and awareness raising campaigns are carried out for all employees to make them aware of their implementation.
  • -   Projects and products: In the area of BBVA's environmental and social framework, an Engagement Protocol was developed in 2021 with customers who a priori do not comply with any of the requirements of said Framework. This protocol specifically includes compliance requirements relating to human rights.
  • -   Supply chain: A pilot project was launched in 2021 to enhance the integration of ESG issues, and specifically human rights, into the supplier evaluation process and to enhance the fact of having a chain of responsible suppliers.
  • -   Customer wellbeing: In 2021 a framework of protection for vulnerable customers has been developed to develop criteria and good practices that offer adequate protection to customers in a situation of vulnerability.
  • -   Respect for communities: The launch is planned of a global framework of sustainable mobility, so that the geographical areas where BBVA operates may prepare local plans that will contribute to reduce the environmental footprint in the areas and communities where we operate. For more information see the chapter "Management of direct environmental impacts" in this report.
  • -   Cross-cutting issues: Work has started to create a privacy policy for the whole BBVA Group. A monitoring tool will also be available for the protection of personal data at global level, which will include indicators relating to the number of complaints and claims on personal data protection.

As a final result, 25 action plans have already been implemented in 2021, run by 14 business areas or globally with the involvement of the whole company.

Claims methods¹⁵

BBVA has a Whistleblowing Channel, through which any stakeholder can report confidentially and, if they wish, anonymously, any behavior that is linked directly or indirectly to human rights. No violations of human rights by the entities belonging to the Group as of December 31, 2021 have been detected in the complaints received through this channel. Fore more information, see the "Compliance" section of this report.

There is also a plan to create a global and local category of claims linked to human rights issues in the customer service channels.

¹³ Turkey and Uruguay not included.

¹⁴ This metric does not include Garanti Turkey.

¹⁵ A complaints mechanism is a formalized way established or facilitated by the company, through which individuals or groups can raise their concerns with respect to any impact of the company on their lives, including the consequences for human rights.

2.2.6 Suppliers

BBVA provides complete and transparent information to its suppliers in the procurement processes, to ensure compliance with the legal requirements on labor and environment, respecting the human rights and stimulating the demand for socially responsible products and services.

Within the procurement process, BBVA carries out an adequate management of the impacts generated in the development of its activity, both real and potential, through a series of mechanisms and standards: the General Procurement Principles, the supplier evaluation process and the Corporate Standard for Procurement of Goods and Contracting Services. These impacts can be environmental, derive from the labor practices carried out in the suppliers' companies, the absence of freedom of association or the violation of human rights.

The General Procurement Principles and the BBVA Code of conduct for suppliers establish the fundamental guidelines that all suppliers with whom any company or entity of the Group is related must respect.

• -   The General Procurement Principles establish, among other aspects, the duty to ensure compliance with the applicable legal requirements regarding human, labor, association and environmental rights by all those involved in the procurement process, as well as how to involve them in the Group's efforts to prevent corruption. In the same way, it ensures that the selection of suppliers complies with the existing internal regulations at all times and, especially, with the values of the Group's Code of Conduct, based on respect for legality, commitment to integrity, concurrency, objectivity, transparency, value creation, confidentiality, continuous improvement and segregation of duties.
• -   Through the implementation of the Code of conduct for suppliers in the purchasing units of all the countries in which the Group is present, minimum standards of behavior have been established in terms of ethical, social and environmental conduct that suppliers must respect when provide products and services.

BBVA aims to integrate ethical, social and environmental factors in the supply chain for which it is responsible. In 2021, the Group consolidated its purchasing function, which is based on three basic pillars of the procurement model:

• -   Service: maximizing the quality and experience of the internal customer, who is accompanied throughout the process.
• -   Risk: limiting the Group's operational risk in supplier contracts, thus ensuring compliance with regulations and processes.
• -   Efficiency: contributing to the Group's efficiency by the proactive management of costs and suppliers.

ESSENTIAL DATA ABOUT SUPPLIERS (BBVA GROUP)

BBVA has technological platforms that support all phases of the Group's procurement process, from budgeting to the recording and accounting of invoices. Furthermore, the BBVA supplier portal facilitates the Group's digital relationship with its suppliers. It is a collaborative environment aimed at companies and freelancers who work or want to work with the Group, which allows them to interact with BBVA electronically throughout the supply cycle.

Both the supplier evaluation process and the Corporate Standard for Procurement of Goods and Contracting of Services have undergone significant updates throughout 2021, evolving toward a more complete evaluation of supplier risk and greater control over the entire procurement process.

The supplier evaluation process carried out by BBVA has finished being implemented in 2021, considerably expanding the number of aspects to review related to each supplier: financial, legal, labor, reputational, anti-corruption and money laundering, technological risks, concentration and country risks, and client protection. The analysis of these aspects aims to mitigate possible risks in contracting with third parties, as well as to verify that it complies with its legal responsibilities, allowing in turn to promote its civic responsibilities and validate that they share the same values as the Group in terms of social responsibility.

In this evaluation process, the supplier must declare that it has its own code of conduct, which complies with the highest standards in its industry. In the event that it does not have its own code of conduct, the supplier must declare that it knows and accepts the BBVA Group's Code of Conduct, which includes the following aspects: legal compliance; commitment to human rights; commitment to the environment; supply chain (outsourcing); combating corruption; prevention of money laundering and financing of terrorist activities; political contributions; conflict of interest; free competition; and confidentiality.

The evaluation of suppliers is periodically reviewed and is subject to continuous monitoring. As of December 31, 2021, the percentage of awards made to evaluated suppliers reached 97.3%.

As of December 31, 2021, 97.8% of the total number of BBVA suppliers (representing 92.8% of total billing) corresponds to local suppliers, which makes it possible to contribute to the economic and social development of the countries in which BBVA is present. The Group defines a local supplier as one whose tax identification matches the country of the company receiving the good or service.

BBVA also favors inclusion and diversity by hiring services in Spain through the so-called “special employment centers” (CEE), protected employment companies where the labor integration of people with disabilities is promoted. During fiscal year 2021, the turnover of CEE to the Bank was €1.7m (as of December 31, 2020, the turnover amounted to €2.4m).

Finally, it should be noted that in the fiscal year 2021, the Internal Audit area evaluated hired suppliers on the procurement processes of goods and services from different areas and on the service provided by certain suppliers, generally outsourcing. These are risk- based evaluations and the reviews are carried out according to a defined internal methodology.

NUMBER OF SUPPLIERS AND TURNOVER BY COUNTRY

AVERAGE PAYMENT PERIOD TO SUPPLIERS ⁽¹⁾ (DAYS)

2.2.7 Regulators & supervisors

The nature of the operations involved makes banking one of the key sectors of a country's economy, as much savings, investment and finance are channeled through it. That is why banks are subject to special regulation and supervision. The regulators and supervisors are therefore important stakeholders for the financial industry in general and for BBVA in particular.

Public regulation aims to ensure that financial institutions operate correctly, strengthen their resilience to adverse events and harmonize the interests of all the parties directly affected (such as banks, savers and investors) with the general interest.

Over the last few years, a number of European authorities, such as the European Banking Authority (EBA), the European Securities and Markets Authority (ESMA), the European Commission, etc., and also global authorities, such as the Financial Stability Board (FSB), Bank for International Settlements (BIS), etc., have developed a regulatory framework to improve the strength of the financial system and thus reduce the virulence and also probability of future financial crises.

Given the importance of the new regulatory and supervisory agenda, BBVA has maintained a constant dialog with the different authorities. BBVA has a responsible unit for coordinating relations with the Single Supervisory Mechanism (SSM) and the Single Resolution Mechanism (SRM), as well as facilitating relations with other local supervisors from a single and global point of view. SSM supervision takes place through mixed groups, in the case of BBVA made up mainly of Bank of Spain teams located in Madrid and the European Central Bank (ECB) teams located in Frankfurt, which are called Joint Supervisory Teams (JSTs). The SRM itself is made up of the Single Resolution Board (SRB), based in Brussels, and the National Resolution Authorities (NRA), which in the case of Spain are the Bank of Spain as the prevention resolution authority, and the Fund for Orderly Bank Restructuring (FROB) as the executive resolution authority.

It should be noted that BBVA maintains an active participation in the consultation processes on the regulation of financial entities carried out by the different regulators or supervisors mentioned above.

For more information on the regulatory and legal framework applicable to the Group’s entities, see the “Regulatory environment” chapter of this report.

¹⁵ A complaints mechanism is a formalized way established or facilitated by the company, through which individuals or groups can raise their concerns with respect to any impact of the company on their lives, including the consequences for human rights.

2.3 Report on climate change and other environmental and social issues

The financial sector and climate change

The fight against climate change is one of the biggest disruptive events of all time, with extraordinary economic consequences to which all actors (governments, regulators, businesses, consumers and society in general) must adapt.

Climate change and the transition toward a low-carbon economy have significant implications on the value chains of most production sectors, and may require significant investments in many industries. However, technological progress in the fields of energy efficiency, renewable energies, efficient mobility and the circular economy will continue to generate new opportunities for all.

Nevertheless, customers, markets and society as a whole not only expect large companies to create value, but to also make a positive contribution to society. In particular, that the economic development to which they contribute with their activity is inclusive.

BBVA is aware of the key role that banking plays in this transition toward a more sustainable world through its financial activity, has adhered to the Principles for Responsible Banking promoted by the UN, the Katowice Commitment and the Collective Commitment to Climate Action and is keen to play a central role, as demanded by society, and to help its customers in their transition toward this sustainable future.

As a financial institution, BBVA has an impact on the environment and society directly through the consumption of natural resources and its relationship with stakeholders; and indirectly (and most importantly) through its lending activity and the projects it finances.

Under Law 7/2021, of May 20, on climate change and energy transition (hereafter Law 7/2021), BBVA has submitted a report (hereafter, Climate Change Report), which includes, among others, the following matters: the organization's governance structure, the strategic focus, both in terms of adaptation and mitigation of the entity to manage the financial risks associated with climate change, the real and potential impacts of the risks and opportunities associated with climate change, the processes of identification, evaluation, control and management of the risks related to the climate and the metrics, scenarios and objectives used to evaluate and manage the relevant risks and opportunities associated with climate change.

In this context, BBVA has incorporated the Climate Change Report into the Group's Management Report, which is attached to the Consolidated Financial Statements for 2021, as covered in the article 32 in the Law 7/2021.

Non-financial Information Report. Contents index of the Law 7/2021, of May 20, about climate change and energetic transition

2.3.1 Committed to sustainability

BBVA aims to align its activity steadily to the Paris Agreement and use its role as a bank to help its customers through finance, advice and innovative solutions to transition toward a more sustainable future, inspired by the Sustainable Development Goals. Specifically, the Group wants to help face challenges as important as climate change or support inclusive growth. Helping customers in their transition also represents a great opportunity, as it requires an unprecedented level of investment to innovate and deploy new technologies in practically all the sectors.

To this end, in 2021 BBVA has continued to make progress in decarbonizing its portfolio. It has announced its intention of reducing its exposure to coal-related activities to zero, and stopping the finance of companies in these activities by 2030 in developed countries and by 2040 in the rest of the countries where it operates. It has also set intermediate goals to decarbonize its portfolio in four emission-intensive industries, such as electricity generation, automotive, steel and cement which represent 60% of the world’s CO₂ emissions¹⁶. Moreover, the Group will focus its efforts on supporting customers with finance, advice and innovative solutions in the joint effort of decarbonization.

2.3.2 Governance model

Corporate bodies

BBVA's corporate bodies have defined and driven the Group's strategy that incorporates sustainability and the fight against climate change as one of its priorities, having approved its basic elements (through its incorporation to the Group's strategic plan in 2019, and with the approval of the General Sustainability Policy in 2020) and carrying out periodic monitoring of its implementation in the Group.

For the Board of Directors, an essential element of this strategic approach is the integration of sustainability and the fight against climate change into the Group’s activities, managing the risks associated with these areas, and considering them a great opportunity for business in which to support its growth strategy. Combined with this is the establishment of targets which facilitate their execution, supervision and monitoring. This approach allows the Group's corporate bodies to define the basic lines of action for BBVA as regards the management of opportunities and risks arising from sustainability and oversee their execution by the executive areas in all spheres of the Entity’s operations.

In this work monitoring and supervising the implementation of the Group's sustainability, the Board is assisted by its committees specialized in their respective areas. Thus, the active role of the Executive Committee is particularly important in driving this strategy in the monitoring of the integration of sustainability in the Group's processes of business and activity, and their impact on its activity and results in accordance with its monitoring and analysis function of the development of the Group's key performance indicators.

Also important is the role of the Risk and Compliance Committee, which assists the Board of Directors in the integration of sustainability in the analysis, planning and management of the Group's risks, and in supervising their execution; that of the Audit Committee, in supervising the public information on sustainability reported to the market; and the Remuneration Committee, in driving the integration of indicators related to sustainability in the Group's variable remuneration model.

A specific example of this activity is the work of the Board in adopting very important decisions for the Group in the area of sustainability which are described in this report, such as the increased commitment to sustainable finance (Pledge 2025); the adoption of the Net Zero pledge for 2050; the determination of commitments related to the decarbonization of the portfolio; decisions related to the integration of risks associated with climate change in the management processes; as well as the creation of the Group's new Sustainability Area, raising the function to the highest executive level of the organization, as described in this report.

In addition to this, there is the work of the corporate supervisory and monitoring bodies for the implementation of the Group's sustainability strategy and activity, and compliance with the organization's objectives, which is carried out on the basis of the reports received by the Sustainability Area and the different areas of the Bank which incorporate sustainability into their daily businesses and activities. These reports are carried out for corporate bodies according to their competence, as described in the above paragraphs, either periodically or ad hoc (worth particular mention are the specific presentations drawn up at least twice a year for the Board of Directors and the Executive Committee).

In addition to the above and in order to achieve the best performance of its duties in this matter, the Board considered it necessary to strengthen its own knowledge and experience in sustainability, by onboarding people with extensive knowledge and experience and by a continuous training program to include sustainability-related subjects, such as sustainable finance or main trends that are being developed in the market on this matter.

Transversal integration of sustainability into the executive sphere

BBVA incorporates sustainability as part of its daily activities and everything it does, encompassing not only relations with customers but also internal processes. In this sense, the definition and execution of a strategy, which includes sustainability and climate change as one of its priorities, has a transversal nature, being the responsibility of all areas of the Group to incorporate it progressively into their strategic agenda and their work dynamics.

In 2021, BBVA gave a renewed boost to its strategy of increasing sustainability to the highest executive level of the organization, reporting directly to the Chief Executive Officer and the Group Executive Chairman (in this case, both linked to strategy and transformation), creating the global area Sustainability business area with the aim of becoming the model bank for customers in sustainability solutions.

In a context in which all the Group employees and areas integrate sustainability into their day-to-day activity, the new global area will design the strategic sustainability agenda, define and promote the lines of work in this area of the different global and transformation units (including Risk, Finance, Talent and Culture, Data, Engineering, and Organization) and develop new sustainable products.

In addition, BBVA has established a network of experts, comprising sustainability specialists from different areas of the Group (Client Solutions, Corporate & Investment Banking, Global Risk Management, Communication & Responsible Business), coordinated as a network by the global Sustainability area. These experts are responsible for building knowledge in the field of sustainability at the Group. This knowledge is then used to provide customer guidance, support areas in developing new value propositions in the sphere of sustainability, make climate risks part of risk management, and draw up a public agenda and set of sustainability standards.

¹⁶ According to the International Energy Agency and UNEP.

2.3.3 Sustainable finance

With respect to finance, in 2021 BBVA increased its Pledge 2025, doubling its initial target of channelling sustainable finance to 200 billion euros through 2025. From 2018 to 2021, BBVA earmarked a total of €85,817m in sustainable activities, distributed as follows:

Figures in € Billion

In 2021 the Group has also strengthened its community involvement to support inclusive growth in countries where it operates, for which €550m will be allocated directly and through its support to foundations between 2021 and 2025. For more information about the community involvement, see the section "Community Commitment" in the chapter "Our stakeholders" in this report.

Among the solutions promoted by BBVA focused on identifying opportunities arising from climate change and inclusive growth, as well as creating value propositions and offering advice to individual and corporate customers that can be highlighted are:

Sustainable solutions for wholesale (corporate and institutional) customers as well as businesses

In 2021, in the sphere of sustainable corporate lending, the Bank mobilized globally a total of €10,044m in financed linked to the achievement of certain environmental and social indicators (KPI-linked) and linked to the customer's ESG rating (ESG-linked), both bilaterally and as a syndicate, among which are pioneering operations in the food sector. In Spain, BBVA has been a pioneer in incorporating mechanisms for the donation of part of the profit margin to sustainable or charity projects and BBVA remains one of the leading entities in the market in sustainable finance, having been lead sustainable coordinator in significant deals for the fifth year in a row. Outside Spain, BBVA has spearheaded several landmark operations, including a number of the main syndicated finance deals in Germany, the UK, Belgium, Mexico, Peru and Colombia. BBVA continues to work with its customers to develop new and demanding formats to link its long-term commitment to sustainability and to the objectives set by the European taxonomy and the Paris Agreement respectively.

Furthermore, BBVA remained extremely active in the financing of sustainable projects throughout 2021, participating in the mobilization of €1,274m (BBVA participation) of sustainable finance in the following main areas: (i) renewable projects; (ii) self- generation and energy efficiency; (iii) sustainable mobility projects; (iv) finance of sustainable agriculture; (v) social projects in the health and telecommunication sector to facilitate access to new technologies; and (vi) sustainable infrastructure projects.

Throughout 2021, BBVA has been very active in the issuance of green, social and sustainable bonds, and bonds linked to environmental indicators for customers in the United States, Mexico, South America, Asia and Europe, including Spain, with BBVA's total disintermediated volume being €6,683m. In 2021 European customers were very active. BBVA continues to support the development of the green bond market in Mexico, Colombia, Argentina and Asia, as lead arrangers of the inaugural issuance of bonds in many of these regions.

Moreover, in the transaction area, BBVA has signed operations for €4,958m, using its sustainable banking framework, as well as adding sustainability-linked transactions to its sustainable product offering. The market for financial products linked to sustainability is relatively new and it is growing rapidly, thereby allowing companies and sectors searching for ways to start or expand their sustainable trajectory to gain access to sustainable financing. Products linked to sustainability are intended to facilitate and support economic activity and growth in both environmental and social spheres. This new approach allows BBVA to actively support its customers in the transformation toward more sustainable business models.

To complete the sustainable offer, in 2020 the ESG Advisory service was created to help global customers in their transition to a sustainable future, with advice based on data and geared to facilitating commitments that customers are assuming, each from a different starting point, to align with the Paris Agreement and make progress in the UN Sustainable Agenda 2030. BBVA offers value- added information on regulation, best practices and the challenges and opportunities to sectors faced by the path to sustainability.

Moreover, BBVA promotes an overview of the whole range of sustainable products and services that can be offered from the Corporate & Investment Banking area, both in terms of debt and equity. This service has a global scope and is open to all sectors of activity.

Sustainable solutions for retail customers

BBVA wants to support its retail customers adopt more sustainable habits that help reduce their CO₂ emissions and wants to do so proactively, through the use of data-based tools and solutions that help control their consumption and emissions. To this end, it is working on making a wide range of investment and finance products available to customers to help them in this transition, adapting to the situation in each of the geographies in which the Group operates.

The sustainable solutions offering in the different countries aims to support energy efficiency and the decarbonization of the economy with products such as financing lines for the acquisition of hybrid and electric vehicles, green mortgages for sustainable housing, or loans for improving the efficiency of homes. In 2021, BBVA achieved its commitment in Spain of offering a sustainable alternative to all its products in this segment.

Also in Spain, in 2021 BBVA became the first entity to use data analytics to calculate the carbon footprint of all its individual customers, obtaining an approximate estimate of CO₂ emissions into the atmosphere, based on gas and light bills and payments for fuel.

Also, a line of inclusive growth is being boosted in the retail segment, mobilizing funds to the investment needed to build inclusive infrastructures and support inclusive economic development. Within this line, the products targeted at individuals are credit (cards, loans and mortgages), which comply with the income and/or vulnerability thresholds established for each country. Worth noting is the social mortgage, which is targeted at the segments of the population with the lowest purchasing power, and which subsidizes part of the total amount of the mortgage.

BBVA also supports entrepreneurs by granting loans to natural persons or legal entities which have begun an economic activity within the last 3.5 years, and offering finance to microenterprises, provided that they comply with the threshold levels for revenues established in BBVA's social taxonomy for each country. Of relevance for this segment is the program for financing female entrepreneurs BBVA has in Turkey, so women who have small and medium-sized enterprises can access loans in preferential conditions.

During 2021, BBVA mobilized a total of €6,471m: €4,250m in Spain; €548m in Mexico; €350m in Turkey; €56m in Colombia; €19m in Peru; and €13m in Argentina, €1,114m through the BBVA Microfinance Foundation and €121m in the United States.

Sustainable investment solutions

In 2021, BBVA Asset Management (BBVA AM), the Group's investment management unit that brings together all its asset management activities around the world, has made significant progress integrating sustainability, above all in the following aspects:

• -   Incorporation of the ESG extra-financial criteria in the process of investment and risk control decision-making for vehicles and portfolios they manage, both in the investment process and voting policy.
• -   Commitment to best sustainable investment practices which, in 2021, has consisted in adherence to the Responsible Investment Principles promoted by the United Nations, the Net Zero Asset Managers Commitment, to arrive in 2050 with net zero emission portfolios and the participation in other collective initiatives involving companies and governments.
• -   Exclusion policies. The exclusion policy affects companies which belong to sectors that are considered intrinsically harmful to society. For its application, BBVA uses exclusion lists of companies and countries, drawn up and updated periodically, with the help of an independent expert advisor. These lists include companies and countries related to defense materiel (military, police and security armaments, ammunition, explosives, etc.). Also excluded are investments in companies that severely infringe the principles of the United Nations Global Compact.

In 2021, the offer of sustainable products has been extended, meaning products which incorporate sustainable targets or metrics in their investment policy; with a total of 4 new mutual funds (2 in Spain, 1 in Mexico and 1 in Peru) and 7 pension plans (6 in Spain and 1 in Portugal). The assets under management in sustainable solutions at the close of 2021 was €5,598m and net new assets amounted to €1,559m.

ASSETS UNDER MANAGEMENT WITH SRI CRITERIA (BBVA ASSET MANAGEMENT. MILLIONS OF EUROS)

For more information on how the group integrates ESG aspects in its customer relations, see the section "Integration of ESG aspects in the relationship with clients" in the chapter "Additional information" in this report.

2.3.4 Risks and opportunities associated with climate change

Climate change risks for BBVA

There are two type of risks that impact the business of BBVA or its customers:

Transition risks

These are the risks pertaining to the transition to a low-carbon economy, and which arise from changes in legislation, the market, consumers, etc., to mitigate and address the requirements derived from climate change.

TRANSITION RISKS

Physical risks

Risks which arise from climate change and can originate from increased frequency and severity of extreme weather events or long- term weather changes, and which may imply physical damage to companies’ assets, disruptions in supply chains or increase in the expenses needed to face such risks.

PHYSICAL RISKS

Climate change opportunities for BBVA

As well as the risks described above, a number of associated opportunities have arisen which BBVA is considering to use and position itself correctly with respect to the major disruption represented by climate change.

CLIMATE CHANGE OPPORTUNITIES FOR BBVA

2.3.5 Management of risks associated with climate change

Integrating climate change into risk planning

The risks associated with climate change (transition and physical) are considered an additional factor that impacts the risk categories already identified and defined in the Group. Because of this they are managed through the Group's risk management frameworks (credit, market, liquidity, operational and other non-financial risks). As a result, the integration of the risks related to climate change within BBVA Group's risk management framework is based on the incorporation of correctly established processes and governance, taking into account regulations and supervisory trends.

Correct planning requires reliable, complete and up-to-date data. To this end, in 2021 a sustainable data strategy was implemented, based in the Principles for effective risk data aggregation and risk BSBC239, in which the sustainability data needs have been identified, the data gaps have been assessed and a conceptual model and implementation plan has been drawn up. All this is geared to guaranteeing a comprehensive vision of the Group's climate risks to ensure their correct control and management. Among the data incorporated, which respond both to regulatory and business needs, those related to customer climate scores, energy efficiency certificates, environmental indicators, greenhouse-gas emissions and sector metrics.

Climate risk management in BBVA Group is based on the process of risk planning which is marked by the defined risk appetite and makes use of management frameworks which establish how these risks are to be treated in day-to-day business activity.

Risk planning: Risk appetite Framework (RAF)

BBVA's Risk Appetite Framework, approved by the corporate governance bodies and applicable to all the Group's material geographical areas, determines the risk levels that BBVA is willing to assume to achieve its targets, considering the organic evolution of the business. It is organized as a pyramid structure that is based on thresholds of core and by risk type metrics and implemented through a framework of risk limits. The Framework has a general statement that sets out the general principles of the risk strategy and the target risk profile. The statement includes a commitment to sustainable development as one of the elements defined by the BBVA business model, stressing customer support in the transition to a sustainable future, and starting in 2022 incorporating the climate factor in risk management. This statement is complemented and detailed with an appetite quantification through metrics and thresholds that provide clear and concise guidance on the defined maximum risk profile.

In 2021 a transition risk metric was incorporated. This High Transition Risk metric measures Exposure at Default (EAD) in relation to capital of the activities most exposed to transition risk in accordance with the Taxonomy defined internally, specifically the activities classified as High or Very High risk. This taxonomy has been developed following recommendations by the TCFD with the aim of developing processes that identify and value climate risks, as well as the ECB Guide on environmental and climate-related risks. With respect to this metric, the Board of Directors of BBVA has approved thresholds at a Group and geographical area level, which determine the maximum appetite for this risk.

The definition of the levels of tolerance established in the Risk Appetite Framework are based on the Risk Assessment and Scenario analyses described below.

Risk Assessment

This section provides, firstly, a self-assessment of how the different climate-change related risk factors impact on the main types of risk currently existing (credit, market, liquidity, etc.); secondly, an analysis of the sectors that are most sensitive to this risk (under the so-called “internal risk taxonomy”); and, finally, the methodology used to assess the climate vulnerability of the relevant geographical areas where the BBVA Group operates. These last two aspects are integrated into the management through processes such as admission frameworks or the establishment of risk limits.

As part of its General Risk Management and Control Model, the Group develops periodic risk identification and assessment processes to, among other things, identify material risks that could have a negative impact on its risk profile and to manage those risks actively and proactively. These processes cover all types of risks faced by the Group in its daily activity, including those risks that are more difficult to quantify. The General Risk Management and Control Model approved this year is considered the specific form of sustainability as an essential part of the Group's strategy.

Global Risk Assessment is a prospective exercise which updates at least twice a year, and allows a comparison between risk types, business activities and moments in time, facilitating the understanding of the Bank's positioning and its development, and identifying the material risks to cover with capital. Since 2020 the Group has carried out a qualitative climate assessment, which assesses BBVA's vulnerability to transition and physical risk. As in the case of the global assessment, the climate assessment process is participative and global in the GRM area. The proposed assessment for each risk type is based on the risk specialists and verified by other group and geographical risk units. The results of the assessment are submitted to the highest executive risk committed (GRMC), as well as the corporate bodies, as this assessment is integrated in key corporate processes such as the Risk Appetite Framework and the Internal Capital Adequacy Assessment Process (ICAAP).

The climate risk assessment process runs parallel to the Group's global risk assessment, although there are two major differences with respect to it. First, there are still no mature indicators to assess the different risks quantitatively (although they are being developed); and second, the time horizon of the analysis is much more extensive. Specifically, the analysis is carried out for a short- term horizon coinciding with the planning horizon (4 years), medium term (4-10 years) and long term (over 10 years). The climate risk assessment, like the other risks, is carried out from two perspectives. First, risk events are identified that could materially affect the Group over a 12-18 month horizon. Next, the risk event matrix identified in 2021 is included. The events are ordered according to their severity, which is estimated on the basis of the likelihood allocated to each event and their estimated impact on the BBVA Group. In the event matrix, these risks are represented graphically by their estimated impact on BBVA Group and its allocated probability.

Climate risk has been included as a material event in this inventory since 2019. In the 2021 assessment the analysis of climate risk events has been broken down into physical and transition risks. In the short term an accelerated transition to a low-carbon economy is thought to involve an event of medium-high impact, although the probability given to this type of scenario is currently medium-low. In a long-term time horizon, the risk of physical climate change is incorporated into the inventory of emerging risks (those that could have an impact in a longer time horizon) and it is assigned a medium-high risk.

Risks with materialization in the short term: 12-18 month time horizon

The second approach followed in risk assessment is based on an assessment of the profile of each type of risk expressed in a heat map. In 2021 the climate risk assessment exercise was given greater profundity by including new risk factors including the customers' carbon footprints, the energy efficiency of real-estate secured loans and financed emissions. Similarly, work has been done on the preliminary inclusion of quantitative metrics for some risk factors and it has been extended to BBVA Group's material geographical areas.

The conclusions of the assessment for 2021 suggest that the main risks emerge in medium- and long-term loan portfolios, with an earlier impact on transition risk in Spain given the speed of this geographical area in adopting decarbonization policies. The factor with the biggest long-term impact on credit risk is that derived from investment in climate change which will have to be carried out by companies in the decarbonization process. With respect to the impact of physical risk on loan portfolios, the greater frequency/ severity of extreme meteorological events and structural changes in climate patterns explains the deterioration shown in the assessment at longer-term horizons.

The impact of transition risk on liquidity risk is due to the stability of the retail deposit base and the high asset quality of the liquid asset buffer. Market risk is equally low, due to the diversification of the equity portfolio and low exposure to sectors sensitive to transition risk in the fixed-income portfolio.

In operational risk, there is a difference in the perceived risk in Spain (medium-low) and in the rest of the geographical areas (medium- high), due to the greater exposure of the latter to physical risk in the medium and long term.

RISK ASSESSMENT CLIMATE CHANGE 2021

In 2021 there has been an increase in transition risk, derived from the drive in Europe for both new regulations and updates of existing ones. Similarly, the determination of the decarbonization path to be taken in carbon-intensive sectors represents an expected increase in investment in capital expenditure (CAPEX), with the resulting impacts on credit risk. To this has to be added the greater awareness of people in general, foreseeable change in the demand for these emission-intensive sectors, as well as the increase in the price of CO₂ emission rights, which hit a high in Europe of €88.87/TCO₂ in December 2021.

All this has highlighted the importance of clearly defining what sectors include a material transition risk and to what extent this could affect BBVA.

BBVA, within the scope of preparing and defining its industry frameworks governing the credit admission process, has developed an internal Taxonomy of transition risk in order to classify industries according to their sensitivity to transition risk. In addition, metrics are identified at the client level to assess their vulnerability and to integrate this aspect into risk and customer support decisions.

The estimation of the transition risk-sensitivity level is based on the qualitative analysis of the amount of exposure to regulatory, technological and market changes caused by decarbonization that may have a financial impact on the companies of the industry and on the estimation of the time horizon impact of these effects.

Thus, industries are categorized according to their level of sensitivity to transition risk: very high, high, moderate or low. The industries identified as most sensitive to transition risk are energy or fossil fuel generation sectors (energy, utilities, coal mining); emission-intensive basic industries (steel, cement); and activities that are final users of energy through their products or services (vehicles manufacturers, air and sea transportation).

As a result of this exercise, with data at 31 December 2021, 17.4% of the exposure measured by EAD of the wholesale portfolio (equivalent to 9.0% of the Group’s portfolio) has been identified as corresponding to sectors defined as “high transition risk”, with a high or very high level of exposure to this risk. This calculation was made on a portfolio of €190,880m (of the Group’s total EAD of €368,819m), corresponding to the EAD of the wholesale lending portfolio.

The percentage of exposure measured by EAD of the sectors sensitive to the transition risk of the wholesale portfolio over the EAD of the wholesale portfolio at December 31, 2021 are as follows:

Internal development. It includes the percentage of exposure (exposure at default) of activities internally defined as “transition risk sensitive” over the EAD of the wholesale portfolio at December 31, 2020 (does not include subsidiaries of Garanti, Forum Chile, Uruguay, Venezuela and BPI). The “transition risk sensitive” portfolio includes activities that generate energy or fossil fuels (energy, utilities - excluding renewable generation and water and waste treatment -, coal mining), basic industries with emission-intensive processes (steel, cement) and final activities users of the energy through their products or services (vehicles manufacturers, air and sea transportation), with an intermediate, high or very high level of sensitivity to this risk.

Work is also being done to extend this calculation to the SME and self-employed sector. The preliminary results obtained with data as of June 2021 indicate that the EAD associated with high or very high transition risk in this portfolio is limited, at around 3%, and focused mainly in Spain and in the automotive (components) sector.

In addition, climate and environmental risk impact has been incorporated into country risk analysis since 2019, as an additional input for establishing risk policies affecting exposures to private or sovereign administrations of all the countries with which the Bank has some type of risk (100+ countries).

To this end, a Climate Vulnerability Index (hereinafter, the CVI) has been created for more than 190 countries, which captures the physical risk and, to a lesser extent, the transition risk of each country, based on international indicators (e.g., Global Adaptation Index of the University of Notre Dame, ND-GAIN, and the Energy Transition Index, ETI, produced by the World Economic Forum). Subsidiarily, vulnerability indices issued by other international organizations and by the three rating agencies are also taken into account.

The methodology establishes 5 climate vulnerability levels, which are a comparative classification, as all countries have a certain level of vulnerability given the global nature of this phenomenon. The CVI has been integrated into risk management by including a specific section in country risk reports, so it is a factor that is taken into account when establishing risk limits (particularly in the most vulnerable countries). It is also taken into account in setting country ratings and outlooks.

In 2020 a methodology was also launched to determine climate vulnerability at the sub-national level (regions, provinces, cities). To this end, indicators developed by internationally renowned institutions such as the Andean Development Corporation (CAF), the EU or BBVA Research. Work has also been done to incorporate transition risk to a greater extent in the CVI.

Analysis of scenarios and stress testing

Scenarios and internal stress tests

Scenario analysis is one of the main tools for integrating climate change into risk management, as it allows a valuation of the vulnerabilities with a prospective vision, thus allowing early adoption of mitigating measures which prevent the materialization of severe shocks. Scenario analysis also enables the assessment of the risk factors’ impact on the metrics defined in the Risk Appetite Framework.

In 2021 the climate scenarios have been integrated into the governance of BBVA Group's internal scenarios, with initiatives being developed in three areas:

• Reflection on the climate has been present in preparing the baseline budget scenario for 2021.
• The climate driver has been integrated into the high-level risk scenarios (HLRS) which are monitored and assessed continuously in the Group by the Scenario Working Group. They serve as a basis for choosing the scenario which is used in the Group's internal capital adequacy process (ICAAP).
• An internal pilot project has been carried out to assess the short-term (4 years) and long-term (20 years) impact on credit risk of two climate stress scenarios. A start has been made in Spain, the most important geography for the Group, and for transition risk, because of its greatest relevance, severity and plausibility in the short term, rather than physical risk, which has longer-term material and persistent impacts.

To do so, and in line with supervisory expectations, three alternative transition risk scenarios have been selected based on a set of representative scenarios defined by the Network of Central Banks and Supervisors for Greening the Financial System (NGFS):

• -   Current Policies Hot House in which only the climate policies currently implemented are continued and therefore there is no transition risk, but with a high exposure to physical risks given the increase in global warming. This is considered the baseline scenario.
• -   Orderly transition with Carbon Dioxide Removal (CDR), managing to limit temperature growth to 1.5°C.
• -   Disorderly transition with limited CDR, managing to limit temperature growth to 1.5°C.

The two transition scenarios are relevant for the purposes of a bank stress test. The disorderly scenario of 1.5°C is not only consistent with the Paris Agreement target, but requires the highest carbon prices of all the set of NGFS scenarios; it is therefore the most intense transition scenario and the highest risks, which makes it an obvious candidate for a stress test. Moreover, the orderly 1.5°C scenario presents a trajectory in which the adjustments for transition are progressive and gradual, as well as ambitious, although they also represent vulnerabilities.

The pilot internal stress test has been structured on the basis of these latest scenarios. This pilot project has been undertaken with a sector-based approach, adapting existing models, and transferring to the main macro variables the impact of temperature growth.

This analysis concludes that in the short term, the most affected portfolios will be SMEs and Mortgages. In SMEs the most emission- intensive sectors have a high impact at expected loss level, although in staging the impact it is very low as a result of the good quality of the current portfolio. In terms of the impact by sectors of Transition Vulnerability Factors (TVFs), which are risk factors specific to the industry which capture the dependence of an industry to CO₂ emissions in relation to the economy as a whole, in the short term both in the orderly and disorderly transition scenarios the greatest impact is observed in the same emission-intensive sectors.

In the long term, the impact of TVFs does not alter the order of the top 3 obtained in the short term.

Regulatory and supervisory scenarios and stress tests

In October 2021, the ECB published the methodology for the stress tests on climate change risk programmed for 2022 in the months March to July. This test represents major challenges from the perspective of data and methodologies. In 2021 work has been done on a preparatory phase for providing a response to it.

Identification, Measurement and Integration of climate change into risk management

Once climate risk is incorporated into the Risk Appetite Framework and the business strategy, it also must be included in the day-to- day risk management, which is a part of the risk decision making that supports the Group’s clients.

For that purpose, the identification and measurement of this risk type for subsequent integration into the existing management frameworks and processes is required, including the adaptation of policies, procedures, tools, parameterization, risk limits and risk controls in a consistent manner. In a first phase, adaptation is focused on the integration of this risk in the industry frameworks (a basic tool in the definition of our risk appetite in wholesale loan portfolios), and in the Mortgage and Auto Operating Frameworks in retail credit. Currently, BBVA is developing the methodologies and tools it needs to identify and measure the different components of climate risk, and the financial impact analysis of each of them for subsequent integration into the management.

Loan portfolio alignment with Paris Agreement

The role of the bank is key as the financier of all the productive sectors. The influence which may be exercised by this finance on its customers' behavior and in their environmental performance, is critical for achieving the targets of the Paris Agreement.

Within the framework of this focus of climate action, in April 2021 BBVA announced the Net Zero 2050 commitment (net zero emissions by 2050), including the emissions of customers who receive finance from the Bank. BBVA wants to support its customers in their transition towards a more sustainable, with plans and specific targets. It has undertaken to publish alignment targets for the sectors defined in the Guide to set the Net Zero Banking Alliance objectives.

BBVA has pledged to reduce its exposure to carbon-related activities to zero, and stopping the finance of companies in these activities by 2030 in developed countries and by 2040 in the rest of the countries where it operates.

BBVA, together with four banks which have signed the Katowice commitment, and with the support of the think tank 2 Degree Investing Initiative (2DII), has adapted the methodology called PACTA (Paris Agreement Capital Transition Assessment) to the banking sector. The concept of alignment seeks the transformation of activities considered particularly CO₂ intensive, and as a result contrary to compliance with the Paris Agreements. This alignment creates an incentive for companies to shift their productive model to greener activities.

The commitment to alignment acquired by BBVA implies establishing a framework which is composed of objectives and commitments for the different sectors committed within the methodology chosen over the next 20 years. In 2021, BBVA published intermediate decarbonization objectives through 2030 for the electricity generation, automobile, steel and cement sectors which represent, together with coal, 60% of the global CO₂ emissions.

Below are details of the metrics chosen to measure alignment within the framework of the Katowice group for the sectors in which decarbonization targets have been set for 2021. Included are the scope of emissions considered, benchmark scenarios, the metrics of the current situation and the target for decarbonization through 2030.

Calculation of financed emissions

BBVA has been working on this carbon footprint measurements for customers or financial assets, so that it attributes to BBVA in its accounting or indirect emissions the equivalent percentage issues of the debt.

To make this measurement, BBVA is implementing the PCAF (Partnership for Carbon Accounting Financials). This project will cover all the portfolios and geographies to obtain a global vision of the emissions financed, identify in what portfolios and sectors these emissions are focused and then define mitigation plans for them, and a cross-cutting vision of the quality of the data we have available to make these calculations.

In an initial estimate of the emissions of the finance to corporate clients and SMEs determined by BBVA SA (made with emission factors based on customer activity), we obtain 80% of the emissions focused on 6 sectors, of which the biggest emitters are: manufacturing, mining and electricity generation.

Measurement and integration of transition risk

The need to decarbonize the economy, as a consequence of climate change, requires a reallocation of resources between more emission intensive activities and those less affected. This dynamic between sectors can be further accelerated in those industries where transition risk brings the time horizon impact closer, or where regulatory measures or technological developments set the implementation schedule.

It is therefore natural to integrate these two factors results in the integration of climate factors into credit risk management processes. through the wholesale credit industry frameworks of those sectors most strongly impacted.

In 2021, sustainability factors have been incorporated as one of the dimensions of the analysis in the Operating Frameworks of all the sectors are included in the taxonomy as "high transition risk". These frameworks analyze, based on long-term scenarios aligned with the targets of the Paris Agreement, the financial impact of decarbonization of risks and opportunities, as well as the time horizon of the changes generated by climate transition. This is done by considering the impact on the sector of factors such as the carbon price, new regulations related to the climate transition, technological investment or transformation (change in the generation mix of energy/utilities, or electrification in the case of vehicles) and the changes in the patterns of consumption of customers or consumers. The industry frameworks take into account the transition strategies developed by the Bank’s main client in each sector.

This exercise has allowed climate transition risks and opportunities to be incorporated in the risk portfolio view exercise which is carried out every year, where risk appetite is defined at sector level. Based on the analysis, the vision of risks of some of the sectors and subsectors with greatest exposure to transition risks has been revised.

Together with the integration into the industry frameworks, the systematic integration of sustainability factors into the customer analysis processes for credit origination purposes began in 2021, thus allowing their incorporation in decision making. BBVA has aligned the loan policies to origination and monitoring guidelines issued by the European Banking Authorities. It assesses customers' ESG and climate risks, with particular attention to the sectors classified as sensitive, called sectors with high transition risk.

This analysis is carried out based on an ESG questionnaire which reveals the climate change strategies, governance strategies and climate change risks and opportunities, decarbonization metrics and targets, and progress made in the management of other material ESG aspects for the customers' sector of activity. This questionnaire allows us to generate a transition scorecard for customers in any sector.

Moreover, for sectors classified as of high transition risk, an advanced scorecard has been developed to incorporate transition risk dimensions in the customer's profile. The scorecard assesses the current low-carbon profile; its transition risk in the geographical areas where it operates (and the measures taken to mitigate its exposure to long-term transition risk); its level of reporting on climate management, and the integration of results into the Paris Agreement commitments. The result of the scorecard is a valuable tool to enhance commitment to customers by identifying their strengths and weaknesses and allows specific products to be defined to help them in the transition to low-carbon business models.

The following chart shows the results of the scorecard of the main customers in BBVA's automobile, oil and gas as well as utilities portfolio.

In 2022, work was done to integrate these tools and measure the transition risk of customers and portfolios (in the rules, policies and procedures for managing habitual risks).

In the retail area the transition risk analysis was focused on the Mortgage, Auto Loan and SME portfolios. In all of them, one of the main aspects that determines the transition risk are carbon emissions associated with each of them. These emissions are associated with the use of fossil fuels or electricity, or dependence on them for the correct operation of the asset or customer. The PCAF financed emissions are thus used as a level to identify the customers or assets most sensitive to changes in regulation, fuel prices or depreciation of certain types of "unsustainable" assets. In turn, to mitigate risk, BBVA also acts as a financing facilitator to address the investments required for climate change mitigation and adaptation to climate change with more sustainable forms of life and products.

In the case of mortgages, significant progress has been made to define the sustainable criteria for classification when a mortgage collateral is considered sustainable according to its efficiency in the use of energy or water resources. These criteria determine the customer's option to choose a sustainable product which, in general, includes discounts. Thus in 2021 the necessary mechanisms have been implemented to promote the acquisition of sustainable housing, thus increasing BBVA's ratio of sustainable finance. Moreover, it is worth noting that for transition risk and the estimation of emissions, detailed information is needed on the characteristics of mortgage collateral (size, efficiency, location, etc.). In 2021, in geographical areas such as Spain (the most important geography in the portfolio by volume of exposure), these data were captured for the first time with an extensive coverage. In 2022 work will continue to improve the availability of data in the rest of the geographical areas.

In the case of vehicle loans, as well as the type of fuel, mechanisms are being implemented to have information available associated with average emissions of each vehicle based on its make, model and version. As in the case of mortgages, finance with sustainable products is promoted when they comply with sustainability criteria, which define the maximum emissions for each geographic area under the Worldwide Harmonized Light Vehicles Test Procedure (WLTP), a protocol for the approval of vehicles within the European Union).

Classification and measurement of physical risk

Physical risk is associated with the location of customer assets and activity. It may be materialized in credit risk by different channels of transmission, impacting multiple forms such as customer purchasing power, business productivity, market demand and asset value. In 2021, BBVA's learning curve increased exponentially in this field and its level of maturity and knowledge of the different methodologies to evaluate the physical risk made considerable progress. The most relevant initiatives to highlight are the construction of sector vulnerability heat maps, the assessment of sources of climate data and market suppliers and the physical risk exercises carried out with a variety of suppliers to calculate a marker with both end-to-end solutions and with geospatial technology suppliers. This work will continue very active in 2022.

With respect to sector vulnerability, a physical risk vulnerability heat map has been developed for Wholesale and Investment Banking and SMEs, following the best practices identified by the Taskforce on Climate-Related Financial Disclosure (TCFD) and the United Nations Environment Program Finance Initiative (UNEP FI). The heat map is the basis for generating a qualitative classification of the portfolios in accordance with their potential exposure to climate risks. It also allows the identification of sectors whose business model and activity may be impacted by chronic or acute changes in the climate.

The heat map indicates the potential exposure, according to eight vulnerability indicators at the subsector level which allows the identification of vulnerability at the different stages of the value chain:

• -   Supply chain: dependence on natural resources and sensitivity of the supply chain to climate changes
• -   Logistics: dependence on transport routes.
• -   Own operations: vulnerability of assets and processes, dependence of the labor force and vulnerability of its productivity, dependence on energy supply and impact of physical risks in the social and environmental performance of the asset.
• -   Sales: sensitivity of sales to physical climate change.

As a result, the sectors identified with the greatest vulnerability to physical risks, have been energy generation, utilities, basic materials, construction, consumption and real estate.

In addition, as part of the work group of UNEP-FI, BBVA carried out an exercise to assess the physical risk score with a sample of the mortgage portfolio, based on the location of the collateral. For this, physical risk was analyzed for a variety of climate hazards estimated for the year 2040 with a scenario of a greenhouse gas concentration of RCP 8.5 (hot house IPCC scenario). The results obtained show that in the case of Spain the most significant hazards are water stress, wildfires and heat stress. These hazards are related to the increase in temperature and reduction in average precipitation. The risks of flooding are limited and focused on the coast and river banks. In the case of Mexico, the most significant risks are the same as for Spain, with the added risk of hurricanes, which are extremely significant in the far east and west of the country. In South America, the risks associated with water stress, heat and wildfires are relevant, but also worth noting is the greater risk of flooding due to the local geography and changes in expected precipitation patterns.

The progress made in 2021 has allowed a definition of an action plan whose objective is to measure the exposure of wholesale and retail portfolios to the different climate hazards and begin to integrate risks into the risk policies and processes.

Finally, and as mentioned in previous sections, the BBVA Group is committed to sustainable development, being one of the elements that defines BBVA's business model. In this regard, the General Retail Credit Risk Policy establishes that one of the general principles governing retail credit risk management in the BBVA Group is respect for equality and diversity, preventing access to financial products there is unfair bias for reasons such as gender, color, ethnicity, disability, religion, sexual orientation, or political opinion.

Additionally, the Model's General Risk Management Policy establishes that in order to avoid unfair biases in access to financial products for reasons such as gender, color, ethnic origin, disability, religion, sexual orientation or political opinion; none of these variables will be included in the admission and pricing models.

2.3.6 Management of direct and indirect impacts

As a financial institution, BBVA has an impact on the environment and society directly through the consumption of natural resources and its relationship with stakeholders; and indirectly, and most importantly, through its lending activity and the projects it finances.

Management of direct environmental impacts

BBVA has a clear commitment to both society and the environment. The global strategy of the reduction of direct impacts is organized around four core elements: reduction in consumption through the energy efficiency initiatives; use of renewable energy; awareness and involvement of employees and other stakeholders in the path toward a low-carbon economy; and offsetting its carbon footprint through the purchase of credits of projects of the Voluntary Carbon Market to comply with the commitment acquired in 2020 to be a carbon-neutral company.

This commitment embodies in BBVA's climate change strategy (the Pledge 2025), whose objectives are, first, a reduction of 68% of Scope 1 and 2 CO₂ emissions with respect to 2015, and a consumption of 70% of renewable energy by 2025, and 100% by 2030. In line with the latter objective, BBVA has since 2018 adhered to the RE100 initiative, through which the most influential companies in the world have agreed that their energy would be 100% renewable by 2050.

New Global Eco-Efficiency Plan

BBVA has also established other ambitious objectives in its climate strategy. They are included in the Global Eco-Efficiency Plan, in force from 2008, and which was renewed in 2021 for the period 2021-2025¹⁷.

The New Global Eco-Efficiency Plan sets direct targets for year-on-year impact reduction and the achievement of the Pledge 2025:

¹⁷ To establish the PGE 2021-2025 targets the base year 2019 has been used, as consumption in 2020 was skewed by the effect of the pandemic.

GLOBAL ECOEFFICIENCY PLAN GOALS 2021-2025

This plan is based on four lines of action:

• Consumption

  With the aim of reducing BBVA's environmental footprint, the following lines of actions will be implemented:

  • -   Electricity consumption: BBVA's strategy is focused on the use of renewable energy, given that the most important level for contributing to the decarbonization of energy markets where the Group operates. The goal is to increase steadily its weight to comply with the Pledge 2025. The strategy for this consists of reaching Power Purchase Agreements (PPAs), such as those already in place in Mexico, Spain and Argentina, as well as the acquisition of renewable energy certificates and Guarantees of Origin in Spain and Portugal, or international Renewable Energy Certificates (iRECs) in Mexico, Colombia, Peru and Turkey. There will also be a commitment to self-generation of renewable energy by the installation of solar photovoltaic and solar thermal panels in the Group's facilities, as is already happening in a number of subsidiaries in Turkey, Uruguay and Spain.
  • -   Implementation of energy saving measures (ESMs) for the operation of buildings, to control and reduce consumption.
  • -   Initiatives for the reduction of water consumption, such as gray water recycling systems and rainwater recirculation for irrigation in the headquarters of Spain and Mexico, and the installation of waterless urinals in some of the buildings in Spain.
  • -   Finally, there are measures for the digitalization and centralization of printing to reduce the consumption of paper, 76% of which is also recycled or environmentally certified in most of the geographies.

• The circular economy

  Waste generation is becoming a serious problem at global level, so part of BBVA's contribution to sustainable development must consist in transitioning linear consumption practices to circular consumption. BBVA has been working for many years to reduce this impact through sustainable construction standards and the implementation of environmental management systems certified with ISO 14001. The aim is to reduce to a minimum the waste which is sent to landfills, so our facilities have clearly differentiated and clearly marked zones which allow us to carry out a correct segregation and recycling of waste. Moreover, under our action plan all these sustainable practices comply with zero waste management standards in some of the Group's geographic areas such as Turkey and Spain. Moreover, in Argentina the BBVA headquarters in Buenos Aires received the Green Seal of the city's government in 2021, certifying its responsible waste management.

• Carbon footprint

  The reduction of the carbon footprint is one of the goals established within the Pledge 2025. BBVA's total emissions are composed of:

  • -   Scope 1 greenhouse gas emissions, which include direct emissions from combustion facilities for own use, combustion of the fleet of vehicles and refrigerant gasses.
  • -   Scope 2 greenhouse gas emissions, including indirect emissions related to electricity production, purchased and consumed by buildings and branches.
  • -   Scope 3 greenhouse gas emissions, which include other indirect emissions. This scope for BBVA includes the emissions from business trips (plane or train), emissions by waste management and emissions due to the trips made by our employees to their place of work.

  Both Scope 1 and 2 emissions and Scope 3 emissions are calculated according to the GHG Protocol standard established by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD).

  Since 2020, BBVA has been a Carbon Neutral company by offsetting its residual emissions through the purchase of credits on the Voluntary Carbon Market. Moreover, in line with the recommendations of the Taskforce on Scaling Voluntary Carbon Markets, BBVA has established requirements for the selection of projects with which to offset its residual emissions. Among these requirements are the obligation for projects to be certified under the maximum quality standards such as the Verra Verified Carbon Standard (VCS) and the Gold Standard; and that preferably they should be projects for the absorption or capture of CO₂.

• Sustainable construction

  Another of the objectives is to guarantee the implementation of the best environmental and energy standards in BBVA buildings to achieve a large percentage of environmentally certified area. In fact, the BBVA facilities hold a number of construction and management certification.

  Among the construction certifications, there are 16 buildings and 1 Group branch with the prestigious LEED (Leadership in Energy and Environmental Design) for sustainable construction. These buildings include the Group's headquarters in Spain, Mexico, Argentina and Turkey. Three of them have also received the highest certification, the LEED Platinum.

  With respect to management certifications, BBVA has implemented an Environmental Management System in many of its buildings, based on the ISO 14.001:2015 Standard, which is certified every year by an independent entity. This certification is used to control and evaluate environmental performance in the operations of some of its buildings. This system is implemented in 86 buildings and 1,034 branches in the main countries where the Group operates. Moreover, the headquarters in Turkey also has the WWF Green Office certification, which promotes the reduction in the carbon footprint and carbon emissions; and the Ciudad BBVA, the Bank's headquarters in Spain, has obtained the AENOR "toward zero waste" seal as a prior stage to obtaining the "zero waste" certification of a standard which promotes the circular economy. Finally, three of our buildings in Spain also have an Energy Management System that has been certified by an independent third party and complies with the ISO 50.001:2018 standard.

MAIN INDICATORS OF THE GLOBAL ECOEFFICIENCY PLAN ⁽¹⁾

Environmental performance in 2021

ENVIRONMENTAL PERFORMANCE 2021

The Group's environmental footprint shows very positive data compared to the baseline year 2019¹⁸, with reductions of 54% in Scope 1 and 2 emissions (according to the market-based method), 14% in electricity consumption, 5% in water consumption and 32% in paper (all per person). The percentage of renewable energy consumption has reached 79%, and the environmentally certified area was 39%.

ENVIRONMENTAL FOOTPRINT (BBVA GROUP) ⁽¹⁾

Given the business activities in which the BBVA Group engages, the Group has no environmental liabilities, expenses, assets, provisions or contingencies that are significant in relation to its equity, financial position and earnings. As such, as of December 31, 2021, the accompanying consolidated Annual Accounts do not include any item that warrants inclusion in the environmental information document provided for in Order JUS/318/2018, of March 21, approving a new template for filing the consolidated annual accounts at the Companies Register for those entities obligated to disclose such information.

Management of indirect environmental and social impacts

BBVA addresses environmental and social risks from the perspective of impact prevention and mitigation. To do this, it uses tools such as the Environmental and Social Framework or the Equator Principles that have an environmental and social focus, and which are described below. Managing the impacts that customers generate on the environment is part of the Pledge 2025. To manage them, BBVA has implemented a number of initiatives and tools.