Environmental, Social and Governance Risk (ESG)
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 sector3.
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.
Under Law 7/2021, of May 20, on climate change and energy transition (hereafter Law 7/2021), BBVA has submitted a report (hereafter, Climate Change Report), which includes, among others, the following matters: the organization's governance structure, the strategic focus, both in terms of adaptation and mitigation of the entity to manage the financial risks associated with climate change, the real and potential impacts of the risks and opportunities associated with climate change, the processes of identification, evaluation, control and management of the risks related to the climate and the metrics, scenarios and objectives used to evaluate and manage the relevant risks and opportunities associated with climate change.
In this context, BBVA includes the Climate Change Report in section 8 of this Report, in addition to the Group's Management Report, which accompanies the Consolidated Financial Statements for the 2022 financial year, as required by article 32 of Law 7/2021. In addition to this report, BBVA includes in chapter 8, the ESG information required by the EBA.
3 For upstream financing.