2. Non-financial information report

Pursuant to the Commercial Code and the Capital Companies Law, this consolidated Non-financial information report includes, among other matters: the information needed to understand the performance, results, and position of the Group⁷, and the impact of its activity on environmental and social issues, respect for human rights, and the fight against corruption and bribery matters, as well as employee matters.

For the publication of the non-financial key performance indicators, BBVA Group has followed, as an international information framework, the guide of the Global Reporting Initiative (hereinafter, GRI), in accordance with the latest version updated in December 2021, as well as the Communication from the European Commission of July 5, 2017 on Guidelines on the presentation of non-financial reports (Methodology for the presentation of non-financial information, 2017/C 215/01). For greater ease of locating said indicators, in chapter "5.2 Compliance tables" of section "5. Other information", you can see the tables related to compliance with the requirements of Law 11/2018 and the GRI, with reference to each of the sections of this Report of non-financial information where the information is found.

The information included in the consolidated non-financial information report is verified by Ernst & Young Auditores, S. L., in its capacity as independent provider of verification services, with the scope indicated in its Verification Report.

It should be noted that this consolidated "Non-financial information report" includes certain information and metrics that are aligned with those required by other initiatives or international standards with which BBVA Group shows its commitment to transparency in terms of sustainability:

• Principles for Responsible Banking promoted by the United Nations Alliance with the financial sector (hereinafter, UNEP-FI): BBVA publishes the progress and advances achieved in each of the six principles defined by UNEP-FI and the UNEP-FI Guide to setting climate goals for banks (see the chapter “5.2.4 Index of contents of the Principles of Responsible Banking UNEP FI” of the chapter “5.2 Compliance Tables”).
• The Group's contribution to the United Nations Sustainable Development Goals (hereafter, SDGs) for the 2022 and 2021 financial years is included in the chapter “5.2.6 Contribution to the Sustainable Development Goals” of the chapter “5.2 Compliance tables”.
• WEF-IBC metrics: BBVA was one of the first entities worldwide to support the Measuring Stakeholder Capitalism initiative of the International Business Council (IBC) of the World Economic Forum (WEF), assuming the commitment to gradually increase the publication of a set of metrics (core and expanded), published in September 2020.
• Sustainability Accounting Standards Board (SASB) - Commercial Banks, Mortage Finance and Consumer Finance standards: SASB sets standards to guide companies on the disclosure of relevant and consistent information in terms of sustainability that is followed by an increasing number of major institutional investors globally.

The alignment with these initiatives or international standards is detailed in the section "5.2.5 Alignment of BBVA Group's non- financial information to WEF-IBC and SASB standards” of the chapter “5.2 Compliance tables”.

⁷ In those cases in which the perimeter of entities in the corresponding disclosure does not coincide with the total entities of BBVA Group, the perimeter used will be explicitly indicated. In general, all the breakdowns include the main countries where the Group operates (Spain, Mexico, Turkey, Colombia, Peru and Argentina).

2.1 Strategy

2.1.1 Purpose, strategic priorities and values

In 2022, the world faced an environment marked by uncertainty caused by the growing geopolitical risk, the invasion of Ukraine, strong inflationary tensions and the rise in interest rates, which has put a brake on the growth expected after leaving COVID-19 behind. However, in this environment, the global trends on which BBVA's strategy is based have confirmed its critical role in the transformation of the economy: digitization, innovation and decarbonization.

• On the one hand, the end of the pandemic has not slowed down digitization. People's behavior continues to move not only to digital and mobile channels, but also to large value ecosystems offered by the main technology companies with a differentiated customer experience.
• Second, innovation. Although the markets have not been immune to this new environment, with corrections in the valuations of sectors leveraged on innovation, the role of new technologies continues to play a critical function in the transformation of the economy, with a great impact on growth and the productivity. A true era of opportunities thanks to the new possibilities offered by new technologies such as artificial intelligence, quantum computing, cloud processing, blockchain technology, etc.
• Likewise, decarbonization is clearly a differential trend in the current environment and the greatest disruption in history due to its strong impact on the competitive dynamics of many sectors. Innovation plays a key role in the decarbonization process, a challenge that requires strong investments in new carbon-neutral technologies in all sectors, beyond energy. This challenge is of great importance today in a context that has shown that high energy dependence can be a strong vulnerability. Energy independence has become a priority beyond the fight against climate change.

All these trends validate the strategy pursued by BBVA. A strategy that revolves around a single Purpose: “To bring the age of opportunity to everyone”. Thanks to innovation and technology, BBVA seeks to have a positive impact on the lives of people and on the businesses of companies, providing access to products, advice and solutions that allow its customers to make better decisions about their finances and achieve their vital and business purposes.

Likewise, the Group is based on solid values: customer comes first, we think big and we are one team.

BBVA's values, and their associated behaviors, are integrated into the models and key levers that promote the Group's transformation, as well as in the global people management processes: from the selection of new employees, through the role assignment processes, evaluation, people development, training; up to the incentive for meeting the annual objectives.

These values, together with the Purpose and strategic priorities, are the guide for action in all decisions and are in the DNA of all the people who are part of the BBVA Group. For more information on values, see section “2.2.3 Employees”, section “Culture and values”, in chapter “2.2 Our stakeholders” of this report.

Guided by this Purpose, BBVA's strategy is structured around six strategic priorities:

1. Improving our customers’ financial health

BBVA aspires to be its customer's 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:

• On the one hand, 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.
• On the other hand, helping clients to make the best financial decisions to achieve their vital and business goals in the medium and long term through personalized advice.

2. Helping our customers transition toward a sustainable future

Climate change is a challenge that urgently needs to be addressed, but it is also a major business opportunity for the financial sector. The decarbonization of the economy will have an impact on all industries and on the way people move, consume or furnish their homes, requiring significant investments that will last for decades to come.

Additionally, the Bank has an opportunity in the development of inclusive growth. The current environment, with high digitization and use of data, makes it easier to provide an efficient service and with a better understanding of customer behavior. This environment allows the development of new business opportunities that favor inclusive economic development, supporting disadvantaged sectors and inclusive infrastructures, as well as mass banking leveraged on digital channels and new relationship models.

3. Reaching more customers

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).

In this sense, BBVA has identified the payments, insurance, asset management and cross-border business activities of companies as key drivers of profitable growth, as well as the value segments of SMEs and private banking.

The key role of innovation in the growth of BBVA implies the Group's firm commitment to new business models such as digital neobanks and the creation of BBVA Spark, that offers a comprehensive proposal of financial services to accompany companies innovative in its different phases of growth.

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 customer 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 not forgetting disciplined management of both financial and non-financial risks and optimized use of capital key factors for consistently achieving a return higher than the cost 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.

BBVA works to promote the growth and training of the people who make up the Group, who have the necessary skills, knowledge and experience to achieve strategic objectives efficiently and effectively. Also to ensure that employees live the values and behaviors of the Group. People want to be part of companies that are inspired by purpose, with an engaging culture and values that foster diversity, inclusion, equality, social impact, and recognition of work.

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 that help create competitive advantages.

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).

A set of strategic Key Performance Indicators (KPIs) has been defined to monitor progress in the execution of strategic priorities.

These are both financial indicators linked, for example, to attributable profit, tangible book value per share (TBV) or the cost-to- income ratio, and non-financial indicators, such as those related to customer satisfaction (NPS), mobilization of sustainable financing or digital sales.

These strategic KPIs are integrated into the Group's various management processes, such as the planning and budgeting process, the prioritization of resources and investments, as well as for the purposes of the variable remuneration system.

2.1.2 Our objectives

With the execution of this strategy BBVA aims to:

• -   Become a larger and more profitable bank..
• -   Become a differential bank for our customers with a unique value proposition.
• -   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 defined ambitious 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 in November 2021.

Among these objectives, in October 2022, BBVA again increased the target for channeling sustainable business to €300bn for the period 2018-2025, tripling the initial commitment tripling the initial target set in 2018. This figure is a tangible example of the Bank's commitment to sustainability.

During 2022, BBVA made considerable headway toward the achievement of these long-term objectives, showing a significant degree of progress.

COST-TO-INCOME (BBVA GROUP. PERCENTAGE)

ROTE (BBVA GROUP. PERCENTAGE)

TBV/SHARE + DIVIDENDS (BBVA GROUP, YoY PERCENTAGE)

NEW TARGET CUSTOMERS⁽¹⁾ (BBVA GROUP, MILLION CUMULATIVE)

SUSTAINABLE BUSINESS (GRUPO BBVA, € BILLION, CUMULATIVE SINCE 2018)

⁽¹⁾ Excluding discontinued operations and non-recurring results.

⁽²⁾ Target customers refers to those customers in which the bank wants to grow and retain, as they are considered valuable due to their assets, liabilities and/or transactionality with BBVA.

2.1.3 Progress made in executing the strategy

A larger and more profitable bank

BBVA seeks to grow by positioning itself where customers are. To this end, the Group pays special attention to attracting customers, either through its own channels or through channels and agreements with third parties. All this without losing focus on profitable growth, betting on the most relevant product verticals and value segments. Likewise, BBVA continues to make progress in its commitment to grow in new business models.

During the 2022 financial year, the Group acquired 11.2 million new customers through its own channels. As a consequence of the improvement in digital capabilities, the acquisition of customers through these channels has continued to increase continuously in recent years and, in 2022, it broke another new all-time record, standing at more than 6.2 million, which represents a 55% of all new customers (+163% since 2019). For their part, mobile customers have grown by 65% since December 2019, reaching 47.4 million, 70% of the total. Digital sales already account for 78% of the total units sold⁸.

In addition, it should be noted that customer acquisition is translating into greater cross-selling and greater customer loyalty. As an example, in Spain more than 70% of new customers become target customers in six months. Target customers are defined as those customers segments in which the Group wants to grow and retain, considering them to be of high value, either due to their level of assets, liabilities or transactions with BBVA.

In the search for profitable growth, BBVA focuses on acquiring customers in high-value segments and relevant product verticals, which allow it to boost the Group's results:

–    Small and medium-sized companies (hereinafter, SMEs)

During 2022, the income generated in the SME segment has contributed 13.4% of BBVA's gross margin, confirming its position as a key segment. The Group is working on developing a global value proposition aiming to improve segmentation and customer experience. Specifically, progress has been made in having greater capillarity, in developing new risk models and new remote and digital capabilities. All this already shows tangible results, such as 100% digital credit solutions linked to Point of Sale (POS) Terminals that grow by 58% and an increase of 60% in pre-approved offers.

–    International Business Banking

To boost the International Business Banking segment, BBVA Pivot was launched one year ago which is an ecosystem of solutions and channels for the management of the treasury of companies and corporations, renewing the offer of services through a digital solution that facilitates the daily management of their activity. Among the solutions offered are: payments, collections, account information, cost reconciliation, expense settlement, supply chain financing or bilateral and syndicated loan information, all through the channel that clients choose: direct channels, web and app.

This ecosystem operates centrally in 14 countries where BBVA is present and 7 countries through agreements with other banks. The companies that use these services simplify their treasury management and also take advantage of the BBVA footprint, generating synergies between businesses in all countries, thus creating a strong link with BBVA. It is one of the greatest levers of growth through different indicators: the gross margin and commissions for treasury management have grown by 70% compared to 2021. These figures represent 37% of the total commissions from cross-border clients of CIB and Companies and Corporations Banking. On the other hand, the transaction volumes have exceeded €665bn, growing by 48% compared to last year.

–    Payments

Payments is a strategic business for BBVA due to its contribution to revenue growth, as it is a key lever for linking and developing the financial relationship with customers, both for businesses, through the acquisition business, and for individuals through cards and other payment solutions.

With the acquisition business BBVA seeks to be the reference partner for businesses with in-store payment solutions and also in digital/electronic commerce. In addition to traditional payment products, BBVA offers high-value solutions such as financing at the point of sale (BNPL, "Buy Now, Pay Later") or financing linked to the billing of the POS. In Mexico, BBVA has Openpay, the payment services platform for businesses, which is already established in Colombia, Peru and Argentina, becoming a key payment service provider in Latin America. Thanks to this focus on the acquiring business, in 2022, BBVA grew its acquisition of new businesses by 26%.

Regarding retail clients, BBVA continues to advance its Aqua card strategy, a new generation of cards without printed numbers and with dynamic CVV that offer a differential experience and greater security compared to traditional cards. Aqua is already a reality in Spain, Mexico and Peru, with the number of cards rising to 22 million by December 2022, tripling the figure for 2021 and significantly reducing e-commerce fraud (i.e. the fraud ratio over sales is 2 times lower in Spain, 5.5 times lower in Mexico and 7 times lower in Peru). BBVA also achieves leadership in the adoption of mobile payments in Peru and Colombia by being part of the group of banks that have adopted Apple Pay first.

–    Insurance

Insurance is a key product to offer comprehensive advice to customers and have an impact on their financial health. BBVA has continued to develop the insurance business with significant growth in activity and results, taking advantage of the technical capabilities in the life insurance segment and deploying the agreements with third parties in the non-life insurance segment that it developed in 2021 in some markets. This has materialized with the launch of modern, innovative products adapted to the trends and best practices in the insurance industry (for example, auto insurance and insurance for SMEs in Spain, health insurance in Mexico and Turkey, and insurance for home in Colombia, Peru and Argentina).

On the other hand, BBVA has continued to develop the life insurance business with an offer of modular solutions adapted to customer needs in all geographical areas, and the launch of new savings products in the main markets. Likewise, BBVA is innovating in the deployment of advanced data analytics models that allow to provide its customers with offers tailored to their specific needs at all times through its different channels. All in all, BBVA managed to raise annual premium growth to 17% compared to 2021.

–    Private Banking and asset management

In 2022, BBVA continued to make progress to offer Private Banking customers increasingly personalized, comprehensive and specialized advice. In the last year, this advice was extended to more than 25,000 new customers in Spain and 11,000 in Mexico, with a greater number of Private Banking advisors, who were provided with remote capabilities to improve customer convenience. On the other hand, progress continued in providing more detailed information for the clients of its investment portfolio. Likewise, the business in Colombia and Peru was strengthened, with a growth in the number of bankers and an improvement in the value offer.

Thanks to its progress towards an increasingly global model for customers with innovative solutions, in 2022 BBVA received the award for the best private bank in the world in digital solutions for its customers, according to Global Finance. On the other hand, thanks to its leadership in sustainability, BBVA once again received the award for the best private bank in the world in responsible investments by Global Finance. It should be noted that all the private bankers of the Group have received specific training in ESG matters.

Innovation is a key factor in BBVA's profitable growth strategy.

An example of this is that the Group has promoted strategic investments in digital banking solutions to grow in new and attractive markets, such as betting on purely digital banks through the stakes in Atom in the United Kingdom, Solaris in Europe and Neon in Brazil. In the same way, the launch of the 100% digital business in Italy has been a success, progressing above forecasts with more than 160,000 customers since its launch thanks to the support of the BBVA infrastructure and mobile app in Spain.

In 2022, BBVA has taken another step forward in its firm commitment to innovation with the creation of BBVA Spark, which was created with the aim of being the bank for the innovative companies that are defining the future. Companies with a scalable and innovative business model, based on technology and with high growth rates. With BBVA Spark, the Group offers a comprehensive proposal of financial services to accompany these companies throughout their different stages of growth. Thus, a global unit has been created that is already operational in Spain and Mexico and that will be extended to the rest of the geographical areas where the Group operates, with the aim of growing and attracting new customers among the most innovative companies with the greatest growth potential.

The market situation experienced in the technology sector in the second half of 2022 has favored the creation of a unit such as BBVA Spark, and has allowed BBVA to generate a great reception in the entrepreneurial ecosystem. This has also been thanks to a differential value proposition for these companies and other actors such as venture capital funds that is based on 3 pillars:

• An ad-hoc relationship model through a 100% dedicated team of bankers and specialists in financing solutions, with in- depth knowledge of the businesses and the needs of these clients.
• A complete offer of financial products: from the most basic such as payment solutions, cards, payroll, insurance or online banking; to other more sophisticated solutions related to financing. Especially with products such as “venture debt”, or with loans to finance growth in general.
• A strong connection with the ecosystem thanks to extensive experience in the Open Innovation area and a team dedicated to managing investments in venture capital funds that allow BBVA to be closer to the investment ecosystem and have a great reach to some of the world's leading investors.

Investment in venture capital funds is a fundamental part of the Group's strategy to learn about new technologies and be able to generate business and financial profitability. Thus, in 2022 the Group has increased its investments in innovation through funds such as Propel, specialized in fintech, or Sinovation Ventures, the leading fund in China. And also with two new verticals:

• The first focused on investments related to technologies that address the great challenge of decarbonization. During 2022, BBVA has entered into funds such as Hy24, which seeks to invest in industrial projects that bring solutions based on green hydrogen to a commercial scale; Lowercarbon, which invests in companies that develop technologies to absorb carbon directly from the atmosphere; o Fifth Wall Climate, a leader in "proptech" with a fund that seeks to decarbonize the value chain of the construction and real estate sector.
• The second, aimed at investing in innovative companies with high growth potential within the markets in which BBVA operates. In total, commitments have been signed with seven funds between Mexico and Spain, among which Leadwind stands out, the first fund aimed at scaleups⁹ in the Iberian Peninsula and Latin America.

Thus, BBVA Spark concentrates in a single global area the synergies with the entrepreneurial ecosystem that the BBVA Group has around the world, both in banking and investment activities, allowing these companies to cover all their financial needs in one place, as well as have adapted financing products.

A differential bank for our customers with a unique value proposition

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

Thus, BBVA occupies the top positions in the NPS¹⁰ in the main markets in which it is present, which is reflected in the retention data, which shows a positive evolution in the levels of customer churn (retail customers and SMEs), and a Higher engagement from digital customers, whose churn rate is 42% lower than that of non-digital customers.

As of December 31, 2022, BBVA maintained its leadership in the retail NPS indicator in Spain and Mexico. In the rest of the countries, BBVA was in second place, with Turkey, Colombia, Peru and Uruguay maintaining their position compared to 2021, in addition to Argentina, whose action plans allowed it to regain the second place in the ranking.

In 2022, BBVA placed a special focus on helping SMEs and companies to continue recovering from the impact of the pandemic. A close and personalized service model, accompanied by improvements in technological channels, positioned BBVA as the leader in the business segment in Mexico, Turkey, Colombia, Peru and Uruguay, along with Spain and Argentina in second position. In addition, BBVA was the leader in SMEs in Turkey, Colombia and Peru, with Spain, Mexico and Argentina in second place, and Uruguay in 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. The Group then 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.

BBVA has therefore worked in 2022 to continue developing global solutions around financial health and with excellent results. Today, six out of ten mobile customers interact with the financial health functionalities.

The financial health area. BBVA takes a two-pronged approach: day-to-day control and the achievement of medium- and long-term objectives:

• On the one hand, accompanying customers in the daily management of their finances, helping them to have a better understanding of their income and expenses, with personalized solutions (for example "My day to day", a very complete tool that allows the categorization of expenses, prediction of the same and even financial assets), and proactive notifications before relevant events that, as far as possible, allow them to have greater control of their savings (more than 40 notifications available at the end of 2022, such as: make a transfer from another account in case of predicting a possible overdraft in the account due to the payment of the credit card or if there has been a charge above the usual).
• On the other hand, advising customers in the achievement of medium and long-term objectives. People's needs change over time: from buying a home to saving for the children's university or retirement planning are long-term objectives that require monitoring until they are achieved. Advice to achieve these objectives is also included under the scope of financial health. An example is "My goals", a service with which the client can create savings goals, mark the money they need and set the deadline to achieve them.

This proactive and personalized information is highly valued by BBVA customers, which is reflected in a better Net Promoter Score among users of financial health functionalities. In Spain, in the last quarter of the year, the NPS of the users of this functionality was almost 10 percentage points higher than that of the rest of the customers. Likewise, these financial advisory functionalities have been a key element for contracting products. Thus, in Spain, they have contributed to 37% of the total investment fund contracts, 22% of mortgage contracts or 5% of car loans in the year 2022.

Also, this differential way of accompanying the customer through digital channels has made BBVA a leader in innovation and digital experience. This leadership has been recognized by the market in 2022 with the granting of awards such as the "most innovative bank" in Europe and Latin America, awarded by The Banker, or the "best digital bank" in Europe, awarded by Euromoney. In addition, the ability to offer these products and experiences globally has allowed BBVA to be "the best global bank in the world," according to The Banker.

Pioneers in sustainability

Sustainability has a long history at BBVA since it participated in the first green bond issue in 2007. Currently, sustainability is a main element of BBVA's strategy, being one of its six strategic priorities: helping clients in the transition towards a sustainable future.

BBVA's sustainability strategy has a roadmap with three objectives:

• Increase the growth of the Group's business through sustainability
• Achieve neutrality of greenhouse gas emissions
• Promote integrity in our relationship with stakeholders

1. Increase the growth of the Group's business through sustainability

Climate change is one of the great challenges that humanity is facing and requires large volumes of investment. It is estimated that decarbonization in the world requires investments of USD275 trillion until 2050, more than 8% of annual world GDP, in clean energy, new materials, infrastructure, agricultural technologies, CO₂ capture and storage, etc¹¹.

The role of the financial sector in general, and of BBVA in particular, is essential, accompanying customers in their transition towards a sustainable future, developing specific products for customers and financing this profitable investment.

Sustainability is a lever for growth for BBVA and it has a holistic approach, with a focus on climate action and inclusive growth, covering all segments. To capture this opportunity, we are working on five lines of growth:

• Sector strategy for corporate clients: focused on low-carbon technologies and high-emission sectors to help them decarbonise. Sector plans are being drawn up to proactively address the reduction of the carbon footprint of the loans that BBVA grants to its clients (alignment of portfolios) and the teams specialized in sustainability are being strengthened.
• Promoting the company: developing products focused on six themes (auto, real estate, agriculture, supply chain, energy and inclusive growth), taking advantage of the Bank's knowledge with corporate customers and creating dedicated teams in all geographies.
• Launch of bets to rapidly expand the retail business by using the Bank's digital advantage: this line is making it possible to create an innovative and disruptive value proposition in specific sectors, for which teams have been created dedicated to developing new solutions in cars, energy efficiency and carbon markets.
• Financing of new sustainable technologies, which are currently unbankable with traditional financing structures (hydrogen, batteries, carbon capture, storage and use technologies, etc.), allowing BBVA to be a reference in the ecosystem.
• Building sustainability risk management capacity: Achieving superior risk management capacity is a key element in fostering growth. The focus is on embedding sustainability throughout the risk value chain, from the risk appetite framework to the loan approval process. The development of specific tools is a priority as a key element in decision making.

In line with the above, BBVA set an initial goal of channeling sustainable business of €100,000m for the period 2018-2025 (Objective 2025). This objective was doubled in 2021 reaching €200,000m. In 2022, the target has been raised again to €300,000m, tripling the initial target set in 2018.

Between 2018 and 2022, BBVA has channeled¹² a total of €135,871m into sustainable business¹³. For further details, see section "2.3.5 Metrics and objectives: Channeling sustainable business" in the chapter "2.3 Report on climate change and other environmental and social issues" of this report.

2. Achieve neutrality in greenhouse gas emissions

BBVA is one of the founding banks of the Net Zero Banking Alliance and, as such, has acquired the commitment to be neutral in carbon emissions (“Net Zero”) by 2050. To this end, the Bank is applying the strategy of alignment of portfolio and management of indirect emissions.

• Regarding risk management and portfolio alignment: in recent years, significant progress has been made:
  • Setting intermediate decarbonization goals for 2030 in six sectors: electricity generation, automobile, steel, cement, coal, and oil and gas (this last objective was set in 2022). Also in 2022, the decarbonization targets were set for the Asset Management portfolio. The objectives for each sector can be found in the section “2.3.4 Management of risks associated with climate change and environmental factors” in the chapter “2.3 Report on climate change and other environmental and social issues” of this report.
  • Developing specific tools to measure the transition of clients towards a low carbon economy that are integrated into credit policies. For example, a Transition Risk Indicator, which is a combination of two metrics (climate change awareness and customer transition path assessment) that, together with credit policies, provide a comprehensive transition assessment of each client.
  • Implementing a governance model that ensures the execution and monitoring of the objectives.
• Regarding the direct impact:
  • Since 2020, BBVA has been neutral in direct emissions (scope 1, 2 and part of scope 3: waste, emissions from business trips and travel by employees of central services, see section "2.3.6 Management of direct and indirect impacts of this report").
  • At the same time, BBVA continues with its strategy to reduce own emissions. For this reason, it has set the objective of reaching a 100% use of renewable energy in its operations by 2030, reducing scope 1 and 2 CO₂ emissions by 68% compared to 2015 in the year 2025 and expanding the measurement scope of CO₂ emissions to more scope 3 activities.
  • BBVA's progress in terms of its direct impact can be found in the section “2.3.6 Management of direct and indirect impacts” in the chapter “2.3 Report on climate change and other environmental and social issues” of this report.

3. Promote integrity in our relationship with stakeholders

Through the Commitment to the Community 2025, in the 2021-2025 period, BBVA and via foundations will allocate €550m to social initiatives to support inclusive growth in the countries where it is present. The programs will reach 100 million people during this period. This is the most ambitious social plan that BBVA has launched to date. For more information on commitment to the community, see section “2.2.4 Society”, section “Community Commitment” in chapter “2.2 Our stakeholders” of this report.

Additionally, the Bank has a commitment to generate a positive impact in the exercise of its own activity. To this end, action plans are being drawn up:

• With employees: BBVA is committed to employees, being an organization based on values that enriches talent, with a diverse and inclusive team. Currently, the focus is:
  • Equality: BBVA has taken another step towards gender equality and established in 2022 a target for the presence of women in management positions of 35% by 2024. At the end of 2022, this percentage stood at 33.5%.
  • Employee awareness and involvement actions on sustainability.
  • Sustainability products for employees.
  • Sustainability training
• With customers: BBVA promotes an integral relationship with customers based on transparency and responsibility.
• With transparency: BBVA has a commitment to continue improving the report related to sustainability, as evidenced by the TCFDs (Task Force on Climate-related Financial Disclosures) and EINFs published to date.

A global benchmark

In 2022, and for the third consecutive year, BBVA obtained the highest score (86 points) among banks in Europe and the second at global level in the latest Dow Jones Sustainability Index (DJSI). Its Corporate Sustainability Assessment (CSA) measures the performance of the largest companies by market capitalization in economic, environmental and social matters. The Group achieved the highest score (100 points) in the sections on financial inclusion, environmental and social information, materiality, tax strategy, crime prevention, public influence or lobbying, and human rights.

Likewise, BBVA was included for the fifth consecutive year in the Bloomberg Gender-Equality Index 2022, which is recognition of the commitment to create trustworthy work environments, in which professional development is guaranteed and equal opportunities for all employees regardless of their gender. The entity's firm commitment to diversity and inclusion allowed it to improve its rating by five percentage points compared to the previous edition. Garanti BBVA, the Group's subsidiary in Turkey, is also part of the index.

BBVA is a member of the main sustainability indices (for more details, see the section “2.3.8 Sustainability indices and ratings” in the chapter “2.3 Report on climate change and other environmental and social issues”).

Continue to lead in efficiency

BBVA works to optimize its customer relations and acquisition model, with the aim of reaching more customers at a reduced cost. The Group seeks to provide its customers with a self-service model that is always accessible and thus respond to the changing habits of consumers, who are increasingly digital. This is demonstrated in a growth of 26% in digital transactions compared to 2021, while transactions in branches fell by 2%.

This new reality implies serving more customers and generating more growth by optimizing the cost structure, with a direct positive impact on network productivity and efficiency. In this way, during the year 2022, the ratio of active customers per network employee has increased by 40% and sales per network employee by 36% compared to 2019. Additionally, the Agile methodology, which has been implemented gradually in the Group in recent years, allows the creation of better products and services for customers in a faster and more efficient way. Thus, the functionalities placed in the hands of customers in the mobile application in Spain have multiplied by 3 since 2016. Another example is the 50% reduction in the number of days needed to design and implement a functionality in Mexico. This way of doing banking translates into more productive and more committed teams.

Additionally, BBVA seeks to leverage itself globally to develop more efficient products and solutions that provide answers to customer needs. To this end, the Group has industrialized and standardized the construction of the digital channel software in all the banks that are part of BBVA, allowing a solution created in one country to be exported very quickly to the rest, which has significantly improved the time to market, the quality of the solutions, the efficiency (it is built once for all the countries) and allows our clients to be provided with the same capabilities and experience in all the geographies in which the entity operates. Two examples are the mobile application for retail customers, in which 81% of the programming code has been reused, or the mobile application for companies, which has been developed in less than a year, reusing 80% of the components. In fact, it began by launching in Spain and the same leading app is now available in Mexico, Peru, Argentina, Colombia and Uruguay.

On the other hand, the Group continues with its commitment to the use of more efficient and scalable technologies, cloud or cloud technologies, which already represent more than 50% of total transactions in Spain, Mexico, Peru and Colombia. The use of these technologies is making it possible to contain the cost of processing when transactionality is growing exponentially (it has doubled in the last 4 years) derived from digitization and greater customer interaction with BBVA channels.

This focus on operational excellence has led the Group to consolidate its leadership position in terms of efficiency for another year. BBVA's efficiency ratio stood at 43.2% at the end of 2022 (277 basis points better than in 2021, in constant terms) while the average for European competitors was 62.8% at the end of September 2022 (latest data available).

The optimal allocation of capital is another critical component of operational excellence. To this end, BBVA prioritizes the allocation of capital to the most profitable business opportunities. In addition, the Bank has a model that links a dynamic pricing system with the allocation of capital by individual operation. Thus, for each loan granted by the Group, the transaction must exceed the minimum capital return thresholds set beforehand. This differential way of doing banking, where the search for profitability is present in each operation, has an immediate translation into the financial magnitudes of the Bank. Specifically, the return per risk-weighted asset (hereinafter, RORWA) at the end of 2022 stood at 2.14%, 13 basis points above the end of the previous year. For more information on RORWA, see “5.1 Alternative Performance Measures (MAR)” in chapter “5. Other information” of this report.

⁸ Data excluding Venezuela

⁹ Companies with a high technological component in a phase of accelerated growth

¹⁰ The internationally recognized Net Promoter Score (NPS, Net Recommendation Index or IReNe) 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.

¹¹ Source: “The net-zero transition: What it would cost, what it could bring”, McKinsey & Company, 2022

¹² For the purposes of the 2025 Objective, the channeling of sustainable business includes the entities that are part of the BBVA Group as of 12/31/2022 as well as the foundation BBVA Microfinanzas.

¹³ For the purposes of the 2025 Objective, channeling is considered to be any mobilization of financial flows, cumulatively, towards activities or customers considered sustainable in accordance, fundamentally, with existing regulations, internal standards inspired by existing regulations, market standards such as Green Bond Principles, the Social Bond Principles and the Sustainability Linked Bond Principles of the International Capital Markets Association, as well as the Green Loan Principles, Social Loan Principles and Sustainability Linked Loan Principles of the Loan Market Association and best market practices. The foregoing is understood without prejudice to the fact that this mobilization, both initially and at a later time, may not be recorded on the balance sheet. To determine the amounts of channeled sustainable business, internal criteria are used based on both internal and external information, either publicly available, provided by customers or by a third party (mainly data providers and independent experts). BBVA does not assume responsibility for the opinions expressed by third parties or for any errors or omissions in the information coming from external sources.

2.2 Our stakeholders

Through its purpose, values, and its strategic priorities, BBVA seeks to have a positive impact on the lives of people, companies and society as a whole through its activity. To this end, it has a responsible banking model and is committed to creating long-term value for the different stakeholders.

This way of doing banking responsibly extends to all the entities that form part of the Group and its principles are integrated into the relationship that BBVA maintains with its stakeholders, as well as its relationship with the environment and social development, its fiscal responsibility, the prevention of behaviours contrary to the norms, human rights and in its participation in international initiatives.

BBVA considers six stakeholders to be a priority:

These stakeholders represent millions of people and hundreds of thousands of institutions, organizations and collectives. Everyone, with their decisions and opinions, influences BBVA and, at the same time, the Group's activities influence them.

In addition, these interest groups interact with each other, forming a universe of relationships that BBVA must manage for a better understanding of the environment in which it operates and for a profitable and sustainable financial performance. Today, dialogue with stakeholders significantly influences the management of sustainability in companies.

Materiality analysis: Identification of relevant aspects

BBVA periodically prepares a materiality analysis to identify those environmental, social and governance issues that are most relevant to the Group and its stakeholders. In 2022, this analysis has been carried out following the new GRI requirements (December 2021 version) and the proposal of the new European Corporate Sustainability Reporting Directive (CSRD), which has implied the incorporation of the double materiality approach, which analyzes, both, the impact that BBVA's activity has on the environment and its stakeholders (impact materiality) and the impact that the environment and its stakeholders have on BBVA's activity (financial materiality).

As a result of this analysis, the material issues for BBVA's stakeholders are the ones shown in the following matrix:

As a result of the double materiality analysis for the year 2022, the most outstanding material issues are:

• Climate change: Stakeholders have climate change among their main concerns and expect BBVA to contribute to an orderly transition towards a low-emissions economy. This requires proper risk and opportunity management.
• Inclusive growth: Stakeholders expect the bank's business model to support the financial inclusion of people in the countries in which it operates, entrepreneurs, and the development of inclusive infrastructures.
• Financial health and personalized advice to customers: Stakeholders expect the bank to get to know its customers and propose personalized solutions and recommendations to better manage their finances and achieve their life goals. All this in a proactive and increasingly automated way.
• Solvency and financial results: Stakeholders expect BBVA to be a bank with ample capital and liquidity, thus contributing to the stability of the system. In addition, they expect BBVA to generate good results over time. That is, they demand a sustainable business model in the current ecosystem.

It should be noted that, with respect to the materiality analysis published in 2021, a total of thirteen material issues remain, although the "COVID-19" issue has been disregarded and "Natural Capital" has been included.

These issues materialize in three of the six strategic priorities: "Helping customers in the transition towards a sustainable future", "Improving the financial health of customers" and "searching operational excellence", as well as in ambitious objectives in terms of efficiency, profitability, value creation for the shareholder, customer growth and sustainable business channelling for the coming years.

The information regarding the performance of these most relevant matters and the rest of the material matters for the BBVA Group in the year 2022 is developed in the different chapters of this report.

The scope of this analysis includes the main geographical areas in which BBVA operates (Spain, Mexico, Turkey, Argentina, Colombia and Peru) and short, medium and long-term time horizons have been taken into account. For more details on the sources used, the methodology, as well as the objectives and degree of progress of these material issues for BBVA and its stakeholders, see the section "Additional information on materiality analysis" in the chapter "2.4. Additional information".

2.2.1 Customers

As previously mentioned in the Strategy section, "The customer comes first" is a value that is part of BBVA's DNA and that motivates the entire Group to place customers at the center of its activity. The relationship with customers must go beyond a simple provision of services and help them meet their vital objectives, while supporting them in improving their financial health.

In order to respond to all the needs of its customers and ensure compliance with the objectives, BBVA has developed a differential value proposition that ensures an exceptional, transparent, clear and accessible customer experience, while strengthening and reinforcing security in each existing interaction between the customer and the Group.

This differential value proposition, leveraged on an omnichannel strategy, with the mobile as remote control, has paid off in 2022, a record year in customer acquisition and leadership in individual NPS and supported by a simplified and transparent service catalogue, driven by proactive and personalized advice.

Four significant points of BBVA's relationship with its customers are developed below:

Regarding the customer experience axis, BBVA has continued to work on improving the accessibility of its solutions, increasing satisfaction rates and reducing the rate of customer flight. In parallel, it has continued to train its staff regarding the principles of Transparency, Clarity and Responsibility and implementing these principles in its new digital solutions and content for clients.

For its part, information security is a fundamental pillar to guarantee operational resilience. For this reason, the Group has established policies, procedures and controls in relation to the security of global infrastructures, digital channels and payment methods, with a comprehensive approach based on artificial intelligence.

In the axis of Conduct with customers, in 2022 the Group has continued to train and raise awareness among its employees about the BBVA Code of Conduct, as well as strengthening its internal regulation.

Finally, with regard to customer care, BBVA has continued to work on resolving customer complaints quickly, and has focused in particular on minimizing cases of fraud derived from the increase in online transactions.

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, and a greater commitment from digital customers, whose drop-out rate is 42% lower than that of non-digital customers.

The internationally recognized NPS methodology measures customers’ willingness to recommend a company and therefore, the level of satisfaction of BBVA’s customers with its products, channels and services. This information is vital for checking the alignment between customer needs and expectations and the initiatives that have been implemented, setting up plans that eliminate detected gaps and providing the best experiences.

The Group’s consolidation and application of this method over the last eleven 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. Such is the case of Spain, which in 2022 reached its best historical NPS Retail data of 15,3%.

Transparency, Clarity and Responsibility (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 aim pursued by TCR is to help customers 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 (advertising, product sheets, contracts, sales scripts, responses to customer letters, communications, etc.).
• TCR awareness-raising and training throughout the Group. Since 2014, more than 33 thousand training interactions have been carried out online, of which 2,350 have been in 2022.

Also during this financial year, based on the TCR Principles and within the framework of a Global Integrity Plan at the Group level, the Bank has established, for retail clients, some essential minimums to be respected in the design and development: (i) advertising content through any channel, (ii) digital contracting and service processes (“servicing”) and (iii) product marketing protocols. To this end, a cascade communication plan has been carried out for all impacted subsegments, as well as information sessions for the teams involved. In addition, a permanent attention channel has been created for doubts and queries about its application.

BBVA has an indicator to measure its TCR performance: the Net TCR Score (NTCRS), which is calculated following the same NPS method. 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 2022 data, BBVA holds leading positions in this indicator in all its markets.

Accessibility to services and products

During 2022, the Group made progress in auditing the accessibility of its main digital solutions to make them accessible to people with disabilities. Thus, BBVA began the implementation of the process to make the new designs and developments accessible. It is also extending the knowledge on digital accessibility with ad hoc support for the Group's entities.

Additionally, and in response to the social demand related to the senior group, and with the aim of helping to accelerate progress towards an inclusive economy, the banking associations AEB (Spanish Banking Association), CECA (Spanish Confederation of Savings Banks) and UNACC (National Union of Credit Cooperatives) reinforced the Banking Strategic Protocol for Social and Sustainable Commitment in 2022.

Within the framework of said protocol, BBVA adopted a series of measures to guarantee that seniors receive personalized and satisfactory attention, such as: extension of face-to-face service hours, preferential treatment for this group in branches, adaptation of other channels (such as apps and ATMs) or mandatory specific training for sales network personnel.

Customer security and protection

Digital transformation and emerging new technologies mean an increase in possible threats and exposure to risk and new challenges affecting security, privacy and, in general, digital trust, which are key aspects for the best development survival of the digital economy.

For BBVA, information security is not only a fundamental piece to guarantee operational resilience, but also one of the main elements in its strategy. In this sense, information security is articulated around four fundamental pillars: (I) Cybersecurity, (II) Data security, (III) Physical security and (IV) Security in business processes and fraud. 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 consider the good practices established in internationally recognized security standards, are periodically reviewed to assess progress and the effective impact on the mitigation of the aforementioned risks.

During 2022, the measures adopted to guarantee effective protection of the information and assets that support the Entity's business processes have been reinforced, from a global perspective and with a comprehensive approach, considering both the technological field and the areas related to 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 which are being implemented at global level or in specific geographical areas of the Group to improve security and customer protection:

• Use of facial biometrics for remote and online onboarding of customers, ensuring compliance with applicable legal requirements.
• 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.
• Reinforcement of behavior biometrics and malware protection to enhance analytical and fraud detection capabilities on 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 threats.

These new initiatives help protect BBVA customers, alongside the use of robust customer authentication mechanisms in e-commerce, the possibility of turning cards on and off from the BBVA app, the sending of real-time notifications on payments or transfers made and the reinforcement of card security to prevent possible fraudulent use of card data, such as the use of the Aqua card, which is the first card without numbering and without a printed CVV, using a dynamic CVV instead.

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

Among the main campaigns, awareness actions and recommendations included in the app, on BBVA's online channels and in social media, we could highlight those related to information protection, secure password management, device protection (computers, cell phones, etc.), detection of social engineering (phishing, smishing, vishing), detection of malware and other computer attacks, detection of cyber scams, security in online shopping and next steps in the event of a security incident.

Other lines of action also include periodic performance of global and local simulation exercises 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.

Cybersecurity

In recent years there has been a rise in the number of cyber-attacks, accentuated by the presence of organized crime groups specialized in the banking sector.

In addition, the acceleration of digital transformation has led to the emergence of new risks and new challenges for businesses, including those related to security in work-from-home arrangements, security in cloud environments, the increase in the risk exposure surface and the management of risks associated with service providers.

Moreover, and especially since the onset of the COVID-19 pandemic, the scope of social engineering attacks carried out via email, SMS messages, instant messaging systems and social networks has increased.

As cyber-attacks evolve and become more sophisticated, BBVA has strengthened its prevention and monitoring efforts to ensure effective protection of its assets and customer information.

The Global Computer Emergency Response Team (CERT) is the Group's first line of detection and response to cyberattacks targeting global users and the Group's infrastructure, combining threat intelligence units of the Threat Intelligence Unit. The Global CERT, based in Madrid, operates 24 hours a day, 7 days a week and provides services in all the countries where BBVA operates, under a managed security services scheme, with lines of operation dedicated to fraud and cybersecurity.

During 2022, system monitoring capabilities have increased, paying special attention to critical assets that support business processes. Additionally, incident prevention, detection, and response capabilities have been strengthened through the use of integrated sources of information, improvement of analytical capabilities, and the use of automated platforms. On the other hand, work is being done on the development of new Artificial Intelligence and Machine Learning models that make it possible to predict and prevent cyberattacks against banking 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, while reducing the possible negative impact and, if necessary, reporting 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 security technical tests to detect and correct security vulnerabilities. These tests include technical tests of technological platforms as well as 'red-teaming' (simulated malicious attacks). The outcome of these exercises is essential to continuous improvement of the Group's safety strategy.

BBVA ́s information security and cybersecurity strategy is based on internationally accepted security standards. Best practices and security measures and controls established in standards like ISO/ IEC 27002 and ISO 2700 family, COBIT 5 and NIST Cybersecurity Framework have been implemented.

BBVA has also obtained several certifications (TIER IV certification, ISAE 3402,...) in various of the countries where the Entity operates. To maintain these certifications, external audits are performed regularly by different external providers, according to each certification specific requirements. The external auditors that perform these audits are always selected among the most recognized audit firms in the specific areas of knowledge applicable in each case. Additionally, the annual financial audit also includes the review of aspects related to information security and cybersecurity within the internal platforms.

Security in business processes and fraud

Cybersecurity initiatives are frequently undertaken in close coordination with our fraud prevention efforts and there are considerable interactions and synergies between the relevant teams. As part of the efforts to monitor fraud evolution and to actively support the deployment of adequate anti-fraud policies and measures, a Fraud Management Working Group has been created, that oversees the evolution of all external and internal fraud types in all countries where the Group operates.

Among the functions of this Working Group are: (I) monitor actively the risks of fraud 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, subject to certain loss limits, deductions and exclusions applicable.

Business Continuity

In 2022 and 2021, Business Continuity continued to be reinforced from a holistic perspective, paying special attention to the Group’s resilience. All this has consolidated a shift from a model geared to ensuring the uninterrupted delivery of products and services in situations of significant 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) which has materialized in the past in the intense activity of the Business Resilience Office which, together with the Group's Crisis Management Committees and Continuity Committees, plays a fundamental role in managing the many areas that can be seen affected by such high-impact situations (such as the crisis derived from COVID-19).

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 the related processes and controlling access to them, considering the security guidelines established by the Group. All the initiatives are performed guaranteeing compliance of 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 2022 there have been no security incidents that have had a significant impact on the BBVA Group.

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

Information security governance

BBVA has implemented an information security governance model to achieve the established security objectives.

The Corporate Security unit is organized through a scheme of committees and working groups for the management of the different aspects related to information security: security in operations, security associated with technology, physical security, security in business processes , security related to personnel, etc. These working groups are responsible for supervising the execution of the information security strategy and the effective implementation of the programs designed for each of the four pillars that constitute it.

The main body of this governance model is the Technology and Cybersecurity Commission, whose functions include monitoring the technology and cybersecurity strategy and cybersecurity risk management. This Committee assists the Board of Directors in monitoring the technological risks to which BBVA is exposed, the main trends in technology and cybersecurity and any technological security event that may affect the Group.

Conduct with customers

BBVA has a Code of Conduct that establishes guidelines for conduct with customers in line with the values of the Group. Moreover, the Bank has established governance policies and procedures that establish the principles to be followed when evaluating the characteristics and risks of products and services, and when defining their distribution conditions and follow-up in such a way that, based on knowledge of the customer, his/her interests must be taken into account at all times and the Bank must offer products and services in accordance with the customer's financial needs. Moreover, any customer protection regulations must always be complied with.

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.

During 2022, BBVA has evolved and strengthened 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 have to be highlighted:

• Updating the standards at the Group level in terms of customer protection, especially highlighting the approval of the General Policy for Customer Conduct and Product Governance by the Board of Directors. The policy encompasses and updates several internal policies on this matter, reinforcing and harmonizing in a single general policy the principles and provisions that BBVA will take into account to adequately attend to the interests of customers during the offer, provision and, where appropriate, recommendation, of products and services, thus providing the Group with a single frame of reference in the area of conduct with customers. This update of standards also covers aspects related to the processes of granting loans and credits in a responsible manner.
• The evolution of the indicators of conduct with the customer to identify early possible indications of inappropriate sales practices, applying advanced data analytics techniques for these purposes.

Furthermore, the Bank has continued working to embed the customer-protection vision in the development of marketing protocols, digital and advertising content and the design of digital contract formation processes, as well as in the development of new products and businesses, both retail and wholesale, from the outset of their design or creation, including modifications arising from regulatory developments in the field of sustainability.

Customer care

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

In 2022, the Group's complaints units¹⁴ worked to keep up the excellent response times achieved in 2021 and proactively identify potential unfamiliar problems and eradicate the root causes of the most common types of complaints. 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⁾

In 2022, one of the main lines of work has been focused on minimizing fraud cases derived from the general growth of card operations and the increasingly sophisticated techniques to defraud. The security measures and communication and awareness campaigns carried out for customers have allowed them to be reduced throughout the year (as is the case in Spain, with 32% less in the second half of the year), although compared to 2021 have led to an increase in the number of claims, in total, as well as in those filed with the financial authorities in Spain and Mexico.

Regarding the rise in 2022 in the average claim resolution time, it is worth noting the aforementioned increase in fraud claims, with a more complex resolution process, as well as the fact that BBVA in Argentina has begun to collaborate since July 2022 with Visa and Mastercard in the integration of the claims of their clients managed in the internal process of the Bank. This integration process is the result of a perimeter change in the information to be reported imposed by the local regulator with the aim of working together to eradicate them. This has meant a three-fold increase, since that date, in the monthly volume of claims in Argentina, with a significant impact on the average response time (outside BBVA), both locally and at the Group level. Without this change, the rise in this indicator would have been less pronounced.

Complaints filed with supra-bank authorities (per 10,000 active customers) during 2022 and 2021 were as follows:

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

The average time for resolution of claims in the Group stood at 7.41 days in 2022, higher than 5.46 days in 2021, as a result of the increase in fraud claims in Spain, Argentina and Peru (whose process of resolution, as mentioned above, is more complex and entails longer response times), the greater number of claims in Turkey associated with the new pension processes, as well as the aforementioned integration of Visa and Mastercard claims in Argentina (which increases resolution time by 5 days).

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

Claims resolved through the First Contact Resolution (FCR) model, which consists of resolving the incident at the very moment it occurs, thus providing quality service and improving the customer experience, remained at 10% of total claims, thanks to the increase in the ratio in Argentina, Colombia and Peru, which offsets the effect of the exit of the United States from the Group, together with the drop in Turkey due to the halving of claims associated with the main type resolved in FCR.

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

Substantiated claims, related to violations of privacy and loss of customer data submitted to the corresponding supra-banking authorities in the countries, have been reduced to 0.004% of the total claims, thanks to prevention and control policies and measures of the risks.

The total volume of claims in 2022, whose breakdown by country is shown in the following table, represents a 15% increase in the volume of claims with respect to the figure for 2021 derived, as previously mentioned, from the increase in cases of fraud related to card operations (like the cases of Peru and Mexico), claims associated with the new pension processes after the legislative change (and gaining of more than 600,000 pensioners) in Turkey, as well as the incorporation of claims managed by Visa and Mastercard in Argentina (+200,000 claims in 6 months), facts that blur the improvements implemented in the claims management process in the Group.

TOTAL VOLUME OF CLAIMS (BBVA GROUP. MILLIONS OF CLAIMS)

For more information on the Customer Care Service and the Customer Ombudsman see the section "Other information on customer complaints" in the chapter "2.4. Other information" of this report.

¹⁴ The claims handled by these units cover banking entities located in the geographical areas indicated in this section and include retail and BEC business segments.

2.2.2 Shareholders and investors

Shareholder structure

As of December 31, 2022, the Group had 6,030,116,564 shares outstanding (as of December 31, 2021, 6,030,116,564 shares outstanding), 59% of which were held by institutional investors and the remaining 41% held by minority shareholders, all of them providing the same political and economic rights, not there being different voting rights for any shareholder. The reduction of 637,770,016 outstanding shares is explained by the amortization of the shares acquired during the execution of the share buyback program.

Shareholder remuneration

The Group's shareholder remuneration policy is to distribute annually between 40% and 50% of the ordinary consolidated profit for each year. It should be noted that said shareholder remuneration policy was modified in November 2021 and compares with the previous policy that established a distribution between 35% and 40%.

This policy is implemented through the distribution of an amount on account of the dividend for the year (which would be paid foreseeably in October) and a complementary dividend (which would be paid once the year has ended and the application of the result has been approved, foreseeably in April), and may Cash distributions can be combined with share repurchases, all subject to the authorizations and approvals that are applicable from time to time.

In this regard, in September 2022, the BBVA Board of Directors approved the cash distribution of an amount on account of the 2022 dividend, amounting to 0.12 euros gross per share, which was paid on October 11, 2022. 2022. Said dividend represented an increase of more than 50% compared to the dividend distributed a year earlier in October 2021 (€0.08 gross per share).

The total remuneration to the shareholder, measured through the TSR (Total Shareholder Return) that considers both, the dividend payment, which is reinvested in BBVA shares, and the evolution of the share price, have shown a favorable evolution, increasing by 15.3% in 2022, which compares with a drop of -3% in the average of its European bank peers.

Additionally, on February 1, 2023, it was announced that it was planned to propose to the corresponding corporate bodies a cash distribution for the amount of €0.31 gross per share in April as a complementary dividend for the year 2022 and the execution of a share buyback program of BBVA shares for an amount of €422m, subject to obtaining the corresponding regulatory authorizations and to the communication of the specific terms and conditions of the program before the start of its execution.

In this way, the total distribution in charge of the financial year 2022 will be €3,015m, 47% of the attributable profit, equivalent to €0.50 per share, taking into account that in October 2022 €0.12 per share were distributed as interim dividend for the year.

The total remuneration to shareholders includes, in addition to the aforementioned cash payments and the new extraordinary share buyback program, remuneration resulting from the execution of the framework program for the repurchase of BBVA's own shares announced on October 29, 2021 and executed in two tranche during 2021 and 2022s. The Bank, in the execution of its framework repurchase program, acquired a total of 637,770,016 shares, for an amount of €3,160m, which represented one of the largest share repurchases in European banks.

In this sense, after the amortization of the shares acquired in execution of the First and Second Tranche of the Framework Program executed throughout 2021 and 2022 (281,218,710 and 356,551,306 BBVA treasury shares, respectively), the share capital of BBVA as of December 31, 2022, has amounted to €2,954,757,116.36, represented by 6,030,116,564 shares with a face value of €0.49 each.

For more information on the Group's share repurchase program executed during 2021 and 2022, see section "The BBVA share", within the financial information of this report.

General Shareholders' Meeting

The General Shareholders’ Meeting is one of the main governing bodies of a capital company whose responsibility is to deliberate and agree, among other matters, the approval of the annual accounts, distribution of results and approval of corporate management; the appointment, re-election and revocation of administrators, etc. In this way, BBVA shareholders are summoned, at least annually, to participate in the Bank's General Meeting where the Entity makes all kinds of means available to them to facilitate their participation.

BBVA held its General Shareholders' Meeting on March 18, 2022 at the Palacio Euskalduna in Bilbao, and also enabled the corresponding channels for telematic assistance to it and its follow-up through its streaming broadcast with free access from the corporate website. Thus, shareholders were able to attend the event in person or electronically, after accreditation in the "Telematic Assistance Portal".

The 2022 General Shareholders' Meeting had a quorum of 65% and, among other resolutions adopted, the Chairman and the CEO were re-elected, as well as the appointment of the new member of the Board of Directors, Connie Hedegaard Koksbang. The resolutions relating to the annual accounts, corporate management of the financial year and the shareholder remuneration proposal were also approved by a large majority.

BBVA is committed to achieving neutrality in its own emissions. In line with this objective, it should be noted that the 2022 General Shareholders' Meeting received, for the fifth consecutive year, the certification of a sustainable event in accordance with AENOR according to the UNE-ISO 201221 standard and, for the third consecutive year, was certified as neutral in carbon emissions.

Finally, on the occasion of the 2022 General Shareholders' Meeting, and in order to contribute to the objective of inclusive and sustainable growth, BBVA made a solidarity contribution in Spain of €300,000 through which different NGOs received funds to finance projects in the areas of sustainability and inclusive growth taking into account the vote of the shareholders in each of the four established purposes.

Relationship with shareholders and investors

BBVA shareholders and investors represent a highly relevant stakeholder. That is why the Group carries out permanent communication work with its shareholders and investors, both national and international, in order to facilitate knowledge of the evolution of the entity and all those relevant issues that allow the proper exercise of their voting rights and decision making.

The purpose of BBVA's Policy for Communication and Contact with Shareholders and Investors is to promote the transparency of the Bank's public information and to do so in a continuous, periodic, timely and available manner with equal treatment among shareholders.

To adequately meet these objectives, the Shareholder and Investor Relations area uses a variety of communication channels and instruments that allow shareholders to access the Bank's relevant information in the manner that is easiest and most convenient for them.

Among these actions, the following channels of communication, participation and dialogue with shareholders and investors stand out:

Conferences and meetings with shareholders and investors

The Shareholder and Investor Relations team periodically organizes informative meetings (meetings, attendance at relevant conferences for the sector and other events), in which Bank representatives meet with analysts, shareholders and investors, both national and international, in order to present the financial and business evolution of the Group and other aspects of interest, attending to their comments and questions in a personalized way. In addition, periodically, the Shareholder and Investor Relations team organizes digital events with shareholders subscribing to the alert service on the shareholder and investor website.

Shareholders and investors website

BBVA has a web page especially aimed at its shareholders and investors (www.accionistaseinversores.bbva.com) where extensive institutional and economic-financial information is provided on the Group's activity and results, as well as any other information that is estimated of interest to them. Similarly, the information on this website can be accessed from the Group's corporate website (www.bbva.com).

Other communication channels with shareholders and investors are:

Webcasts and conference calls

BBVA operates a streaming channel for the quarterly results presentations and other relevant communications for the market, which allows shareholders, investors, analysts and anyone else who wishes to access them, as an important mean of keep these stakeholders informed about the Bank's performance. This channel is also available on a delayed basis and is accessible through the corporate website.

Consultation service and Shareholder Office

In order to facilitate open and transparent communication between shareholders and the Bank, a Shareholder Office is permanently maintained through which requests for information, clarifications or questions and their corresponding responses are channeled. To this end, BBVA makes available to shareholders a telephone line and an electronic mailbox.

There is also an electronic mailbox for institutional investors, through which they can send any questions, requests and suggestions. The mailbox is continuously managed in order to maintain fluid and transparent communication with investors.

Finally, BBVA offers its shareholders and investors, and the general public, a subscription service that, at the user's request, allows them to find out in real time the news published on the corporate website in relation to financial reports, relevant facts or economic-financial presentations.

2.2.3 Employees

BBVA has one Purpose: “To bring the age of opportunity to everyone”. A Purpose that seeks to help all stakeholders, customers, shareholders and also its employees, to meet their vital objectives. The objective as an organization is to have the best and most committed team, one of BBVA's six strategic priorities, and, therefore, BBVA must be capable of attracting, motivating, training and retaining the best talent, aligned with the Group's Values.

For this, the employee value proposition has been developed around three pillars: Bank, Team and People.

In a year of great economic uncertainty and disruptions driven by innovation and sustainability that affect practically all workstations, BBVA has made great strides in talent management.

• In relation to the “Bank” Pillar, 2022 has been a very positive year in terms of employee commitment to the Group. In the Gallup survey, in which 94% of the workforce participated this year, BBVA has obtained an outstanding result in commitment, with an overall index of4.39 -on a scale of 5-, which means +12 basis points above 2021, placing us in the 74th percentile compared to all companies in Gallup.
• As part of the "Team" pillar, BBVA is convinced that diversity enriches the organization, and that is why the Group has been making decisive progress in gender diversity for a long time and in 2022 it wanted to set an ambitious goal, concrete and measurable to show this commitment: reach 35% of women in management positions in 2024.
  
  In the work environment, the Group has consolidated the hybrid work model with a very positive balance. This has been possible thanks to the 'agile' organization and the principles of empowerment and trust towards employees on which the people strategy is based.
• Within the "People" pillar, BBVA has improved growth processes by making them more transparent and homogeneous, something that has allowed the annual performance review process of employees to evolve to promote meritocracy and promote a culture of high performance. A very important milestone in 2022 was the celebration of the "Talent Week", where more than 72,000 employees were able to see the opportunities for professional growth offered by BBVA.
  
  The Group has promoted training plans in the strategic capabilities of the future (sustainability, financial health, cybersecurity, data, etc.), providing the entire workforce with the necessary tools for their professional development.
  
  Given the relevance that innovation and technology have as fundamental levers for the transformation of BBVA, the Group has strengthened the recruitment and retention of talent in strategic profiles with high demand through specific measures.
  
  In the remuneration field, the high inflation in 2022 has had a significant impact on the purchasing power of employees in all geographical areas and, especially, in those countries with hyperinflation. To deal with this, different measures have been taken, such as the application of salary reviews aligned with inflation, the increase in the frequency of salary reviews or the advancement of variable remuneration. The financial health of people is one of the Group's strategic priorities. For this reason, in addition to the salary increase, the Group has incorporated other economic benefits for employees with a focus on the long term. For example, starting in 2023, BBVA has decided to increase the minimum contribution it makes to its employees' pension plan in Spain by 48% and make a new long-term savings policy available to them.

As of December 31, 2022, the BBVA Group had 115,675 employees located in more than 25 countries, which represents an increase of 5% in the year. The growth in the workforce is due to the hiring of new profiles linked mainly to the Engineering and Sustainability areas, support for specific businesses that present growth opportunities and support for the elderly in the digitization process.

52.5% of the Group's workforce were women and 47.5% men, with an average age of 37.6 years in 2022.

Culture & Values

BBVA’s values and behaviors are the action guidelines for the Group's employees in their day-to-day decision-making and help them accomplish the Group's 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.

BBVA's values are integrated into the core models and levers that promote the Group's transformation. They are also included in the global people management processes: from the selection of new employees to the procedures for allocating roles, people development, training, and even incentives for achieving annual goals.

In 2022, a new edition of Values Day was held, a day on which the employees experience BBVA's culture and deepen their understanding of the positive impact that the daily application of the Values has on our stakeholders. Under the slogan "I am BBVA", the concept of pride of belonging has been reinforced, with the participation of more than 51 thousand employees in different activities. The most relevant of these activities were the team workshops in which new initiatives are identified to continue promoting innovation and collaboration. The Values Day was rated as a very positive action to internalize the Values by 97.2% of the participants.

BBVA conducts an annual Employee Engagement Survey, managed externally by Gallup. In 2022, the sixth listening process was carried out, with 94% of employees have participated. BBVA shows an outstanding performance in employee engagement with an overall rating of 4.39 (on a scale of 5), up 12 basis points from 2021. The attached table shows the main commitment indicators:

ENGAGEMENT INDICATORS

On the other hand, BBVA continues to make progress in the implementation of a global leadership model in which all employees are leaders, a model that focuses on entrepreneurship, empowerment and responsibility (commitment to results), for which in 2022, the Group has launched different initiatives:

• The “The Good Manager” project was launched, with the aim of providing team managers with the necessary skills to have more committed teams.
• It has opted for the development of a feedback culture (hot feedback) to improve the professional growth and leadership of employees.

As a further step in the process of cultural transformation and, specifically, in the ways of working based on flexibility, responsibility and trust in people, in 2022 the Group implemented the flexible work model permanently for those functions where it is feasible. A general model through which employees can telework up to 40% of their time, with great autonomy, being able to distribute that percentage on a quarterly basis (see "Work organization" in the "Work environment" section).

Lastly, BBVA continues to promote a corporate culture of social and environmental commitment to help customers in the transition towards a sustainable future, with a focus on climate change and inclusive and sustainable social development. Within this program, among other actions, employee access to volunteer actions is facilitated. For more information on volunteer actions, see "Volunteering" in the "Contribution to society" section in the "2.2.4. Society" chapter, ).

Professional development

During 2022, BBVA has improved the professional growth processes, making them more transparent and homogeneous. Something that allows the annual performance review process of employees to evolve to promote meritocracy and enhance the culture of high performance. All the employees participating in the annual evaluation process received a report with the results of the performance evaluation, evaluation of the competencies (as well as the deviation from the required level of the position), the potential, the location on the map of talent and qualitative feedback from the different participants in the process.

Likewise, BBVA has continued to work on the Professional Development Model by consolidating an ecosystem that makes the different development tools available to employees. This ecosystem is structured into three modules that allow the employee to: 1) get to know themselves better, 2) improve to grow, and 3) explore new paths.

A very important milestone in 2022 has been the celebration of the "Talent Week" at a global level, where the Group shared with the employees the growth and development opportunities available to them. The initiative had a global agenda with attractive and inspiring presentations in relation to the following main themes:

• Discover the Professional Development Model,
• The different growth tools,
• Merit-based promotion criteria,
• Manager's responsibility,
• The importance of a feedback culture.

Under the motto "Growing Together Moves Us", on the one hand, BBVA carried out face-to-face activities in all geographical areas and, on the other, created a global access site with activities, challenges and games that allowed employees deepen and practice with growth tools in online format. The impact was significant, with more than 72 thousand connections to global events, more than 82 thousand participations in 174 local events, more than 2 million interactions on the site and 79 thousand employee accesses to the Group's training platform. The initiative's net satisfaction index was 70 points (NPS).

Attracting talent

Innovation and technology are the fundamental levers of BBVA's transformation. To this end, the Group has reinforced the recruitment of talent in strategic profiles with high demand through segmented measures and initiatives (differentiated and specific attraction measures depending on the profiles). BBVA seeks to offer a unique value proposition through a common brand, in keeping with a global and digital entity.

BBVA has a global reference model for attracting talent, with clear policies that strengthen transparency, trust and flexibility for all stakeholders in the process.

As shown in the following table, in 2022 the Group hired 10,727 professionals (7,586 in 2021).

SIGNED CONTRACTS BY GENDER (BBVA GROUP. NUMBER)

Development

BBVA has worked on the definition of a transversal model of organizational roles with a global job architecture and a definition of homogeneous competency requirements for comparable functions in the Group. Based on this model, BBVA has launched different important initiatives, including the following:

• The "Opportunity" tool, which allows employees to explore new opportunities for growth in the Group, providing a personalized experience.
• “Open Mentoring”, which helps employees develop their skills, acquire new knowledge and ideas, as well as expand their network of contacts within BBVA, and where the figure of the mentor is very important by sharing their knowledge and experience. The initiative has more than 1,000 relationships in 2022.
• “Coaching”, with more than 300 internal coaches who have supported the growth of more than 480 BBVA Group employees.

In 2022, BBVA has continued to promote internal mobility, where the percentage of vacancies filled with internal candidates stood at 60.0% in 2022 (56.7% in 2021) and continues to demonstrate its commitment to the global policy of prioritizing Internal versus external talent. Talent recruitment activity has been steady throughout the 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 providing them the means to decide their learning itinerary for themselves and how to grow professionally.

The solidity and level of implementation of BBVA's training model facilitates anticipating and the possibility of responding in an agile manner to the ever-changing training needs of the BBVA Group, its areas, countries and employees.

In order to ensure that employees have the necessary knowledge to be able to face the transformation challenges in which the Bank is immersed, not only content generated internally by BBVA professionals has been integrated into the training catalogue, but also current content from external specialists of international prestige. In addition, it has been necessary to establish innovative digital learning methodologies that adapt to the needs of each employee and enable continuous learning through the Group's training platform.

This platform provides employees with access to more than 20,000 training resources: MOOCs (Massive Open Online Courses), podcasts, videos, blogs, communities of practice, portals structured according to areas of knowledge, simulators, etc.; specific experiences aimed at specialized technical profiles and links to external training platforms of recognized prestige worldwide; or courses offered by leading educational institutions.

As a result, BBVA continues to stand out and is a benchmark for its ability to innovate and generate training solutions that reinforce a learning culture in which online training is part of the employee's day-to-day life and their professional growth and development. In the last 4 years, more than 72% of training was conducted online and in 2022 it was 73%.

BBVA has a strategic knowledge framework that is structured into 4 large groups: 1) Business, 2) Technology and Data, 3) Operations, Processes and Internal Control, 4) Agile and Leadership; which in turn contain up to 14 types of specific knowledge that are made available to the employee through the "The Camp" platform. In 2022, the drive for "The Camp" has intensified as the accelerator that allows the incorporation of the strategic skills that employees need to advance with the "up/reskilling" that they require depending on the position they occupy or the projection they want to have in his carrer.

Over the course of the year, the topics related to sustainability, cybersecurity, data, Agile, design and behavioral economics have had the participation of more than 27,588 professionals who have completed 340,000 hours of training, and all with an average satisfaction rate of 4.8 (out of 5).

Specifically, and related to the Sustainability strategic priority, in 2022 more than 61,000 employees participated in the various training initiatives related to this topic by completing more than 66,000 hours of training. Likewise, more than 488 employees have passed the EFPA-ESG (European certifier) and ISF1 certifications from IASE (international certifier).

In addition, internal/external certifications have continued to play a leading role in training initiatives and have accompanied the business transformation process, allowing the incorporation of the knowledge and skills that drive the BBVA Group's strategy.

The basic training data for 2022 and 2021 are shown below:

BASIC TRAINING DATA (BBVA GROUP)

The data on training in 2022 and 2021 are collected in the following tables:

TRAINING DATA BY PROFESSIONAL CATEGORY AND GENDER (BBVA GROUP. 2022)

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

AVERAGE NUMBER OF TRAINING HOURS ⁽¹⁾ BY PROFESSIONAL CATEGORY AND GENDER (BBVA GROUP. 2022)

EMPLOYEE TRAINING (BBVA GROUP. NUMBER, PERCENTAGE)

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. Diversity is addressed in a comprehensive manner with a special focus on gender diversity¹⁵, LGTBI+ diversity, generational diversity and the integration of people with different abilities.

BBVA takes a further step toward gender equality and sets a target of 35% women in management positions by 2024, after having already achieved the goal set for this year of reaching 40% of women on the Board of Directors by the end of the year. This measure is a step forward in the commitment to promote equal opportunities and contributes to increasing the number of women in positions of responsibility. In order to meet these objectives, the following actions have been implemented:

• Talent management: The Talent Map allows to identify female talent with the capacity to take on new responsibilities in the short and medium term, prioritizing them in the different T&C processes.
• Changes to processes: facilitate the professional growth of women through programs such as the implementation of the Rooney Rule, which ensures that an appropriate percentage of women reach the final stages of the selection process.
• Internal and external visibility of BBVA's female role models: through programs such as Women@BBVA or BBVA Tech Women, which promote the exposure of BBVA employees in the media and at events.
• Promotion of family co-responsibility and labor flexibility through awareness campaigns and increased parental leave in some geographical areas.

BBVA works jointly with the Employee Resource Groups (hereinafter ERGs), which are internal work groups launched and managed on their own initiative by the employees, which promote diversity and encourage professional relationships between people with common interests. Various ERGs have been created in various geographical areas with which they cooperate when identifying the needs of collaborators and launching impact initiatives.

The Group has protocols for prevention and action against sexual harassment in the main geographical areas in which it is present, expressly stating BBVA's rejection of any behavior of a sexual nature or connotation that has the purpose or has the effect of attacking against the dignity of a person and undertake to apply this agreement as a solution to prevent, detect, correct and penalize this type of conduct within the company. Likewise, the BBVA Code of Conduct, applicable to the entire Group, expressly mentions the Group's null acceptance of this type of conduct and its efforts to eradicate it.

In terms of gender diversity, in 2022 and 2021¹⁶ women accounted for:

• 40.0% of the board members of BBVA, S.A., (33.3% in 2021).
• 22.2% of Senior Management (22.2% in 2021)¹⁷.
• 33.5% of management positions (32.9% in 2021), which would be 39.6% if all branch managers were considered as part of the management team (39.5% in 2021).
• 59.1% of the business and profit generation positions (57.4% in 2021).
• 30.7% of STEM (Science, Technology, Engineering and Mathematics) positions (30.2% in 2021).
• 25.3% of Middle Management positions (25.2% in 2021)¹⁸.
• 34.0% of Junior Management positions (33.4% in 2021)¹⁹.

The distribution by age and gender of the Board of Directors and Senior Management for 2022 and 2021 is shown in the following tables²⁰.

DISTRIBUTION OF MEMBERS OF THE BOARD OF DIRECTORS AND SENIOR MANAGEMENT BY AGE STAGES (BBVA GROUP. PERCENTAGE)

DISTRIBUTION OF MEMBERS OF THE BOARD OF DIRECTORS AND SENIOR MANAGEMENT BY GENDER (BBVA GROUP. PERCENTAGE)

With regard to LGTBI+ diversity, BBVA has implemented various measures to ensure open and prejudice-free work environments. In Spain, BBVA holds the presidency of the Business Network for LGTBI Diversity and Inclusion (REDI for its acronym in Spanish), the first business association in Spain created to promote an inclusive and respectful environment in organizations; in Colombia, BBVA received the Friendly Blitz certification that recognizes it as a friendly entity with the LGTBI+ community; and in Argentina, BBVA formed a strategic alliance with the organization Contratá Trans to implement a project for the labor insertion of transgender people. Similarly, in 2022, BBVA has published and shared internally an awareness and accompaniment guide for trans employees, a manual to facilitate and raise awareness of gender transition and a guide on family diversity.

BBVA has expressed its commitment to the social integration of individuals with different abilities. It has an ERG related to different abilities 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 different abilities, such as grants to students and programs for the incorporation of people with different abilities, with the collaboration of specialized organizations and companies, as well as educational centers and universities. In Spain, a pilot program in collaboration with the Adecco Foundation for the incorporation of people with intellectual disabilities into the workforce has been launched, and the collaboration with the Specialisterne Foundation has continued, through which people with Asperger's syndrome are incorporated into different roles in the organization. In Mexico, together with the BBVA Foundation, the BBVA "Chavos que inspiran" (Youth who inspire) scholarship was extended to support disabled students with a vulnerable socioeconomic profile. In the last two school years, the Bank has supported 532 students with disabilities and also launched the first call center trained to serve visually impaired customers, being pioneers in Mexico in offering this service.

As of December 31, 2022, BBVA had 645 people with different abilities on the Group's staff (589 in 2021), of whom 358 are located in Turkey, 183 in Spain, 54 in Mexico, 41 in South America and 9 in Portugal.

Lastly, the Group has been carried out initiatives to promote ethno-cultural diversity and generational diversity in different geographical areas. In relation to generational diversity, in Spain, BBVA promoted the creation of the Added Value Awards, in collaboration with the Transforma Foundation, whose objective is to recognize those individuals who have contributed with their work and merits in the educational, scientific, technical, cultural, social and business areas to highlight the value of senior talent in Spain, especially if their greatest achievement has been reached in their senior years. BBVA has also carried out various awareness campaigns through volunteering. As in the other areas of diversity, BBVA has an ERG for generational inclusion.

With regard to ethno-cultural diversity, BBVA has carried out various awareness campaigns through volunteering. In Spain, collaboration with Acnur, Rescate Foundation and Entreculturas Foundation is noteworthy; and in Colombia, the agreement with the National Learning Service (SENA for its acronym in Spanish), a government entity linked to the Ministry of Labor and whose main purpose is to train young people belonging to Colombia's ethnic groups, continues to be implemented. In addition, a project has been launched internally to promote the professional development of BBVA employees belonging to an ethnic group.

In 2022, BBVA has held the third edition of "Diversity Days", internal conferences to promote diversity, inclusion and equity in the workforce through activities, conferences and events throughout a week, in addition to delving into in projects promoted by the bank around the world in this matter, and where Mexico was the host country. Within the framework of the "Diversity Days", the bank has presented its Diversity Policy to the staff, a general guide for action that makes respect for difference, and therefore diversity, a fundamental axis in the strategy of the Group.

BBVA has been included for the fifth consecutive year in the Bloomberg Gender Equality Index, a ranking that includes the world's companies with the best practices in gender diversity.

Regarding the Employee Engagement Survey, regarding the question “BBVA always values diversity”, for yet another year, BBVA exceeds the score of the previous year, obtaining a score of 4.64 out of 5, above 4.53 of the financial year 2021.

In Spain, BBVA obtained the 3rd extension of the Equality Badge in the Company granted by the Ministry of Equality for a duration of 3 years. With this, the Bank's commitment to Equal Opportunities between men and women is recognized, with measures that promote productivity and the reconciliation between work and free time, dissemination and awareness measures in the entity and in society as a whole. among which the actions to give greater visibility to women who occupy positions of responsibility in the organization stand out, as well as those initiatives that promote female vocations in STEM careers. BBVA received the "Top LGTB+ Diversity Company" award by the Intrama consultancy for his initiatives in favor of LGTBI+ people. The Family-Responsible Company certificate is also maintained.

¹⁵ BBVA, S.A. in Spain has an equality plan in force since 2010. This plan specifies aspects that will guarantee real and effective equality between women and men.

¹⁶ The data published in 2022 differs from those published in the 2021 Consolidated Non-Financial Information Report due to changes in the criteria described in the introduction to the chapter "Main employee metrics".

¹⁷ This category corresponds to Management level I. The Management Level is an organizational attribute that aggregates and aligns different categories of roles within the organization for homogeneous analysis in the Group.

¹⁹ This category corresponds to Management level III.

²⁰ For the purposes of diversity calculations, executive directors have been included both in the calculation of the Board of Directors and Senior Management.

Main employee metrics

In order to continue advancing in the transformation, during 2022 the Group has implemented important organizational and technological initiatives -including the use of a new technological platform for employee management that has come into operation in the second half of 2022- that give rise to to changes in the internal structure, impacting on the axes of grouping of the reported information.

To facilitate the comparison of the 2022 data with that reported in the 2021 Management Report, the 2021 information is presented based on the new criteria²¹.

The concepts impacted by the new criteria are described below:

• Professional Categories. In order to align the information structure with the employee data generated by the new technological platform implemented in the Group, to align it with what is observed in the information on employees presented by other competitors and because a new model of transversal roles that allow us to have a global and comparable vision of the positions in the Group, BBVA establishes 3 professional categories that replace those presented in 2021, as follows: Management Team, Managers and Rest of Employees.
• Age ranges. With the aim of aligning the information structure with the best practices observed in the market, BBVA establishes 4 age tranches that also represent, to a greater extent, the idiosyncrasy of all the Group's employees, as follows: <30 years; 30-39 years ; 40-49 years ; ≥50 years.

²¹ Tables affected by changes to these criteria have a general note in the footer.

EMPLOYEES BY COUNTRIES AND GENDER (BBVA GROUP)

PROMOTED EMPLOYEES BY GENDER (BBVA GROUP)

In 2022, the number of promoted employees has returned to pre-pandemic levels as 2021 was a year where, in general terms, part of those not carried out in 2020, due to the COVID-19 pandemic, accumulated.

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)

BBVA offers a part-time work modality in countries such as Spain, Argentina and Colombia.

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 AGE STAGES (BBVA GROUP. PERCENTAGE)

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

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

In 2021, the average annual number of full-time indefinite contracts²², part-time indefinite contracts and temporary contracts was 93.7%, 1.8% y 4.5%, respectively. (2020: 94.1%, 1.6% and 4.3%, respectively). In absolute terms, the annual average for 2022 was 105,908 full-time permanent contracts, 2,043 part-time permanent contracts and 5,080 temporary contracts (in 2021, 109,409 1,888 and 4,988, respectively).

²² Permanent part-time employees include full-time contracts with reduced hours.

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)

SIGNED CONTRACTS 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)

The general increase in the turnover rate of employees under 30 years of age in 2022 in Spain is explained by the hiring of new profiles linked mainly to the Engineering and Sustainability areas and the support of the group of older people in the digitization process .

Working 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 around work conditions and employee rights, the work/life balance as well as occupational health and safety.

Work organization

As a further step in the process of cultural transformation and, specifically, in the ways of working based on flexibility, responsibility and trust in people, in 2022 the Group has implemented the flexible work model for those functions in which is feasible.

As one of the strategic priorities is to have the best and most committed team, BBVA has decided to definitively implement the flexible work mode that began as a result of the pandemic, with a general model that consists of working a minimum of 60% of the working day in person and a maximum of 40% remotely, although there are adaptations to this model motivated, among other issues, by the local legislation of each country or by the type of function carried out.

This work model is voluntary and, in general, reversible both for BBVA and for the employee, requiring a minimum notice to exercise the reversibility that can range, depending on the country, between 10 and 30 days.

To maintain closer communication that facilitates closeness between people and the integration of teams, although there is flexibility to specify the days of remote work, the teams coordinate to meet in person.

Digital disconnection

The right to digital disconnection is included in the internal regulations and policies of each country unit and recognized as a fundamental element for achieving better organization of working time 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.

During 2022, different initiatives have been launched and communicated at a global level related to digital disconnection, such as promoting that no emails are sent or meetings are set up after certain hours in the afternoon, or during weekends and holidays. Additionally, setting up meetings should be avoided one afternoon a week in order to spend that time planning tasks.

Maternity and paternity leave

BBVA is committed to the well-being of its employees, completing and expanding the benefits established at the local level in the main geographical areas where it is present, as follows:

In Spain, during maternity or paternity leave, BBVA supplements benefits 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, BBVA has extended the leave available for the birth of a child 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 five days legally established.

In Argentina, BBVA has extended paternity leave 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 child with a disability, the paternity and maternity leave is extended by 60 calendar days.

In Uruguay, BBVA has extended paternity leave by 3 working days, in addition to the 10 under 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 different forms of remote working for a period of 6 months after their return to work.

PARENTAL LEAVE (BBVA GROUP. NUMBER, PERCENTAGE)

The data on parental leave for the geographical areas indicated above corresponds to the information provided by Argentina, Bolivia, Chile, Colombia, Spain, Mexico, Peru, Portugal, Turkey, Uruguay and Venezuela.

The retention rate for employees taking parental leave in Spain in 2022 was 87%, with 88% for men and 85% for women (in 2021, 90%, 91% and 89% respectively).

Additionally, BBVA makes available to its employees the possibility of taking certain leaves to care for family members for health reasons, with varying degrees of coverage depending on the particularities of legislation and local public systems. In Spain, for example, there exists a range of licences/leaves that can be used for this purpose with different degrees of remuneration, as well as specific financial aid.

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 union representatives. Dialogue and negotiation are part of how to address any dispute or conflict within the Group, for which there are specific procedures for consultation with trade union representatives across different countries, including the issues concerning labor health and safety.

In Spain, employee representatives are elected every four years by personal, free, direct and secret suffrage and are informed of any relevant changes that may occur in the organization of work in the Bank under the terms of the legislation in force. The banking industry collective agreement is applied to 100% of the workforce (except for members of senior management), supplemented by employer-specific collective agreements which build upon and improve the provisions of the sector-wide agreement, and which are entered into with union representatives.

In Mexico and Peru, the collective bargaining agreement regulates the working conditions of 100% of unionized workers. In BBVA Mexico in 2022, on the occasion of the 2019 reform to the Federal Labor Law, the union with representation in the Bank carried out a process to legitimize the collective bargaining agreement. Unionized workers voted voluntarily, freely, secretly, personally and directly on the continuity or not of the collective bargaining agreement governing labor relations at the Bank. The proceedings concluded with 95% of votes in favor of continuing with the same collective bargaining agreement and the union that represents it. In both countries, non-unionized workers' terms of employment are regulated by individual employment contracts and internal company policies on compensation and benefits. Thus, the working conditions of 100% of the workforce in both countries are regulated.

In Argentina, Uruguay, Portugal and Venezuela, 100% of the workforce is covered by the collective bargaining agreement (except for members of senior management). Fluid communication is maintained with the internal union committees at the local level and with the sections of the banking association at the national level.

In Colombia, there are two types of collective bargaining agreements that regulate working conditions, which together cover 100% of the workforce. The 'Convención Colectiva' is the agreement between the Bank and unionized employees, while the 'Pacto Colectivo' is the agreement between the Bank and non-unionized employees. Both groups of employees maintain a fluid and direct dialogue with the Bank.

In Turkey, Chile and Bolivia, there is no union representation. Therefore, employees' working conditions are applied in accordance with the terms of their employment contracts and the Bank's internal policies.

Occupational safety and health

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

Occupational risk prevention

The Group's occupational risk prevention model is regulated by the local regulations, conventions and agreements of the geographical areas where BBVA is present. For example, in Spain it is governed by the Occupational Risk Prevention Law or the collective agreement on occupational health for the consultation and participation of BBVA workers in matters of occupational risk prevention; in Peru it does so by national legislation in relation to the approval of the evaluation of the Occupational Safety and Health policy and the Internal Regulation of Occupational Safety and Health; and in Mexico it does the same through the Political Constitution of the United Mexican States, the Federal Labor Law, Regulations and the Official Mexican Standards. In all cases, employees have the right to consult and participate in these areas that are exercised and developed through union representation or stakeholders in the different existing committees, on which the consultations are exposed and the matters pertaining to safety and health at work are handled.

BBVA has preventive policies in Spain that affect 100% of the workforce of all companies and are carried out by the Occupational Risk Prevention Service, as well as a collective agreement in which the instruments for worker participation are articulated in this matter. Likewise, there are corresponding government bodies for its proper management: a State Health and Safety Committee, Health and Safety Committees of Large Centers and Territorial Prevention Delegates, who meet quarterly.

The Group develops this policy through an Occupational Risk Prevention Management System that allows risks to be identified and evaluated; establish the criteria, methods and resources that ensure the effectiveness of the management system; obtain and analyze the information on the results in this area; as well as the implementation of actions that ensure the results and improve the processes and the system. This Occupational Risk Prevention Management System complies with the requirements of the OSHAS 18001:2007 standard and is in the process of being adapted to ISO 45.001, which adopts a proactive approach in risk assessment.

As a cornerstone of this system, BBVA has an Occupational Risk Prevention Plan, which integrates the company's preventive activity into its general management system and establishes its occupational risk prevention policy implemented in annual planning with specific objectives of action in this matter. Among these actions, BBVA includes: occupational risk assessments; specific evaluation of psychosocial risks; evaluations of especially sensitive personnel and pregnant personnel; specific technical reports; training and information to workers; preparation and implementation of self-protection plans and emergency manuals; safety inspections, accident investigation and communication; actions for the coordination of business activities of works and services; health surveillance through medical examinations; preventive health campaigns; health examination satisfaction surveys.

To this end, the prevention service is divided into two lines of action:

• Technical-preventive, in which the Group carries out systematic evaluations of occupational risks and psychosocial evaluations from which the corresponding action plans are derived, detailing those responsible and deadlines, and ensuring their implementation. Likewise, it is responsible for carrying out and implementing emergency and evacuation plans, for training in safety matters. Additionally, BBVA carries out a continuous coordination of business activities (CAE) with the companies and their external personnel who attend the Group's work centers with the support of a documentary exchange platform, establishing an activity coordination procedure for works and another for services.
• Occupational medicine through which the Group has the following objectives: monitor the health of workers by carrying out medical examinations; protect especially sensitive employees; assess medical records; adapt workstations with specific ergonomic material; carry out preventive activities and campaigns with the aim of maintaining and improving the health of workers and contributing to the control of risk factors and the promotion of healthy habits, as well as the development of a preventive culture.

The BBVA Prevention Service monitors the measures implemented. At the same time, and with the aim that prevention is integrated into the set of activities and at all hierarchical levels, the Bank in Spain has a periodic verification of the system, carried out by an independent auditor, where a systematic, documented and objective assessment of the effectiveness of the occupational risk prevention system. For said certification, the independent audit performs selective tests of the supporting evidence of the risk assessment carried out, the organization, the procedures and preventive practices established and the results obtained, being the results favorable and highly qualified.

In the case of other companies in Spain, such as OPPlus, it also has a preventive policy that affects 100% of the workforce whose management is carried out through a mixed model, formed by its own Occupational Risk Prevention Service, with assumption of the Occupational Safety and Ergonomics and Psychosociology specialties and the External Prevention Service with the company Quirón prevention with assumption of the Health Surveillance and Industrial Hygiene specialties.

In Mexico, in addition to the Health and Safety Committee (called the Safety and Hygiene Commission) based on the Official Mexican Standard, BBVA has a Committee whose objective is to analyze the different medical cases of prolonged disabilities or with possible determination of states of disability. The areas of Medical Service, Labor Relations, T&C, among others, participate in said Committee. In 2022, in Mexico, BBVA has established improvements to the NOM-035 Standard compliance tool (psychosocial risk factors).

In other countries such as Peru, Colombia, Uruguay, Chile and Venezuela, BBVA also has a structure of Health and Safety committees that respond to local needs.

Employee training in occupational safety and health

In coordination with the Training area, BBVA plans a range of training actions on Occupational Risk Prevention to raise awareness and provide employees with the knowledge they need to carry out their work safely. Online courses are available for all the workforce through the E-Campus platform and attendance-based courses are given by highly specialized trainers from external entities, with specialists from the Prevention Service also taking part in the training of some groups.

BBVA Occupational Risk Prevention Training Plan includes courses such as: training in occupational safety, health and welfare; advanced ORP training; first aid courses; defibrillator handling courses (in workplaces equipped with them); psychosocial courses (Personal Risk Situations for new arrivals, initial support and hold-up protocol); specific emergency training courses for emergency teams; contingency exercises for emergency management; practical fire courses for Personal Protective Equipment (PPE) and emergency management; road safety courses; intercompany training for supervisors of external personnel; sleep hygiene training and workshops; training in emotional wellbeing (anxiety management, emotional self-control, balance, wellbeing and happiness, etc.); training in musculoskeletal prevention (preventive training); training in healthy dietary habits.

Courses are online or face-to-face. The modality varies depending on the subject to be covered, and the duration of each course is different depending on the content to be taught on the topic. Training is free of charge and provided during working hours.

In Group companies such as OPPlus and Next Technologies, and in countries such as Argentina, Peru, Colombia or Venezuela, BBVA also makes available to its employees a wide range of training in occupational safety and health through specific courses on the following topics: psychological first aid, food and nutrition, cardiopulmonary resuscitation and defibrillator management, health care and breastfeeding, etc.

Health at work

Health check-ups

BBVA has carried out the medical examinations in accordance with internal protocols, complying with the requirements of the Occupational Risk Prevention Law in Spain. In 2022, for BBVA, S.A., the Group has summoned more than ten thousand people to carry out the medical examination. It has also carried out the ergonomic procedures to adapt the workplace to the worker's pathology. With regard to pregnant employees, BBVA has medically and ergonomically assessed more than 140 requests made by employees who have communicated their status according to the established protocol.

In addition, the Group has implemented a new application that makes it possible to manage medical and nursing care appointments online. With this new functionality of the Medical Service, BBVA adapts to the new flexible ways of working while allowing more efficient management of its services.

Health campaigns

In 2022, BBVA has carried out different health campaigns, in which the following can be highlighted:

• Spain: the smoking cessation campaign, which includes the platform "Improve your health by quitting smoking"; flu vaccination campaign; prevention of skin cancer and heat stroke; breast cancer prevention that included various initiatives and conferences; stroke prevention through the implementation of a web page with information on the early detection of warning signs of stroke, control of risk factors, as well as videos and conferences on this cerebrovascular disease; Food and nutrition; diverse informative documents like the one of the smallpox of the monkeys; blood donation campaigns, etc.
• Mexico: oncological, metabolic and visual preventive campaigns.
• In other countries, BBVA has also carried out health campaigns. For example, in Colombia a culture of self-care has been created through mindfulness or the Activate program (physical and cognitive breaks), Chile has focused on stress control and emotional management, Uruguay annually performs preventive check-ups on 100% of the workforce and it offers benefits that allow top-level medical care for employees and their families, Argentina stands out for its extensive training offer and its anti-smoking prevention campaigns, among others, and Venezuela has a comprehensive health center.

Health and well-being program

BBVA continues to work to improve the well-being of its employees, so in 2022, and as part of the “Wellbeing” “Work Better / Enjoy Life” concept, it has implemented a Health and Well-being program throughout the Group with two large pillars: Mind and Body, giving conferences with prestigious specialists, and holding workshops and courses on sleep hygiene and emotional management.

Occupational health website

The Occupational Health Portal is a tool of great importance in communication with workers and the provision of all relevant information on occupational health and occupational risk prevention, which during 2022 has been made available globally. This initiative is part of BBVA's commitment to promote health and safety at work and aims to be the reference communication and information platform in this area.

The information on this portal is structured into eight large blocks to which the connection to the “coronavirus” Portal is linked, which are: healthy work environment (with the new inclusion on teleworking); healthy lifestyle; prevention of pathologies; procedures to follow in work accidents, medical examinations, pregnancy, etc.; road safety; "Woman, your health is your best gift", with specific preventive information for women at all stages; health conferences; risk assessment and emergency measures. Likewise, the portal contains additional information on first aid, defibrillators, actions in case of emergency, etc.

During this year, BBVA has also developed and linked to the portal two new web pages on the following preventive activities:

• Eye prevention, which includes preventive recommendations and visual training exercises.
• Information on teleworking implemented in the entity, on specific risks and their prevention, evaluation forms, recommended exercises in teleworking, etc. (protected with the entry into force of Law 10/21 of July 9 in Spain).

Cardioprotected spaces

BBVA has proceeded to renew the defibrillators installed at BBVA in Spain, where there are currently a total of 25, located in the main work centers, in order to adapt to the new Regulations on defibrillators and cardioprotected spaces. The handling of the defibrillator and knowledge of basic life support are part of the first aid training integrated into the course on emergency measures aimed at PPE's.

OCCUPATIONAL HEALTH (BBVA, S.A. NUMBER)

TECHNICAL-PREVENTIVE ACTIONS (BBVA GROUP)

PREVENTIVE ACTIONS TO IMPROVE WORK CONDITIONS (BBVA GROUP)

In Spain, technical preventive procedures and preventive actions have been increased in 2022 to improve working conditions, once the restriction on activity caused by the COVID-19 pandemic has been overcome in 2021.

Below are the data on absenteeism for 2022 and 2021:

VOLUME AND ABSENTEEISM TYPOLOGY OF EMPLOYEES (BBVA GROUP)

COVID-19 pandemic

During 2022, BBVA has continued to manage the COVID-19 pandemic at a global level. Together with the Communication area, the specific platform on the coronavirus has been updated to provide information to BBVA employees globally.

Within the action plan for managing the pandemic in Spain, BBVA maintains the following action protocols:

• Monitoring of the CDC (Center for Disease Control and Prevention), ECDC (European Center for Disease Prevention and Control), World Health Organization (WHO) and Ministry of Health.
• Action protocol for BBVA workers / New coronavirus (COVID-19) Guidelines for BBVA Employees and following updates: action protocol in the event of a confirmed case: protocol on what to do if you are considered a close contact and quick guide to action against COVID-19.

Likewise, the Area of Occupational Medicine has continued with the integration of all the Occupational Health information of the workers in the OHS application, with the aim of unifying all the information of the employees in the same tool for better coordination and efficiency of the activities that are the responsibility of both Areas.

In Mexico, BBVA organized vaccination campaigns against the SARS-CoV-2 virus, in collaboration with the Ministry of National Defense (SEDENA), for workers and their families.

Work-related injuries

In the Group, a total of 281 work accidents with medical leave were registered in 2022 (167 in 2021), none of which were fatal, the same as in 2021.

At BBVA S.A. In Spain, a total of 89 work accidents were registered in 2022 (114 in 2021), of which 27 were with medical leave (41 in 2021) and 62 without medical leave (73 in 2021), data that represents a low occupational accident rate, with indices below the sector. The main types of injuries in accidents with sick leave are sprains and strains, superficial injuries and foreign bodies in the eyes, and closed fractures. Most internal personnel accidents are in itinere (that is, going to or coming back from work), the rest being due to falls.

The severity index for labor accidents of BBVA, S.A. stood at 0.04 in 2022 (same data as in 2021), while the frequency rate stands at 0,76 (compared to 0.89 in 2021).

In BBVA Group, no cases of occupational disease were recorded among internal staff.

Remuneration

BBVA has a General Remuneration Policy, which applies to all Group employees, including BBVA's Senior Management - with the exception of BBVA's executive directors - (the "BBVA Group General Remuneration Policy") and a BBVA Directors' Remuneration Policy, both designed within 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 toward the recurrent generation of value for the Group, the alignment of the interests of its employees and shareholders with prudent risk management and the implementation of the strategy defined by the Group. The Remuneration Policies are part of the elements devised by the Board of Directors as part of BBVA's Corporate Governance System to foster proper management and supervision in the Group. It is based on the following principles: long-term value creation; the achievement of results based on prudent and responsible risk assumption; attraction and retention of the best professionals; remuneration for the level of responsibility and professional record; secure internal equity and external competitiveness; guaranteeing equal remuneration for men and women; and ensuring the transparency of the model of remuneration.

These principles are specified in the Policies:

• They contribute to BBVA Group’s business strategy and to the achievement of the goals, values, interests, value creation and long-term sustainability.
• They are compatible and promote sound and effective risk management, not offering incentives to encourage taking risks that exceed the level tolerated by the Group, consistently with the risk strategy and culture of BBVA Group.
• They are clear, comprehensible, transparent and simply drafted, allowing easy understanding of the different elements that make up the remuneration and conditions for its concession, vesting and payment. To this end, they clearly distinguish between the criteria for establishing fixed remuneration and variable remuneration.
• They are impartial in terms of gender, reflecting an equal remuneration for the same functions or functions of equal value, and does not establish any difference or discrimination for reasons of gender.
• They 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.
• They seek 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, comprising a relevant part of the total remuneration, which takes into account the level of responsibility, the functions performed, and the career path of each employee, as well as the principles of internal equity and the value of the function in the market, being a relevant part of the total remuneration.
• A variable remuneration constituted by those payments or benefits additional to the fixed remuneration, whether monetary or not, that are based on variable parameters. This remuneration must be linked, in general, to the achievement of previously specified objectives. All employees have a corporate variable remuneration model, which is complemented by sales incentive models, tailor-made for specific groups of business areas. In all cases, financial and non-financial indicators are defined for the Group, which are aligned with 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 2022, the level of achievement of the Group's indicators was 129%, based on the results obtained for 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 2022) (BBVA GROUP. 2022) - FINANCIAL INDICATORS

For non-financial indicators, the Group's level of achievement for incentive purposes is detailed below:

ANNUAL VARIABLE REMUNERATION (AVR) (MEASUREMENT PERIOD 2022) (BBVA GROUP. 2022) - NON-FINANCIAL INDICATORS

In 2022, as in 2021, among the non-financial indicators used to calculate the Annual Variable Remuneration of all employees, BBVA includes the Mobilization of sustainable financing indicator, directly associated with the activity carried out by the Group to comply with the commitments assumed with the market in terms of climate change and that reinforces the commitment so that BBVA achieves its sustainable development objectives.

As of 2023 and bound to the approval of the corresponding corporate bodies, the BBVA Directors Remuneration Policy and the BBVA Group General Remuneration Policy are expected to include, as part of the Annual Variable Remuneration of the members of the identified group, including executive directors and members of the Senior Management of BBVA, a long-term incentive linked, among other things, to the degree of compliance with the decarbonisation objectives of a series of sectors for which the Bank publishes specific objectives.

Average remuneration

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

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

AVERAGE REMUNERATION BY PROFESSIONAL CATEGORY ⁽¹⁾ AND GENDER (EUROS)

The differences observed in the average remuneration of some professional categories derive from factors such as seniority, and the varied composition of the same, which are not representative of the wage gap. The average remuneration of each category is influenced by aspects such as the different distribution of men and women in the most valued positions or the greater proportion of women in countries with lower average remunerations.

In general, the increases in average remuneration are due to generalized salary increases aimed at offsetting the high inflation rates in most of the geographical areas where the BBVA Group operates. These increases have not been offset by the depreciation of local currencies, which has been less than the inflation rate in most of the Group's geographical areas, and has even appreciated in countries such as Mexico, Peru, Uruguay or Chile.

In the case of executive directors and other members of BBVA Senior Management who held their positions on December 31, 2022, 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 other members of Senior Management the amounts are presented as an aggregate. The average total remuneration of Senior Management (excluding executive directors) in 2022 was €2,185 thousand for men and €1,841 thousand for women.

Wage gap

The BBVA Group's General Remuneration Policy is impartial in terms of gender, reflecting an equal remuneration 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 pay equity ratio or gross pay gap by professional category is obtained from the above average remuneration tables. 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 reflect equal remuneration for the same functions or functions of equal value and, therefore, the adjusted salary gap is shown below.

BBVA's remuneration model defines certain job positions on which remuneration pivots. Each of these positions has a unique theoretical value determined according to different factors, such as the level of responsibility, the complexity of the function, the impact on results, etc. Similarly, each position has a unique value linked to the achievement of previously established objectives.

The adjusted salary gap compares the total remuneration received by men and women in equal positions in the Group.

For each of the previously described positions, BBVA calculates the median of the total remuneration received by all the men and women who occupy said positions. BBVA calculates the adjusted salary gap for the position 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 adjusted 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). BBVA doesn’t include in the calculation items such as allowances, social benefits, etc. 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.

Based on 2022 and 2021 data, the adjusted salary gap is as follows²³.

²³ 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.

WAGE GAP (PERCENTAGE)

Additional information related to remuneration

Annual total compensation ratio

BBVA calculates the annual total compensation ratio for BBVA, S.A. employees located in Spain, as well as for employees located in Mexico, Turkey, Colombia, Peru, Argentina, Chile and Uruguay, as the ratio between the total annual compensation (fixed remuneration plus accrued variable remuneration and pension contributions) of the best person paid in each of the geographical areas and the median total annual compensation (fixed remuneration plus accrued variable remuneration and pension contributions) of all employees in the same geographical area, taking full-time annualized remuneration and excluding the highest paid person.

The annual total compensation ratios for the 2022 and 2021 financial years are as follows:

ANNUAL TOTAL COMPENSATION RATIO

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 geographical 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).

BBVA calculates the salary ratio of the standard initial category as the quotient of the salary of the initial category between the minimum salary in the geographical area.

As shown in the table below, in the main geographical areas where the Group operates, BBVA's entry-level remuneration is higher than the local legal minimum wage in 2022 and 2021:

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

Pensions and other benefits

BBVA has social welfare systems based on the geographical areas and coverage that it offers to the different groups of employees, without gender or personal differences of any other type. 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 2022, the Bank in Spain made a payment of €21.17 (€26m in 2021) in savings contributions to pension plans and life and accident insurance premiums, of which €11.34m corresponded to contributions for men and €9.83m for women (in 2021, €14.3m and €11.7m, 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 €1,032 in 2022 (€1,143 for men and €927 for women), compared with €1,049 in 2021 (€1,186 for men and €918 for women).

2.2.4 Society

BBVA aims to contribute to the inclusive growth of the societies in which it operates. Therefore, it undertakes practices and initiatives that generate positive impacts and reduce negative impacts. This chapter includes:

• Initiatives and social programs to contribute to the development of the societies in which the Group is present.
• The regulatory compliance framework and its management model to ensure that the development of BBVA's activities and businesses are carried out in accordance with current legislation at all times and in accordance with strict standards of ethical behavior.
• BBVA's tax contribution, as well as the principles that guide BBVA in tax matters, its strategy in this area and the Group's tax risk control and management model.
• BBVA's commitment on preventing conducts contrary to respect of the human rights.

Contribution to society

Community Commitment

In the area of contributing to the development of the companies in which the Group is present, BBVA has the Commitment to the Community 2025, through which it will allocate €550m between 2021 and 2025 to social initiatives to support the inclusive growth of these companies. The objective of this plan is that these initiatives reach 100 million people in 2025. Specifically, it will support five million entrepreneurs, it will contribute to the financial education training of two million people and it will help more than three million people to have access to a quality education. This plan is structured around three main areas of action and seeks to contribute to the fulfillment of certain Sustainable Development Goals (SDGs):

• Reduce inequalities and promote entrepreneurship (SDG 8 and 10): includes initiatives that provide access to basic goods and services necessary to improve people's social well-being; training in financial education and digital training to empower the population, improve their financial resilience and promote financial inclusion, employability and digital security. It also includes support for vulnerable entrepreneurs through the activity of the BBVA Microfinance Foundation and other support programs for SMEs and entrepreneurs.
• Create opportunities for all through education (SDG 4): includes programs to reduce the digital education gap, scholarships to support access to quality education, programs to develop values and skills, support programs for higher education and vocational training. It also includes collaboration initiatives with public education systems and the creation of free, quality content that is disseminated through various Group channels, and
• Support research and culture (SDG 9 and 11): includes initiatives to support researchers and creators in the field of science, culture or economy, support for leading cultural institutions and scientific dissemination.

In addition to this commitment, in 2022 BBVA launched a social response plan to Russia's invasion of Ukraine to help alleviate the effects of the humanitarian emergency caused by the war. A donation of €1m was made to support the social organizations UNICEF and UNHCR alongside the launch of a donation campaign in favour of UNICEF, UNHCR, Red Cross and Doctors of the World. This initiative channelled donations from employees, customers and non-customers amounting to €2.37m through the Bizum mobile payments app and bank transfers. In addition, BBVA maintained a line of collaboration with the authorities for the reception and accommodation of refugees in Spain.

In 2022, the BBVA Group earmarked €131.0m for investment in the community (€106.3m in 2021). This figure represents 1.9% of adjusted net attributable profit. Through this contribution, we reached 77.8 million people. Among direct beneficiaries, 2.905.584 entrepreneurs were supported, 855.646 people were trained in financial literacy and 772,366 people participated in educational programs.

BBVA puts this community commitment into practice through its local banks and foundations, as well as supporting other foundations: The following can be highlighted:

• The BBVA Foundation (hereafter, FBBVA) focuses its activity on generating knowledge. Expanding the frontiers of 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.
• The BBVA Mexico Foundation: focuses its activity on the educational field with a reference program "Chavos que Inspiran" that offers a 10-year accompaniment that transforms the lives of talented and low-income young people from all over the country, allowing these scholarship holders to be the first in their family to finish college, breaking the poverty line and achieving a socioeconomic level that would have taken their family at least 4 generations to reach.
• The BBVA Microfinance Fondation (hereafter, BBVAMF) was established in 2007 by BBVA under the framework of its corporate social responsibility to support vulnerable entrepreneurs. In 2022, for the third consecutive year, BBVAMF was considered the leading foundation in terms of contribution to development in Latin America and second in the world, according to the Organization for Economic Cooperation and Implementation (OECD).

Additionally, in the field of commitment to the community, BBVA develops other relevant initiatives such as volunteer activities, alliances with environmental organizations, support for non-profit entities, the promotion of corporate responsibility through its participation in different working groups. and participation in initiatives (SDG 17)²⁴.

²⁴ More information in the section "Participation in International Initiatives" in the chapter "Report on climate change and other environmental and social issues" of this report.

Below is BBVA's community investment at year-end 2022 and 2021 within the framework of the Community Pledge, by geographical area and corporate foundations:

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

Below is a breakdown of the investment and beneficiaries (in percentage) of the Commitment to the Community in 2022 by focus of action, which have been described at the beginning of this section:

INVESTMENT OF THE COMMUNITY COMMITMENT BY FOCUS. 2022

BENEFICIARIES OF THE COMMUNITY COMMITMENT BY FOCUS. 2022

Below is a breakdown of the type of beneficiary of the Commitment to the Community in 2022 by focus of action:

BENEFICIARIES BREAKDOWN BY TYPE AND FOCUS AREAS (MILLIONS OF PEOPLE)

Below are the objectives for 2025 and the progress since 2021 in relation to investment and beneficiaries of the Commitment to the Community by focus of action.

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

Other contributions to society

In relation to contributions to foundations and non-profit entities²⁵ , the global figure of these contributions in 2022 stood at €19.5m (2021, €19.1m). In 2022, the BBVA Group²⁶ carried out:

• 192 donations to foundations and non-profit organizations for an amount of €6.8m, including both one-off contributions and those which contribute to social programs.
• 117 contributions (not donations) to foundations and other non-profit social entities for an import of €2.6m.
• 392 contributions, of a non-social nature, to foundations, associations, lobbies, think-tanks and other non-profit entities for an amount of €10.06m.

²⁵ Information provided in compliance with section IV of the first article of Law 11/2018.
²⁶ Does not include Turkey.

Volunteer work

In the General Sustainability 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.

To this respect, volunteering is a key element to develop the approaches and lines of work of the Commitment to the Community 2025 (explained in the chapter "Contribution to society" of this report). In fact, the 2030 Agenda for Sustainable Development has explicitly recognized volunteering as a vehicle for sustainable development and volunteer groups as actors to achieve the seventeen SDGs.

In addition, carrying out volunteer activities is aligned with the purpose and values of BBVA.

Overall, 8,637 BBVA employees participated in volunteer initiatives during 2022, having dedicated more than 24,262 hours (81% during working hours and 19% outside working hours). The time dedicated by employees in 2022 is equivalent to a contribution of €429,044.

Compliance and conduct

Code of conduct

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 canons of ethical behavior. To achieve this, it has a compliance system, of which the Code of Conduct (published on the BBVA corporate website, www.bbva.com), the internal control model and the Compliance function are fundamental pillars.

The Code of Conduct establishes, for all members of the BBVA Group, the duty to act with integrity and responsibility, respecting applicable laws and regulations, with the prudence and professionalism that corresponds to the trust that customers and shareholders have placed in BBVA.

In February 2022, the Board of Directors approved an update of the BBVA Code of Conduct to align it with new business developments and the environment in which BBVA operates, and meet the expectations of the companies in which the Group is present. The new version of the Code of Conduct was communicated to all BBVA employees and made available to them on the corporate intranet. It was also made available to stakeholders on the corporate website.

In November 2022, and with the aim of reinforcing awareness and knowledge of the Code of Conduct, a new corporate course on the Code of Conduct was published that all BBVA employees must complete. This course incorporates, among other novelties, messages from members of Senior Management on different aspects of conduct to be taken into consideration in the daily activity of BBVA employees, thus showing the commitment and importance that the Bank's Senior Management attaches to maintain a high corporate culture of compliance in the entity (“tone from the top”).

By January 2023, the number of employees who have completed this new Code of Conduct course is 85.329.

In this context, among the tasks carried out in 2022 by the Compliance unit, continuous advice on the application of the Code of Conduct has stood out. Specifically, the Group formally attended to 306 individual queries (Query Channel) of different natures, relating, among other types, to the offer, delivery or acceptance of gifts and/or personal benefits, as well as the assistance and organization of promotional events and leisure (30%). the treatment of conflicts of interest (24%), the selection, hiring and promotion of personnel (14%) or the development of other professional activities (10%).

Compliance

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 (AML&FT), 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 statute is reviewed periodically, the last update being in 2021 by the aforementioned corporate bodies to keep it aligned with the external and internal regulatory framework, as well as with changes in the Group's organizational structure and with the tasks and responsibilities of the members. of the function, and also with the expectations of the different stakeholders.

Mission and scope of action

The Compliance Unit is part of the Regulation and Internal Control Area, which is in charge of the second line of defense functions for all the risks to which the group is exposed. To reinforce its independence in the performance of its functions, the Area reports to the Board of Directors through the Risk and Compliance Committee, which supervises its activity on a regular basis, and is also subject to the supervision schemes of the competent authorities in the matter.

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 proactive management in AML&FT and Compliance and Conduct risk; and
• defining and promoting the implementation and total ascription of the Organization to the risk prevention and management frameworks and measures related to these issues, which includes exercising control over the first line of defence.

In order to perform its functions adequately, Compliance maintains a configuration and systems internal organization in accordance with the principles of internal governance established by the European guidelines on this matter. In its configuration and development of the activity, it adheres to the principles established by the Bank for International Settlements (hereinafter, BIS) and to the reference regulations applicable to AML&FT and Compliance and Conduct issues.

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 function has, among others, those responsible for AML&FT and Compliance and Conduct issues, for the definition and articulation of the function's strategy and management model or for the execution and continuous improvement of the area's internal operating processes.

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

• Carry out a risk assessment of AML&FT and Compliance and Conduct inherent to the Group's activity.
• Advise the Organization on the requirements that must be met in relation to PBC&FT and Compliance and Conduct matters for the management of the risks that derive from them.
• Prepare and implement internal regulations on their matters.
• 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.
• Establishing systems, technological tools and data for risk management.
• 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.

To achieve the above, Compliance has a global prevention and management framework, which, under a comprehensive 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.

The framework is based on the Code of Conduct, the Compliance Statute and Compliance Policies, and is supported by a series of specific programs, as well as technological infrastructure and transversal data for better operationalization and efficiency in risk management. These include, among others, a global Internal Regulation portal, a gift registry tool, customer monitoring tools and market abuse or whistleblowing channel management.

The strategic aspects of the function are defined and submitted to different committees at the executive level, among which are the Global Compliance Committee or the Internal Control Body in AML&FT matters, among others.

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, standards and procedures (internal regulation) that strengthen the positions and requirements to be applied in risk management.
• 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 actions, with the aim of maintaining up-to-date knowledge and adequate awareness of the aspects of risk prevention and management on the part of the Group's professionals. These mechanisms are articulated within the Compliance Culture Program.
• A set of indicators for supervision and monitoring of the implementation of the model at a global level and for the early detection of possible risk situations.
• Independent periodical review of effective model implementation.

Throughout 2022, work continued on strengthening the documentation and management of this model.In this sense, the review and update of the Compliance aspects in the Group's risk appetite framework (RAF), and the review and update of the global AML&FT and Compliance and Conduct risk typologies stand out, both at a general level and in the different geographical areas, highlighting the reinforcement of Conduct Risk with customers in said appetite framework. Likewise, the framework of indicators has continued to be strengthened, integrated into the management of the operating and business units, in order to improve the early detection of these risks. In addition, the management and extension framework of internal regulation in the Group has been strengthened through the evolution of the technological infrastructure on which it is supported and the evolution of the reporting framework to the Risk and Compliance Committee.

The model is continuously reviewed and tested through extensive and different annual verification processes in each of the geographies, including inspections carried out by supervisory bodies, internal and external audits, and the Compliance Testing activities carried out by specially dedicated teams in the Compliance units. In relation to this activity, during 2022 efforts have focused especially on the review of AML&FT risk management frameworks.

BBVA's drive to develop innovative initiatives and projects has led to the strengthening of organizational, governance, supervision and advisory aspects of the Compliance unit for this type of initiative. Likewise, this year the function has carried out a specific review of its programs from the environmental and climate point of view to ensure that this dimension is adequately incorporated into them.

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 "Conduct with Customers" in the "Customers" chapter of this report.

Prevention of money laundering and terrorist financing (AML&FT)

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

BBVA also pays particular attention to compliance with the AML&FT regulation and the restrictions imposed by national or international organizations on operations with certain jurisdictions and individuals or legal entities.

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&FT 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 2022, the regulated entities of the Group carried out this AML&FT risk assessment exercise under the supervision of the corporate AML&FT area.

The BBVA Code of Conduct determines the basic guidelines for action in this area. Within the framework of the Function's Strategic Plan, during 2022 the internal regulatory body on this matter has been completed and updated (with the approval, among others, of a new AML&FT General Policy). Governance in corporate decision-making of global scope for the Group has also been strengthened, reinforcing the role of the Corporate Internal Control Body for AML&FT. Additionally, the importance of adequately managing this risk has been highlighted (with its inclusion in the General Declaration about the Risk Appetite of BBVA Group).

In the belief that technology and data are essential to implement an effective AML&FT program, the improvement of the technological infrastructure and the use of advanced analytics techniques represent two essential lines of work in the aforementioned Strategic Plan.

During 2022, the design of the new strategic approach of global AML&FT tools has begun throughout the BBVA Group and the deployment in Argentina, Colombia and Peru of the same monitoring tool implemented in Spain, Mexico and Turkey, which allows more advanced functionalities. Similarly, the Group continues to develop different applications of new data-based technologies (machine learning, artificial intelligence, etc.) to AML&FT processes in order to: (I) enhance the capabilities of detecting risk elements; (II) increase the efficiency of said processes; and (III) strengthen analysis and research capacities. Additionally, and leveraged on the creation of a global Compliance data model, a specific line of work has been launched for the creation of a global supervision model, which allows centralized control over AML&FT processes.

In 2022, BBVA Group resolved 139,592 investigation files that resulted in 82,860 reports of suspicious transactions sent to the corresponding authorities in each country, mainly in jurisdictions such as Mexico, Turkey, Argentina, Colombia or Spain.

In the area of training related to AML&FT, 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&FT regulations, as well as specific issues that affect the functions performed by the target group of the training. In 2022, 91,401 attendees participated in AML&FT training activities; this figure includes 23.624 employees belonging to the most sensitive groups from the perspective of AML&FT, who received an enhanced level of training.

The AML&FT 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 2022, this external expert concluded that "BBVA has continued the different lines of action established in previous years and has undertaken new initiatives in order to strengthen the AML&FT control framework established to mitigate the risk of being used as a vehicle for money laundering and financing of terrorism” 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 with the different government agencies and international organizations in this field: Attendance at different committees of the European Banking Federation (Executive Committee Financial Crime Strategy Group of the AML & Financial Crime Committee and the Financial Sanctions Expert Group), 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 Institute of International Finance (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), participation in the “UNODC (United Nations Office on Drugs and Crime) private sector dialogue on disrupting financial crimes related to forestry crimes” as well as contributions to public consultations issued by national and international bodies (European Commission, European Banking Authority and FATF-GAFI (Financial Action Task Force), 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 members of BBVA Group.

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 (hereafter, ICC) aimed at the target group with the greatest exposure in the markets. The RIC develops the contents established in the Policy, adjusting them, when appropriate, to local legal requirements.

This Policy, as well as the different RIC, have been updated during 2022, reflecting the new expectations of supervisors, the experience of recent years in terms of self-employment, and the new forms of remote work. Both the Policy and the RIC are extended throughout the Group. To carry out the management of this regulation, BBVA has tools, in continuous evolution, implemented in practically the entire Group for more than a decade.

In 2022, Compliance has supervised in the normal course of business more than 70.000 operations in the securities markets on the own account of employees subject to the ICC, 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, of both customers and the ones derived from BBVA’s own operations, in 2022 around 200 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 4.000 alerted communications have been analyzed through voice and electronic channels from the market areas.

The internal regulation of market abuse has been reviewed, highlighting the update of the Restricted Securities Procedure and the new General Procedure for market prospecting. It is also worth noting the preparation of a Remote Work Guide (Working from Home) that has been distributed throughout the Group, which includes the main recommendations for working safely from home, mitigating cybersecurity risks, market abuse as well as those related to the non-compliance of investor protection.

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. Likewise, during 2022 the training program on market abuse was enhanced with the launch of a specific course on market prospecting, as well as another on wall-crossing. It is also worth noting the update of the Code of Good Practices in the Foreign Exchange Market (FX Code) course for the FX-traders and -sales teams within the obligations of adherence to these best practices in BBVA, S.A. and BBVA Mexico.

By updating the Swap Dealer Manual, the control framework over derivatives operations with clients affected by the US Dodd-Frank regulation under the Swap Dealer license has continued to be strengthened.

Regarding the US regulation known as the "Volcker Rule", the ongoing training process for the areas involved has been maintained, having trained 400 employees involved in compliance with the specific requirements of covered funds in 2022. Additionally, employees considered critical in compliance with the standard have been sent a reminder training on its basic principles.

Likewise, the buy-back programs executed by BBVA throughout 2022 have involved the execution of the corresponding control framework by the business and compliance teams, with the results of the controls being satisfactory throughout 2022.

Data protection

In the different geographical areas where it carries out its activity, the BBVA Group has privacy policies or notices in accordance with their own local legislation. They disclose the way in which the Group entities collect and process the personal data of their customers, suppliers, and employees, as well as the rest of natural persons whose personal data is processed by the corresponding Group entity. Said privacy policies or notices are subject to review and update, based on the applicable regulations, as well as the General Privacy and Data Protection Policy of the BBVA Group.

During 2022, the Personal Data Protection unit, integrated into the Compliance area and led by the Data Protection Officer (DPO), has continued to promote supervision and control processes throughout the Group to determine the degree of application of data protection regulations in each geographical area and, where appropriate, promote the necessary actions for their proper application.

The implementation has been carried out through (I) the reinforcement of the global regulatory framework, protocols and verification actions of processes and activities with an impact on the protection of personal data, (II) the development and adaptation of tools to help implement control and compliance processes in Spain and other countries (III) the review of relevant processes, as well as (IV) the follow-up and resolution of the recommendations resulting from the audit activities carried out in this field.

Other standards of conduct

One of the main mechanisms for managing the AML&FT and Compliance and Conduct risk in the Group is the Whistleblowing Channel, where the members of BBVA (customers, suppliers or any other stakeholder) 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 in Spanish and English 24 hours a day, 365 days a year.

The Whistleblowing Channel is managed by the Compliance Unit and covers different phases that range from receipt of the communication and acknowledgment of receipt to the complainant (within 7 days) to verification of the facts and closure of the case regarding the basis of an objective, impartial and confidential investigation. The new version of the Code of Conduct, and specifically the corresponding training course created in 2022, informs BBVA employees of the Whistleblowing Channel management process.

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 2022 the Group received 1,597 complaints, mainly referring to categories of conduct with co-workers (61.1%) and conduct with the company (18.5%). Some 46% of the complaints processed during the year ended with disciplinary action being taken including 156 disciplinary dismissals.

Currently, the management process of the Complaint Channel is being adapted to the Spanish Law (in the Draft Law phase) that transposes Directive (EU) 2019/1937 of the European Parliament and of the Council of October 23 regarding to the protection of persons who report breaches of Union Law.

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 and awareness actions in this area have been carried out during 2020, 2021 and 2022.

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 5.3 of the 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.

The Group's General Anti-Corruption Policy is developed through various specific internal regulations that establish guidelines for action and precautions in cases in which the risk of corruption could eventually materialize (i.e Standard for the Acquisition of Goods and Contracting of Services, regulation in terms of gifts and events, regulation of donations and commercial sponsorships, among others).

In line with the aforementioned, in general, BBVA has clauses included in the contracts in which the suppliers undertake to comply with the applicable anti-corruption legislation.

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) 139,592 operations out of a total of 140,305 (99.49%) in relation to the AML&FT 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 193,739 (100%) operations; and (III) 4,685 out of 4,706 third parties have been evaluated from the AML&FT and Corruption risk dimension (99.55%).

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 2022 financial year, this course had been taken by a total of 79,706 (93.1%)²⁷ employees, broken down as follows:

²⁷ This metric does not include Garanti Turkey.

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

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

On the other hand, the total number and percentage of members of the Boards of Directors of the main entities²⁸ that make up the Group who have received anti-corruption training since the financial year 2020 until the date of publication of this report is 90 (100%).

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.

During the 2022 financial year, various awareness-raising actions were carried out regarding conflicts of interest at BBVA. 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.

²⁸ With reference to the following geographies: Argentina, Chile, Colombia, Spain, Mexico, Peru, Switzerland, Turkey and Venezuela.

Criminal 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, in 2022, BBVA has obtained the certificate from AENOR (Asociación Española de Normalización y Certificación), which certifies that its criminal 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.

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 internal 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 2022, BBVA Group has further 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).

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 Sustainability area, and monitors the performance of the plans it has launched in this sphere.

Fiscal risk management and control

BBVA Group has set up a Fiscal Control Framework that complies with requirements for the improvement of Corporate Governance that Law 31/2014 amending the Law on Corporations introduced in terms of fiscal risk control and management for listed companies.

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 Framework 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 framework, 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.

The BBVA Group's Control Framework and, in short, the Group's entire tax risk management and control system, complies with the standards established by the UNE 19,602 standard, BBVA being the first financial institution in Spain to obtain the certificate of compliance after the corresponding AENOR audit.

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 2022 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 2020” 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 geographical areas 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.

Dialog with other stakeholders on fiscal matters and participation in technical-fiscal discussion forums

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 and has promoted initiatives that allow its extension to other multinationals, such as the European Business Tax Forum.

BBVA is currently recognized by the Haz Foundation (formerly Fundación Compromiso y Transparencia) with the "t**" seal of tax transparency and responsibility, and its tax strategy has been recognized as a best practice in the report Best Practices for Good Tax Governance issued in 2022 by the Tax Executive Council of the Conference Board, The B Team and the European Business Tax Forum itself. Likewise, 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, which has awarded BBVA the highest possible score in tax sustainability for the fifth consecutive year.

Additionally, 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.

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 amounts of "Cash payments of corporate income tax" are highly conditioned and derive fundamentally from the methodology for calculating the instalment payments provided for in the regulations governing corporate income tax in the different geographical areas, producing differences between the instalment payments made in the current year and the refund of instalments from previous years that may result once the final tax returns have been filed. In this respect, it should also be noted that it is normal for there to be, differences between the amounts of "Corporate tax cash payments" and "Corporate tax expense", as the tax paid in the year is not necessarily directly related to the pre-tax profit existing in a jurisdiction, but takes into account the tax payments (and refunds) in respect of profits made in previous years, as well as the instalment payments made in the current year and the withholding of input tax. However, the "Corporate Income Tax Expense" for the current year is more directly related to the existing Profit before tax for a given year.

In 2022, BBVA Group has not received public aid for the financial sector which has the aim of promoting the carrying out of banking activities and which is significant. 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 2022 (MILLIONS OF EUROS, NUMBER OF EMPLOYEES)

TAX INFORMATION BY AREAS 2021 (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, in the year 2022, its tax rate stands out, above 30%, mainly due to the limitation of the exemption of intragroup dividends, as well as the tax effects derived from the purchase operation of the company Tree Inversiones Inmobiliarias, SOCIMI, S.A. to Merlin Properties.

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 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 2022, the fiscal adjustment for inflation that contributes to the drop in said rate.

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.

The nominal tax rate in Argentina is 35%. The fact of being considered a hyperinflationary economy and the consequent restatement of its financial statements causes, in general, a distortion in the country's fiscal pressure. Additionally, in 2022, the effects associated with the application of the tax adjustment for inflation as well as the tax revaluation of BBVA Argentina's fixed assets, also linked to inflation, explain the country's tax pressure.

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 38% (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 cause the 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 in fiscal year 2022 its effective tax rate is lower, mainly due to the weight of certain exempt income (i.e. exemption of interest on deposits in the Central Reserve Bank and for the interests of 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.

In June, the Group agreed to apply IAS 19 ("Financial reporting in hyperinflationary economies") to Group entities in Turkey with effect from January 1, 2022. Despite Turkey's status as a hyperinflationary economy, in fiscal year 2022, Turkish tax regulations do not provide for the application of any inflation adjustment, resulting in significant upward distortions to Turkey's tax burden.

In addition, at the beginning of the fiscal year, the nominal rate was expected to be 23% in 2022 and 20% in the following years. However, in April 2022 the nominal tax rate in Turkey was reformed again and, as a result of this tax reform, the nominal tax rate for the financial sector became 25% in fiscal 2022 and subsequent years. In fiscal year 2022 the effective tax rate has been higher than the nominal rate of 25% mainly due to the negative effect caused by the restatement of the financial statements and the impossibility of applying the tax adjustment for inflation.

Likewise, the Group is also present in the United States, Chile, Venezuela, Uruguay, Bolivia, Brazil and Curaçao, basically carrying out, as in the rest of the jurisdictions, retail and commercial banking activities. The joint relative weight of these countries in the Group's accounts is very limited; representing less than 3% of the total consolidated Profit Before Taxes of the Group generated in 2022.

The applicable average nominal rate would amount to 28.70%. The effective tax rate has risen to 31.95%, above the average nominal rate, among other reasons, affected by the peculiarities of jurisdictions such as Venezuela being a hyperinflationary economy.

Additionally, in the rest of Europe and Asia, the banking and financial entities located in Switzerland, the Netherlands, Romania stand out, and on the other hand, the branches located in Frankfurt, Brussels, Paris, Milan, London, Portugal, Taipei, Tokyo, Hong Kong, Singapore, Shanghai, Malta and Cyprus whose main activity falls within the field of Corporate and Investment Banking. The joint relative weight of these countries in the Group's accounts is limited, representing 5% of the total consolidated Profit Before Taxes of the Group generated in 2022.

The applicable average nominal rate would amount to 22.55%. In financial year 2022, the effective tax rate has risen to 19.69%, below the average nominal rate, among other reasons, due to the registration of tax assets in Portugal.

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.

Issuers of securities

As of December 31, 2022, 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.

In relation to these BBVA Group establishments in off-shore financial centers, BBVA's Internal Audit area carries out risk-based reviews, following up on the action plans derived from such reviews. Likewise, under a risk-based approach, the Group's non-financial risk control model includes these establishments within its scope.

Commitment to Human Rights

BBVA is committed to respecting internationally recognized human rights. This commitment applies to the relationships that BBVA establishes with its customers, suppliers, employees and with the communities in which it carries out its business and activities.

BBVA has had a commitment to human rights since 2007, which has been updated in 2022, framed in the Group's General Sustainability Policy and which is aligned with its Code of Conduct. This commitment takes the United Nations Guiding Principles on Business and Human Rights as a point of reference.

In 2022, BBVA has adopted an active role in the field of future community legislative initiatives. Within the framework of its participation in the Working Groups on Sustainable Finance of the European Banking Federation (EBF), in the Association of European Financial Markets and in the European Financial Services Roundtable, BBVA contributes to the preparation of sectoral positions on various community initiatives. In this context, it is worth noting the work of dialog and support with the European regulator in relation to the proposal for a directive on due diligence of companies in terms of sustainability. In addition, BBVA is also part of the EBF's advisory group on diversity and inclusion.

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

On the other hand, the methodology for evaluating BBVA's reputational risk, which is mentioned in the “Reputational risk” section of the “Risk management” chapter, is an essential complement to this impact management.

Due diligence procedure

In 2018, BBVA carried out a first human rights due diligence process. In 2021, a new due diligence process was carried out in order to prevent, mitigate and remedy potential impacts on human rights in line with the United Nations Guiding Principles on Business and Human Rights. The main objectives of this exercise were:

• Updating and inclusion of new topics compared to the previous year.
• Assessment of the adequacy of the claim measures and mechanisms to manage these risks (according to the United Nations Guiding Principles on Business).
• Renewal of the Human Rights Action Plan to prevent and/or mitigate potential negative impacts that arose from the due diligence process carried out in 2018.
• Alignment of the process with the current Operational Risk Management Model and regulatory recommendations so that this process constitutes a continuous and dynamic process. For more information, see the “Operational Risk” section in the “Risk Management” chapter of this report.

This global due diligence process has been carried out in the global areas of BBVA and replicated in Spain, Mexico, Turkey, Argentina, Colombia, Peru, Uruguay²⁹ and Venezuela. For each country, the issues with the greatest impact and frequency were prioritized as a result of the social and governmental practices of the country and of the interviews held with the management areas and the global Risk Control Specialists and as a result, each country has prepared its own action plan.

²⁹ At the end of 2022, in the absence of completing the preparation of the action plans.

Identification, assessment and testing

Taking as a starting point the issues analyzed in the previous due diligence process of 2018, and incorporating recommendations and expectations from analysts and investors and other emerging issues, in 2021 an internal taxonomy of 28 issues grouped into 6 topics that cover, among others, aspects of forced labor, child labor, freedom of association and collective bargaining, equal pay or discrimination, has been elaborated:

• Employment condition
• Projects and products: impact on human rights derived from lending activity
• Supply chain
• Customer well-being
• Respect for communities
• Cross-cutting issues: data protection and the impact of new technologies on human rights

For each of these 28 issues, an assessment was made of:

• Inherent risk: based on the of seriousness of impact and frequency of occurrence for each issue.
• Residual risk: to assess the mitigating aspects available to BBVA to manage each issue. In this identification and evaluation phase, the potential negative impacts on stakeholders were taken into account, such as the employees themselves (with a focus on women), suppliers or subcontractors, customers, as well as 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 there is, in general, a medium-high effectiveness of the management and mitigation measures for each of the issues. However, areas for improvement were detected around four areas that have been documented in a document called the Human Rights Action Plan 2021-2022 that is available on the shareholders and investors website and that includes 25 action plans:

• Strategy. One of the areas for improvement detected was to strengthen the structure of management, monitoring and control of the risks associated with human rights. Throughout 2021 and 2022 we reinforced the alignment with the Non-Financial Risk Model by working on the gradual integration of the management of these risks in the ordinary processes. In addition, we carried out a half-yearly monitoring system of the implementation of the 2021-2022 Action Plan.
• Stakeholders. In 2021, the active participation of key stakeholders in the due diligence process was identified as an area to be enhanced. In 2022 we conducted a consultation process with key stakeholders. The results were integrated into the Human Rights Action Plan 2021-2022.
• Reporting and disclosure. In addition to GRI, BBVA discloses information on human rights in accordance with two of the most advanced standards: Measuring Stakeholder Capitalism of the International Business Council (IBC) of the World Economic Forum (WEF) and the Sustainability Accounting Standards Board (SASB).
• Processes Action plans were established in each of the 6 thematic areas:
  
  • Employment conditions. In 2022, the commitment to non-discrimination between employees was strengthened. The non-discrimination variable was included in the internal analytical model of existing data to contribute to the Group’s selection and recruitment processes. Moreover, work continued on global labor disconnection guidelines which will include express measures on digital disconnection, methods and contact times in calls, emails and other channels.
  • Projects and products. Within the scope of the BBVA Environmental and Social Framework, the possibility of initiating a dialogue and support plan with the clients covered by said Framework is foreseen. This protocol specifically includes the requirements relating to human rights.
  • Supply chain. In 2022, work has continued in order to reinforce the integration of ESG issues and specifically human rights in the supplier evaluation process.
  • Customer well-being. In 2022, the development of a vulnerable customer protection framework has continued to develop criteria and good practices to adequately protect these customers.
  • Respect for communities. Work has been done to define a global framework for sustainable mobility, which will contribute to reducing the environmental footprint in the places and local communities where the Group is present. For more information, see the chapter "Management of direct environmental impacts" of this report.
  • Cross-cutting issues. In September 2022, a general privacy and data protection policy was approved for the entire BBVA Group. Additionally, a global personal data protection monitoring tool has been launched.

Claims methods³⁰

BBVA has a whistleblowing channel that allows any interest group to report confidentially and anonymously if they wish, any behavior that is directly or indirectly linked to human rights. In the complaints received through this channel in 2022, there are no human rights violations attributable to the Group entities as of December 31, 2022. For more information, see the "Compliance and conduct" section of this report.

³⁰ 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, among others, the consequences for their human rights.

2.2.5 Suppliers

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

As a part of the procurement process, BBVA suitably manages the impacts, both real and potential, that may be generated by its activity through a series of mechanisms and rules: the General Procurement Principles, a supplier evaluation process and the Corporate Rules for the Acquisition of Goods and the Contracting of Services. These impacts may be: environmental; caused by labor practices carried out in supplier companies; a result of the absence of freedom of association; or related to human rights.

The General Procurement Principles and the BBVA Code of Ethics for Suppliers establish the fundamental guidelines that must be followed by all suppliers with which any company or entity of the Group has dealings.

• The General Procurement Principles establish, among other aspects, that it is necessary to ensure compliance with all applicable legal requirements throughout the provisioning process regarding human, labor, association and environmental rights by all parties involved in this process, as well becoming involved in the Group's efforts aimed at preventing corruption. In the same way, it ensures that the selection of suppliers remains in compliance with existing internal regulations at all times and, in particular, with the values of the Group's Code of Conduct, based on respect for legality, commitment to integrity, competition, objectivity, transparency, value creation, confidentiality, continuous improvement and segregation of duties.
• Through the implementation of the Supplier Code of Ethics in the purchasing units of all countries in which the Group is present, minimum standards of conduct in terms of ethical, social and environmental matters were established which suppliers are expected to follow when providing products and services.

BBVA understands that integrating ethical, social and environmental factors into its supply chain is part of its responsibility. The purchasing function is based on three core 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 managing costs and suppliers.

The following is the basic data on suppliers at the end of 2022 and 2021:

ESSENTIAL DATA ABOUT THIRD PARTIES (BBVA GROUP)

BBVA has technological platforms that support all phases of the Group's procurement process, from budgeting to recording and accounting for invoices. Moreover, BBVA has a supplier portal that facilitates the Group's online relationship with its suppliers. It is a collaborative environment targeted at companies and self-employed workers who work or are interested in working with the Group, allowing them to interact electronically with BBVA throughout the supply cycle.

The supplier evaluation process carried out by BBVA was completed in 2021. It considerably extended the number of aspects to be reviewed with respect to each supplier: financial, legal, labor, reputational, anti-corruption and money-laundering, technological risks, concentration and country risks and customer protection. Examination of these topics aims to mitigate potential risks in entering into contract with third parties and to verify that each supplier complies with its legal responsibilities. This in turn enables us to promote their 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 and complies with the highest standards in its industry. If it does not have its own code of conduct, the supplier must declare that it is aware of and accepts the BBVA Group's Code of Conduct, which includes the following requirements: legal compliance; human rights commitment; environmental commitment; supply chain (outsourcing); anti-corruption; prevention of money laundering and financing of terrorist activities; political contributions; conflict of interest; antitrust/fair competition; and confidentiality.

BBVA launched a supplier evaluation pilot in Spain under ESG criteria to reinforce a responsible supply chain. The model covers a broad spectrum of sustainability aspects evaluated, such as (I) compliance with environmental and social regulations, (II) management and measurement of environmental impacts, (III) human rights, (IV) control structures, (V) sustainability reporting, and (VI) ESG assessment of the supplier's own supply chain. In 2022, the technological developments tied to the evaluation process were completed. The new model will be implemented gradually in the main geographical areas where the Group has a footprint during 2023.

Supplier evaluation is reviewed periodically and is subject to continuous monitoring. As of December 31, 2022, the percentage of contract awards made to evaluated suppliers reached 98.2%.

As of December 31, 2022, 96.1% of the total number of BBVA third parties (representing 90.2% of total revenue) corresponds to local third parties. This makes it possible to contribute to the economic and social development of the countries in which the Bank is present. A local third party, in this context, is defined by the Group as one whose tax identification matches the country of the company receiving the goods or services.

BBVA in Spain also favors inclusion and diversity by engaging services through "special employment centers" (Spanish 'CEEs'). These are sheltered employment companies where the labor integration of people with disabilities is promoted. During the 2022 financial year, billing to the Bank by sheltered employment centers amounted to €1,9m (as of December 31, 2021, billing amounted to €1.7 m).

Finally, in financial year 2022 the Internal Audit area conducted evaluations of suppliers regarding the procurement processes for goods and services in different areas and the service provided by certain suppliers, generally outsourcing suppliers. These are risk-based assessments, and reviews are carried out according to a defined internal methodology. The supplier evaluation process has been audited with a favorable result and with recommendations fully implemented before December 31, 2022.

The following tables contain other information related to suppliers at the end of 2022 and 2021:

NUMBER OF THIRD PARTIES AND ANNUAL TURNOVER BY COUNTRY

AVERAGE PAYMENT PERIOD TO SUPPLIERS⁽¹⁾ (DAYS)

2.2.6 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.

2.3 Report on climate change and other environmental and social issues

2.3.1 Committed to sustainability

Decarbonization is one of the greatest challenges facing humanity. Climate change and the transition to a low-carbon economy have significant implications for the value chains of most productive sectors, since they require significant investments in many industries. As a financial institution, BBVA has an indirect impact on the environment and society through its lending activity and the projects it finances.

The investment needed to make the world go zero emissions has to be attractive, economically viable and profitable. In this sense, investment in renewables, energy efficiency or electric cars already has a profitable alternative for families and companies, compared to fossil fuels. However, most activities do not have an emission-free version that is economically viable.

BBVA aspires to gradually align its activity to a scenario of zero net emissions by 2050 and to use its role as a bank to help its clients with financing, advice and innovative solutions, in the transition towards a more sustainable future inspired by the Sustainable Development Goals. In addition to the intermediate decarbonization targets that it published in 2021 in five sectors (electricity generation, automobiles, cement, steel, and coal), in 2022 it has published decarbonization targets for the Oil and Gas sector³¹.

Likewise, customers, markets and society as a whole not only expect large companies to create value, but also expect them to contribute positively to society and that the economic development to which they contribute with their financial activity is inclusive. contributing to a just transition.

BBVA has a governance model at the highest level that has incorporated sustainability as one of its six strategic priorities, integrating it transversally into the executive sphere. BBVA has carried out an analysis of risks and opportunities associated with climate change and has a risk management model as described below. Likewise, BBVA has an additional objective to the decarbonization objectives mentioned above of channeling 300,000 million euros into sustainable business between 2018 and 2025.

³¹ For upstream financing.

2.3.2 Governance model

Corporate bodies

BBVA's corporate bodies have defined and promoted that the Group has a strategy that incorporates sustainability as one of its priorities. Sustainability was embedded in the Group's strategic plan in 2019.

For the Board of Directors, an essential element of this strategic approach is the integration of sustainability into the Group’s businesses and activities, managing the risks associated with these areas, and considering them a great business opportunity 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.

For this role, the Board is assisted by its committees on matters within their respective areas of concern. The Executive Committee plays an active role in promoting this strategy and monitoring the integration of sustainability into the Group's business processes and activities.

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.

In the exercise of these functions, in 2022 the Board approved the update of the General Sustainability Policy, which integrates the previous Corporate Social Responsibility Policy and the General Sustainability Policy. The new policy sets out the general principles and the key management and control objectives and guidelines to be followed by the Group in terms of sustainable development with a focus on climate change, natural capital and inclusive growth.

In addition to this, there is the role 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 based on the reports received by the Sustainability Area and the different areas of the Bank which incorporate sustainability into their daily businesses and activities. The reports are submitted to the corporate bodies according to their area of concern along the lines described in the preceding paragraphs, on a scheduled or ad hoc basis.

To achieve the best performance of its functions in this area, the Board of Directors believes it necessary to have suitable knowledge and experience in sustainability matters. To this end, it continues to conduct initiatives that involve the recruitment, within the process of gradual replacement its members, of directors with extensive knowledge and experience in these matters, and in the extension of the continuous training program of its members to matters related to sustainability.

Cross-cutting integration of sustainability into the executive sphere

BBVA incorporates sustainability as part of its daily activities, encompassing not only relations with customers but also internal processes. The definition and execution of the 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 fresh impetus to its strategy by elevating sustainability to the highest executive level of the organization, reporting directly to the CEO and Chair (in this case, in areas linked to strategy and transformation) by creating the Global Sustainability business area.

In a context in which all the Group employees and areas integrate sustainability into their day-to-day activity, the new global area designs the strategic sustainability agenda, defines and promotes the lines of work in this area of the different global and transformation units (including Finance, Talent and Culture, Data, Engineering, and Organization among others) and develops 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, Asset Management, Global Risk Management and Global Sustainability), 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 change risks part of risk management, and draw up a public agenda and set of sustainability standards.

The Group's sustainability governance model integrates a suitable structure of corporate bodies with a robust executive structure that reports to them. It combines the cross-cutting reach of the global sustainability area with the execution of the strategic priority in the various business areas, which allows the Board and its Committees to have the necessary information to make suitable decisions and perform their supervisory and control function.

2.3.3 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

2.3.4 Management of risks associated with climate change and environmental factors

Integrating climate change into risk planning

The risks associated with climate change (transitional and physical) are considered as an additional factor affecting the risk categories already identified and defined in the BBVA Group and are therefore managed through the Group's risk management frameworks (credit, market, liquidity, operational and other non-financial risks). As a result, the integration of climate-change related risks into the BBVA Group's risk management framework is based on their incorporation into the governance and processes currently in place, taking into account regulatory and supervisory trends.

Correct planning requires reliable, complete and up-to-date data. Accordingly, in 2022 work continued on the deployment of the sustainability data strategy, based on the Principles for effective risk data aggregation and risk BCBS 239, in which sustainability data needs have been identified, data gaps have been assessed and a conceptual model and implementation plan have been developed. All this is geared to guaranteeing a comprehensive vision of the Group's climate change risks to ensure their correct control and management. In response to both regulatory and management needs, and so on, the data considered include data related to customer climate scorings, real estate energy efficiency certificates, ESG ratings, greenhouse gas emissions, asset and collateral location and sector-specific metrics, etc.

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

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 geographic 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 under a pyramidal structure that starts from the thresholds of the core metrics and the metrics by type of risk and declines in a framework of management 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, focusing on supporting the customer in the transition toward a sustainable future, and incorporating the climate factor in risk management. This statement is complemented and detailed by a quantification of the appetite through metrics and thresholds that provide a clear and concise guide to the maximum acceptable risk profile.

A quantitative transition risk metric has been incorporated into the framework since 2021. 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 (High Transition Risk), focusing on activities classified as High or Very High risk. With respect to this metric, the Board of Directors of BBVA has approved thresholds at a Group and geographic area level, which determine the maximum appetite for this risk.

Furthermore, a new metric has been included in the 2023 management limits, called High Market Misalignment. This metric is defined as the percentage of the capital base of exposure to customers whose issuance intensity is above 30% of the market average. This metric takes a transition risk management approach by focusing on customers with a clear level of misalignment with respect to the emissions intensity trajectories established by the International Energy Agency, The Net Zero Emissions scenario for each of the sectors. The calculation scope is the loan portfolio of the automotive, power generation, steel and cement sectors.

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 firstly provides 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 geographic 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 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. Since 2022, the General Risk Management and Control Model specifically considers sustainability as an essential part of the Group's strategy.

The 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 climate assessment, mainly of a qualitative nature, which assesses BBVA's vulnerability to transition and physical risk. As in the case of the global assessment, the climate assessment process is of a participative and global nature in the GRM area. The results of the assessment are submitted to the highest executive risk committee (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 change risk assessment process runs parallel to the Group's global risk assessment, although there are two major differences. First, there are still no mature indicators to assess the different risks quantitatively and second, the time horizon of the analysis is much more extensive. 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 change risk assessment, like the other risks, is carried out from two perspectives of the global assessment:

• Identification of risk events: transition risk and physical risk are included in the identification of risk events that may have a material impact on the Group. Below is the matrix of risk events identified in 2022 that are graphically represented according to their estimated impact on the BBVA Group and their assigned probability.
  
  

  RISK MATERIALIZING IN THE SHORT TERM: TIME HORIZON 12-18 MONTHS

  
  
  

  Climate change risk is included as a material event in this inventory since 2019. The assessment in the analysis of climate change risk events classifies physical and transition risks. In the short term (12-18 months), it is considered that an accelerated transition to a low-carbon economy would entail a medium-impact risk event, although the probability currently given to this type of scenario is medium low. At a medium/long-term time horizon, the risk of physical climate change is included in the inventory of emerging risks (those that may have an impact on a longer horizon) and is assigned a medium risk.

• Risk level assessment: 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 2022, the analysis was extended to the six relevant geographical areas of the BBVA Group (Spain, Mexico, Turkey, Argentina, Peru and Colombia). The financial year incorporates risk factors, such as the carbon footprint of customers, the energy efficiency of real estate collateral and the emissions financed, to name a few. Work has also been done on the preliminary inclusion of quantitative metrics for certain risk factors, especially exposures to activities that are sensitive to transition risk (include table of indicators).

The conclusions of the assessment for 2022 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 geographic area in adopting decarbonization policies. In contrast, there has been a reduction in risk due to regulatory pressure in emerging geographies. The factor that has the greatest impact in the long term on credit risk is that derived from the investments in technological change that companies will have to carry out in order to decarbonise. 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 over longer-term horizons. Also noteworthy is the increase in medium-term insurance risk associated with the increase in reinsurance premiums, which may have an impact in the medium term, although the level of risk remains at a medium-low level.

The impact of transition risk on liquidity risk is low 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.

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

RISK ASSESSMENT CLIMATE CHANGE 2022

Within the scope of preparing and defining its industry frameworks governing the credit admission process, BBVA 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 customer 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.

Therefore, 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 and coal mining); emission-intensive basic industries (steel, cement); and activities that are final users of energy and generators of emissions through their products or services (vehicles manufacturers, air and sea transportation).

As a result of this exercise, with data as at December 31, 2021, 12.95% of the exposure (measured by EAD) of the wholesale portfolio (equivalent to 6.69% 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 €209,759m (of the Group’s total EAD of €406,097m), 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, 2022 are as follows:

Prepared by BBVA. Includes the percentage of exposure at default of activities internally defined as "transition risk sensitive" over the EAD of the wholesale portfolio as of December 31, 2021 (not including the 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, waste treatment and coal mining), basic industries with emission-intensive processes (steel and cement), final activities users of the energy through their products or services (vehicles manufacturers, air and sea transportation) and mining, with a high or very high level of sensitivity to this risk.

During 2022, this calculation was introduced for the small business sector (SMEs and the self-employed). The results obtained 2022 indicate that the EAD associated with high or very high transition risk in this portfolio is limited, at around 3%, and focused in mainly in Spain and in the automotive (components) sector.

In addition, climate change 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).

Analysis of scenarios and stress testing

Scenarios and internal stress tests

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

• The climate reflection is presented together with the preparation of the budget baseline scenario. It reviews the climate policies in place in each relevant geographic area, their effective relevance within the overall economic policy framework, their consistency with the transition to a decarbonized economy and whether there may be any bias on the economic growth of the budget baseline scenario due to its potential development.
• 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 assessment process (ICAAP).

In 2022 different physical risk events in Spain were assessed in order to consider them as input in the ICAAP. Among the events taken into account, drought is considered relevant for the design of physical climate change risk scenarios due to its presence in recent history, its persistence over time and its impact on the economy.

Regulatory and supervisory scenarios and stress tests

In October 2021, the ECB published the methodology for the stress tests on climate change risk scheduled for 2022 in the months March to July. 104 entities participated fully or partially in this exercise, and of these, 41 entities, including BBVA, participated in the whole exercise. The exercise was based on three different modules, with the following contents:

• Module 1: qualitative questionnaire about the internal framework of climate stress testing including 11 blocks with topics related to governance, RAF, integration with the strategy, ICAAP and future plans
• Module 2: analysis of the current portfolio of entities with respect to revenue dependence on polluting³² sectors as well as emissions financed in such sectors
• Module 3: Bottom-up stress testing and loss projections with different types of risks and horizons considered:
  • Transition risks:
    • Short-term (3-year projection) including both credit risk and market risk, based on the Network for Greening the Financial System Disorderly scenario (NGFS)
    • Long term (2030-2040-2050), including only credit risk and considering dynamic balance sheet projections based on both the macro situation and the Entity's strategy covering three NGFS scenarios (Hot House, Orderly and Disorderly)
  • Physical risk (credit risk): two one-year projections each, considering a flood scenario and a drought and heat wave scenario
  • The exercise covered operational risk and reputational risk by means of qualitative questionnaires

In order to comply with the methodology required by the ECB in this exercise, a sectoral layer has been incorporated into the loss projection models. These models, together with the sectoral scenarios published by the ECB, have made it possible to make projections reflecting the idiosyncrasies of each sector. In this way, the possible differences in sensitivities to climate change risk in each of them are adequately reflected through differentiated impacts.

³² The exercise focused on a list of 22 NACE sectors published by the ECB.

Identification, measurement and integration of climate change risk into risk management

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

It is therefore necessary to identify this risk type for subsequent integration into the existing management processes, including the adaptation of policies, procedures, tools, parameterization, risk limits and risk controls in a consistent manner. Currently, BBVA is developing the methodologies and tools it needs to identify and measure the different components of climate change risk, and the financial impact analysis of each of them for their subsequent integration into the management. These tools are based on the metrics of financed emissions, alignment with decarbonization pathways, analysis of the vulnerability and exposure to climate hazards of our customers and their collaterals, and the analysis of climate scenarios that allow for a prospective view of risks, opportunities and their financial impacts.

The adaptation of policies and procedures initially focused on the integration of transition risk in the Sectoral Frameworks (a basic tool in the definition of risk appetite in wholesale loan portfolios) where climate criteria are specified in the admission guidelines and in the mortgage and vehicle action frameworks in retail credit. In 2022, sectoral analyses of the risks derived from decarbonization were developed according to the baseline scenarios. This work made it possible to define strategies and business plans aimed at meeting the alignment objectives established in the medium term, as well as mitigating the risks related to decarbonization on the balance sheet.

Sector plans

The Group is working on drawing up strategic sector plans for all sectors for which a portfolio alignment and/or exit objective has been defined. The content of these plans includes an analysis of the risks and opportunities of the sector, the long-term vision of the role of the sector in the decarbonization of the economy and the strategic responses of the actors of the entire sector.

In addition, the plans include an analysis of the current state of the portfolio and the positioning with respect to the Group's objective for the sector, as well as the identification of drivers to manage the risk of portfolio transition, including the portfolio alignment metric. . All this is reflected in the formulation of a business plan, which includes the identification of opportunities with existing and potential clients, and a tiered approach to define the appetite towards clients in the sector. These business plans allow the definition of projected decarbonization curves for each sector to monitor progress in the alignment exercise.

During 2022, a series of multidisciplinary working groups have been launched, made up of teams from GRM, CIB, Sustainability and Strategy, called Climate and Environmental Sectoral Panels. These groups have developed Sector Strategic Plans in the oil & gas and electricity (which includes electricity generation) sectors. This work has made it possible to define strategies and business plans aimed at meeting the alignment objectives established in the medium term as well as mitigating the risks related to decarbonization in the balance.

Loan portfolio alignment with Paris Agreement

The Net Zero 2050 commitment (zero net emissions in 2050) also includes emissions from customers who receive financing from the Bank. For this reason, in order to accompany its clients in the transition towards a more sustainable future, with specific plans and objectives, BBVA undertook to publish alignment objectives for the sectors defined in the Guide to set the Net Zero Banking Alliance objectives.

BBVA's commitment to alignment involves establishing a framework comprising objectives and commitments for the different sectors considered to be the greatest emitters. These objectives, as defined in the aforementioned Guide, must be set at the sectoral level. In this sense, BBVA announced its objective of phase-out of activities related to coal, ceasing to finance companies involved in these activities before 2030 in developed countries and before 2040 in the rest of the countries in which BBVA is present. (under the terms of the Environmental and Social Framework).

Under the PACTA³³ methodology, BBVA published intermediate decarbonization targets for 2030 for the electricity generation, automobile, steel and cement sectors, which, together with coal, account for 60% of global CO₂ emissions. The Net Zero scenario of the International Energy Agency (IEA) has been used as a benchmark.

In 2022, BBVA published its alignment target for the Oil & Gas sector. BBVA is participating in the definition within the NZBA of a specific guideline for this sector. However, given its relevance in global emissions, it was decided to publish a metric that would include the largest amount of emissions given the information available. The PCAF methodology has been used for the calculation and a scope 1, 2 and 3 absolute emission reduction target has been established for oil exploration and production.

The following table details the metrics chosen, the scope of emissions considered, the metric of the current situation, the methodology used and the decarbonization target for 2030 for the sectors in which decarbonization targets have been defined.

It is important to emphasize that the baseline of these metrics may change, since the sources of information used and the methodology are constantly changing. BBVA's commitment is to maintain the level of ambition for reduction despite the fact that the baselines may change.

In this sense, the baseline of the electricity generation, steel and cement sectors has been modified and the objectives have been adjusted maintaining the level of ambition. These changes have been due to improvements in the calculation methodology and in the databases used. The primary provider of emissions intensity information is Asset Resolution, which provides asset information for the portfolio included in the calculation perimeter. The coverage percentage is between 95% and 100% depending on the sector under analysis.

In order to follow up on these objectives and supervise their compliance, the Bank has tested a governance framework that includes the creation of a Sustainability Alignment Steering Group (SASG) made up of the heads of the Business, Risk, Sustainability and Strategy areas, with the following functions:

• Approval of the sectoral alignment objectives and intermediate objectives, as well as the methodologies used in their calculation.
• Evaluation of the fulfillment of these objectives and the promotion of initiatives to facilitate their management.
• Analysis and understanding of the best practices in the sector, promoting the integration of sustainable criteria in day-to- day business.

After having passed through the SASG, the monitoring of compliance with the objectives, including the explanation of possible deviations and measures to redirect them (if applicable), will be submitted for review to the highest executive level and subsequently to the corporate bodies, at least twice a year.

To facilitate effective management and compliance with the alignment objectives, BBVA has developed a series of internal tools that allow it to integrate the management of these objectives into the day-to-day risk and business processes. These tools include:

• Alignment dashboard with PACTA methodology.
• TRi (Transition Risk Indicator), a tool for assessing each customer's current emissions profile and decarbonization strategies.
• Sustainability Client Toolkit, which compiles ESG information from large corporations and/or entities with public information that is required at management level in a single repository for use from the front end.

During 2022, a series of multidisciplinary working groups, consisting of teams from GRM, CI&B, Sustainability and Strategy, were launched, under the name Climate and Environmental Sectoral Panels. These groups have developed Sector Strategic Plans in the Oil & Gas and Utilities sectors (including power generation). This work made it possible to define strategies and business plans aimed at meeting the alignment objectives established in the medium term, as well as mitigating the risks related to decarbonization on the balance sheet.

This work is a fundamental part of portfolio alignment management and input for the definition of the risk appetite included in the Sector Frameworks. In 2023, plans will be implemented for the rest of the sectors for which an alignment objective has been defined.

³³ Partnership for Carbon Accounting Financials (PCAF):This initiative was born in 2019 and its objective is to establish an international methodology to measure and disclose greenhouse gas emissions financed by banks and investors.

Calculation of financed emissions

BBVA is working on the measurement of emissions financed in retail and wholesale portfolios. To carry out this measurement, BBVA has adopted the PCAF (Partnership for Carbon Accounting Financials) methodology. This calculation will cover all the portfolios and geographic areas to obtain a global vision of the emissions financed, identify in what portfolios and sectors these emissions are concentrated and then define mitigation plans for them, and a cross-cutting view of the quality of the data available to make these calculations.

In the defined roadmap, the calculation at the end of December 2022 includes the measurement of the issues financed for the perimeter of loans to companies, project financing, commercial real estate, mortgages and autos) within the scope of BBVA, S.A. For the perimeter described, a calculation of 34.5 million tons of CO₂e has been obtained. In parallel, the Group is working on the inclusion of the rest of the portfolios and geographical areas during 2023.

As a result of the estimation of the issuances of the financing limited to BBVA, S.A., 72% of the financed issuances are obtained in corporate loans, concentrated in 3 sectors that represent 43% of the risk arranged subject to PCAF: Manufacturing, Electricity generation, gas, steam and air conditioning and Mining and quarrying with an economic intensity of financed emissions of 0.7, 0.6 and 2.2 million tons of CO₂e/M€ respectively.

The sectors with the highest weight in the financed emissions for the BBVA, S.A. perimeter are detailed below:

FINANCED EMISSIONS (BBVA BUSINESS IN SPAIN. 2022)

PCAF offers various levels of quality scores when calculating financed emissions. The criterion takes into account the availability and reliability of the data used in the calculation by the entities and is measured based on a scale from 1 to 5. This means, that the score is situated at a higher level if the quality of the data is lower (estimates by sector or trends by industry, for example), tending to 5. On the contrary, the best score is obtained when the calculation of financed emissions is based on data on emissions reported and verified at the individual counterparty level (score 1).

Measurement and integration of transition risk

In 2022, sustainability factors continued to be included as one of the analysis axis in the Action Frameworks of all the sectors included in the taxonomy as High transition risk. In these Action Frameworks, the risks and opportunities of the climate transition are incorporated as an additional factor in the definition of the risk portfolio view, which is carried out annually and where the risk appetite is defined at sector level.

In sectors classified as High transition risk, transition risk assessment criteria have begun to be defined at customer level based on their alignment with the objectives of the Paris Agreement or the ambition and credibility of their transition plans. In some cases, this analysis leads to the definition of specific risk policies with the customer or to the definition of credit risk mitigants.

In addition to the integration into the sectoral frameworks, in 2022, sustainability factors also continued to be systematically integrated into the customer analysis processes for credit origination, enabling their incorporation into decision making.

This analysis is performed in an environment integrated in BBVA's systems, called ESG Client Toolkit, which presents a common interface for the Risk and Business teams where the customers' sustainability information is viewed. This interface provides insight into climate transition strategies, governance and climate change risk and opportunity management practices, decarbonization metrics and targets, as well as progress in the management of other ESG aspects material to the customer's sector of activity, its compliance with BBVA's Environmental and Social Framework, existence of social, environmental and ethical controversies and its level of alignment with the objectives of the Paris Agreement and level of emissions financed. This environment integrates the calculation of the transition risk scorecard, known as the Transition Risk indicator.

Moreover, for those sectors classified as high transition risk, an advanced transition risk scorecard has been developed to incorporate transition risk dimensions in the customer's profile. The scorecard evaluates the company's current low-carbon profile; the levels of regulatory pressure in the geographic areas where it is present; its level of disclosure on climate management in line with TCFD recommendations; and the ambition and maturity of its decarbonization objectives. The result of the scorecard is a valuable tool to better identify the strengths and weaknesses of customers and to define concrete products to help them in the transition to low-carbon business models.

In 2022, versions of the transition scorecard were developed for the steel and cement sectors to join those previously defined for Automotive, Power Generation and Oil & Gas. The number of customers for whom the transition scorecard is available has been significantly expanded and work has begun on integrating it into standard risk management processes. The following image shows the results of the transition scorecard of the main customers in BBVA's Automotive, Oil & Gas, Power Generation, Steel and Cement manufacturing portfolio (the size of the circles represents the number of customers in each category):

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. Therefore, the calculation of financed emissions serves as a lever to identify the portfolios that are 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, during 2022 we worked on the correct collection of consumption and emissions data associated with mortgage guarantees, both from real and estimated Energy Efficiency Certificates (EEC), and in Spain we are promoting the standardized and homogeneous collection of these estimates and real EEC data at sector level. Based on the definition made in 2021 of sustainability criteria to classify when a collateral asset is considered sustainable, BBVA has applied differentiated pricing to loans with sustainability content, such as in the Efficient Home Mortgage, for homes with consumption letter A or B.

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 with mortgages, financing with sustainable products is encouraged when the sustainability criteria are met, in this case, for electric or plug-in hybrid cars.

Lastly, as mentioned in previous sections, the BBVA Group is committed to sustainable development, which is one of the defining elements of 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, avoiding unfair bias in access to financial products for reasons such as gender, color, ethnic origin, disability, religion, sexual orientation or political opinion.

Additionally, the General Risk Management Model Policy establishes that in order to avoid unfair bias in access to financial products based on gender, color, ethnic origin, disability, religion, sexual orientation or political opinion, none of these variables will be included in the admission and pricing models.

Classification and measurement of physical risk

Physical risk is associated with the location of assets and vulnerability based on their activity and can materialize in credit risk through different transmission channels, having an impact in multiple ways such as, for example, on the purchasing power of customers, business productivity, market demand or the value of assets. In 2022, BBVA learnt a great deal in this field and its level of maturity and knowledge of the different methodologies for the assessment of physical risk has advanced considerably. However, these advances represent a first approximation due to the complexity of carrying out an assessment of the exposure and impacts of physical risks.

BBVA has continued to make progress in assessing the materiality of chronic and acute risks in the different portfolios. The analysis of physical risk is articulated around three pillars: threat, exposure and vulnerability.

Regarding the threat, the methodology of the Think Hazard tool of the World Bank has been followed. This tool indicates the risk levels of the different natural hazards, both acute (cyclone, heat waves, fire and river flooding) and chronic (drought and coastal flooding) at a global level and in different detail depending on the geographical area of the planet. These risk levels are calculated based on the frequency of occurrence and intensity of the different natural hazards. It is important to note that the information used is provided by a number of private, academic and public organizations. In addition, work has been done to increase the granularity of the risk levels offered by Think Hazard, using scientific and technical criteria, for the most relevant hazards in BBVA's geographical areas, specifically, tropical cyclones, coastal and river flooding, and forest fire.

For the vulnerability component, during 2022 the sectoral granularity of the analysis for Wholesale Banking and SMEs has been increased. This analysis is carried out based on 8 indicators that capture direct and indirect physical impacts, so that the sensitivity of each sector to climate hazards is indirectly assessed by analyzing its sensitivity to these vulnerability indicators. This methodology follows the best practices identified by the Taskforce on Climate-related Financial Disclosure (TCFD) and UNEP-FI. As a result, a qualitative classification of the (sub)sectors is generated according to the potential impact on their business model and activity of chronic or acute changes in the climate.

Threat and vulnerability scores are applied at the contract level based on the location to identify prone exposure to physical risk. As a result, the sectors identified as most vulnerable to physical risks have been power generation, basic materials, construction, consumption, and real estate.

EXPOSURE TO PHYSICAL RISK AS OF DECEMBER 31, 2022 (PERCENTAGE)⁽¹⁾

⁽¹⁾ The breakdown includes the portfolios of Spain, Mexico, Turkey, Peru, Colombia and Argentina.

The advances achieved during 2022 have allowed a first approximation, based on international tools and methodologies, of the exposure prone to chronic and acute risks. The implementation of an action plan has also begun, the objective of which is to have the analytical capabilities and data necessary to integrate physical risks into risk policies and processes.

As of 2023, work will be done to have precise and standardized information on the locations of the guarantees and assets of our clients from all portfolios, to analyze the exposure of the wholesale and retail portfolios to the different chronic and acute hazards based on climate scenarios. and in calculating the financial impacts of perils at the customer and asset level.

Identification and measurement of other environmental risks

Following international reference frameworks such as the SASB Materiality Map and rating agencies, BBVA has identified the sub-sectors of activity it finances and the most relevant environmental and social factors of each one, including aspects such as pollution and waste, biodiversity and land use or water resource management. This exercise is included in the "Sector Guide for the integration of sustainability factors in credit analysis", which defines the most common metrics and reference thresholds in relation to environmental aspects and is used as a support tool in the admission process.

In the case of natural capital, BBVA has identified the levels of impact and dependencies by sector following the methodology of the ENCORE (Exploring Natural Capital Opportunities, Risks and Exposure) tool developed by the Natural Capital Finance Alliance in collaboration with UNEP-WCMC. This tool provides information on how the activity of the sub-sectors that BBVA finances depends on nature and provides environmental information by sector.

NATURAL CAPITAL DEPENDENCY - HEAT MAPPING OF PORTFOLIOS

The activities with the most significant dependencies on natural capital are agoindustry, oil & gas, forestry and paper products, food, beverages and tobacco, and mining. While water, flood and storm protection and climate regulation are the most important ecosystem services on which our loan portfolio depends, confirming our current environmental priorities.

Given the importance to BBVA's loan portfolio and the dependence on water resources in the Power Generation sector, the Group has built a framework for conducting detailed water stress risk assessments at the customer level. This assessment was carried out using the locations of its customer's power generation plants, the Aqueduct Water Risk Atlas tool of the World Resources Institute (WRI), which identifies water risk at asset locations, and the ENCORE (Exploring Natural Capital Opportunities, Risks and Exposure) tool developed by the Natural Capital Finance Alliance, which details water impacts and dependencies.

The results of the assessment are a water stress risk scorecard of the customer and of the assets. The results of this assessment lead to the conclusion that water is a key parameter when assessing the credit risk of customers, considering that their activity may be negatively affected by the physical effects of climate change in the coming years.

2.3.5 Metrics and goals: Channeling sustainable business

BBVA³⁴ has once again increased its 2025 Goal, tripling its initial target for channeling sustainable business by setting it at €300 billion for the period 2018 - 2025. Between 2018 and 2022, BBVA mobilized a total of €135,871 million in sustainable business, distributed as follows: