CLIMATE FINANCE REPORT. Funding the shift towards a low-carbon economy

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1 2016 CLIMATE FINANCE REPORT Funding the shift towards a low-carbon economy

2 Funding the shift towards a low-carbon economy Funding the shift towards a low-carbon economy The shift towards a low-carbon economy is a great business opportunity for the Bank, one that comes mainly in the form of funding for renewable energies and energy efficiency projects. Banco Santander's focus on these businesses heightens its commitment to the environment and the fight against climate change. The shift towards a low-carbon economy will also pose challenges for the economy and the financial sector. Climate change and the shift towards a low-carbon economy The role of the banking sector: risks and opportunities The participation of Banco Santander Renewable energies Banco Santander funds various renewable energy projects that help reduce the impact of Climate Change. Energy efficiency Funding the shift towards a low-carbon economy Climate initiatives and projects Banco Santander promotes energy efficiency in its funding to customers. Projects which concern the mobility and management of natural resources for the adaptation and mitigation of climate change, including management of the Bank's own operations CLIMATE FINANCE REPORT

3 Funding the shift towards a low-carbon economy Introduction» Climate change and the shift towards a low-carbon economy According to the Intergovernmental Panel on Climate Change (IPCC), the Earth s temperature has gradually risen over the last few decades, and now stands approximately 1.2ºC higher than it was in the pre-industrial age. This increase in temperatures has taken place at the same time as the concentration of CO 2 in the atmosphere has risen. The scientific community has warned there is a clear link between global warming and human activities, in particular the use of fossil fuels. According to the IPCC, 2ºC is the upper ceiling above which damages caused to the environment become disruptive and irreversible. If the current trend continues, the concentration of greenhouse gases in the atmosphere will cause an increase in temperatures of between 4-6ºC by Climate change does not only affect temperatures; it will also have an impact on other phenomena, such as: more frequent extreme weather phenomena, changes in rainfall patterns and in soil properties, rise in ocean levels, extinction of animal and vegetable species, higher rates of respiratory, cardiovascular or infectious diseases and food shortages. This will all have economic consequences which are difficult to predict. It is therefore imperative to take measures immediately both to adapt to and also to mitigate climate change, bringing all countries, economic sectors and populations on board in an attempt to invert this growing trend, so that global warming can be maintained within acceptable levels. Against this background, natural resources management plays a key role; forestation and reforestation are crucial ways of bringing down global warming, as forests are the most important CO 2 sink across the globe. The Paris Agreement, which came into force in November 2016, is a very important step forward in terms of international collaboration against Climate Change. The heating of the climate system is an unmistakable fact. Many of the changes which have been observed since the 1950s had not been seen in previous decades, or even in the previous millennia. The atmosphere and oceans have heated up, snow and ice volumes have fallen, the sea level has risen and greenhouse gases have increased IPCC Fifth Assessment Report Climate Change 2013 Physical Bases 2016 CLIMATE FINANCE REPORT 3

4 Funding the shift towards a low-carbon economy Specific measures to adapt to new environmental conditions and to the regulatory demands of each economic activity. Deployment of public health programmes relating to air quality. Protection of coastal areas at risk of flooding. Planning for emergencies and natural disasters. Measures aimed at protecting biodiversity and natural resources. Adaptation Mitigation Use of renewable energies. Promoting the creation of carbon sinks. Development of low carbon technologies in productive processes. Changing lifestyles and in business practices aimed at bringing down the carbon footprint. Increasing energy efficiency. UNFCCC COP 21 Paris Agreement 195 participant countries 98.8 % of global emissions 162 NDCs already delivered Goal: to keep temperature increases below 2ºC, with the target of limiting warming to 1.5ºC above pre-industrial levels. Canada 30% below 2005 levels by 2030 EU 40% below 1990 levels by 2030 Russia Limiting emissions to 70-75% as against 1990 levels by 2030, subject to maximum forest absorption capacity Nationally Determined Contributions (NDC): they indicate a country's commitments and its plan for adopting a lowcarbon economic model. Countries began to deliver their NDCs in Came into force on 4 November USA % below 2005 levels by 2025 Mexico 25% below 2013 levels by 2030 Chile Bringing down emissions by 35-45% against 2007 by 2030 Brazil 37% below 2005 levels by 2025, and 43% below 2005 levels by Argentina Reducing emissions by 15% compared with current forecasts by 2030 China Bring down emissions by 60-65% against 2005 levels by 2030 India Bring down emissions by 30-35% against 2005 levels by 2030 Source: WRI CAIT Climate Data Explorer & C2ES; Climate change & finance risks, opportunities, disclosure; UN Environment Finance Initiative CLIMATE FINANCE REPORT

5 Funding the shift towards a low-carbon economy Paris Agreement, The purpose of this Agreement is to elevate financial currents to a level compatible with a trend towards climate-resilient development and low greenhouse gas emissions. Changes associated with the shift towards a low-carbon economy also offer significant opportunities for organisations focused on mitigating climate change Michael Bloomberg, Task Force on Climate-Related Financial Disclosures» The role of the banking sector: risks and opportunities The objectives set out in the Paris Agreement are a response from many parties, both public and private ones. Changes arising from climate change commitments will have a particularly strong impact in certain sectors, which, given the integrated and global nature of the current economic system, will be felt across the entire value chain. Although certain risks are apparent in adapting the entire value chain to the new circumstances, it is also an opportunity for differentiation and for creating a competitive advantage. It is crucial to adapt to the new requirements of society and regulators to be able to shift towards a low-carbon economy. The Task Force on Climate-related Financial Disclosures (TCFD) of the Financial Stability Board has recently published a set of recommendations on corporate governance, strategy, risk management, measurement and objectives to deal with climate change. These recommendations will be a significant step forward in financial entities reporting on risks and opportunities associated with the global challenge of climate change. The banking sector will play a key role in this shift, as there will be major investment opportunities in order to bring the system and global economic activities in line with the new challenges posed by climate change. In order to deliver on the promises to mitigate climate change of the Paris meeting, there must be dialogue between governments so that they can promote the policies which are needed for the shift Christine Lagarde, Managing Director of the International Monetary Fund Risks and opportunities associated with the shift towards a low-carbon economy Vulnerability of investments and funding, particularly in certain sectors where there is strong environmental regulatory pressure. Increase in funding for renewable energy and energy efficiency projects in line with the objectives of the COP21. Physical risk of natural disasters in properties or infrastructure Alignment of existing installations to the physical risks of natural disasters. Reputational risks, risks of transparency and compliance in ESG (Environmental, Social, Governance) matters. Assessment in transactions on emissions market (carbon trading). Risk of deterioration in value of assets due to changes in their relative profitability caused by technological disruptions. Relatively higher profitability of investments in renewable energies thanks to disruptive technological innovations CLIMATE FINANCE REPORT 5

6 Funding the shift towards a low-carbon economy» The participation of Banco Santander Banco Santander is taking bold strides in contributing to a low-carbon economy. The Bank has policies which heighten its commitment to develop environmentally friendly products and services, thus making progress in adapting to and mitigating climate change. The Bank reviews these policies every year. The Bank s soft commodities and energy policies set out the criteria to be applied to funding activity for energy and soft commodities sectors (the latter comprise products such as palm oil, soy, timber and livestock) so as to ensure that these resources are exploited in a sustainable way and to avoid deforestation. In 2016, Banco Santander set up the Climate Finance Task Force to improve its analysis of business opportunities and prevention of risks associated with climate change. This Task Force takes over from the former Climate Change committee, and is responsible for defining the Bank's strategy in this area. It is a multidisciplinary working group in which different areas of the Bank are represented. This working group forms part of the Bank's Sustainability governance; in 2016, it submitted its activities to governance bodies and will also do so in The Climate Finance Task Force will take into account the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) of the Financial Stability Board when determining its strategy. The Bank's environmental responsibility includes both reducing its carbon footprint and also making sure that environmental criteria are included in its financial transactions. The Bank has developed measurement systems to quantify to what degree these transactions help to bring down CO 2 emissions. Lastly, the Bank is developing a structured approach for its climate change strategy, to ensure the transversal involvement of business lines and other key internal functions such as risk management; this will assure that customers continue to perceive the values which set the bank apart from its competitors, and will also step up the Bank's involvement in environmental conservation. Santander is also one of the eleven banks which recently joined the United Nations Environmental Protection Financial Initiative, which is designed to enhance transparency and the disclosure of risks and opportunities due to climate change. Climate change has profound implications for financial and economic stability Mark Carney, Governor of the Bank of England and Chairman of the G20 s Financial Stability Board. The private sector is the best ally of anyone who wants to make sure that the promises of the Paris Agreement are followed through, and it is essential to mobilise to align its core business with the strategic objectives of the international community. António Guterres, Secretary General of the United Nations. Making money and how it is made are equally important Ana Botín Group Executive Chairman of Banco Santander The Bank collaborates with other organisations to make headway in managing a question as complex as climate change. Banco Santander has signed and plays an active role in many different climate change initiatives, such as, for example, the Banking Environment Initiative (BEI), whose mission is to direct global funding flows towards economically and socially sustainable development so as to help save the environment. The Bank is also a member of one of the EIB s initiatives, the Soft Commodities Compact, which is aimed at halting deforestation and so helping in the struggle against climate change. The Bank is also one of the 23 signatories of the European Financial Services Round Table (EFR), which is a group of the most important European insurance companies and banks, a initiative which is aimed at providing a resolute and ambitious response to climate change. International initiatives to which Banco Santander is party* Sustainability Management at Banco Santander Sustainability indices and ratings* CLIMATE FINANCE REPORT

7 What contribution does Climate Finance make... What contribution does Climate Finance make......to the Bank s strategic priorities? Stakeholder Strategic priority Contribution of Climate Finance Shareholders Capital strength and risk management. Improved profitability. New business opportunities in funding markets with high growth potential Business diversification Differentiation and enhanced corporate image Customers To win the trust and loyalty of our individual and corporate customers: to improve our franchise. Customer engagement through products and services for Climate Finance assessment Broader portfolio of products and services Strategic priorities of Sustainability Environment Ensure our business helps protect the environment Promote the shift towards a low-carbon economy..to Sustainable Development Goals? Main SDG on which Climate Finance has an impact: AFFORDABLE AND CLEAN ENERGY Finances creation and development of green energy projects. PEACE, JUSTICE AND STRONG INSTITUTIONS PARTNERSHIPS FOR THE GOALS NO POVERTY ZERO HUNGER RESPONSIBLE CONSUMPTION AND PRODUCTION Fosters and promotes responsible use of resources. LIFE ON LAND GOOD HEALTH AND WELL-BEING INDUSTRY, INNOVATION AND INFRASTRUCTURE Invests in shifting the energy industry towards a low-carbon economy. LIFE BELOW WATER CLIMATE ACTION 17 sustainable development goals QUALITY EDUCATION GENDER EQUALITY CLIMATE ACTION Is involved in mitigating climate change, helping in the shift towards a low carbon economy. RESPONSIBLE CONSUMPTION AND PRODUCTION CLEAN WATER AND SANITATION SUSTAINABLE CITIES AND COMMUNITIES Funds sustainable energy solutions for people and companies. SUSTAINABLE CITIES AND COMMUNITIES REDUCED INEQUALITIES INDUSTRY, INNOVATION AND INFRASTRUCTURE DECENT WORK AND ECONOMIC GROWTH AFFORDABLE AND CLEAN ENERGY REDUCED INEQUALITIES Collaborates with a number of social entities to achieve sustainable development CLIMATE FINANCE REPORT 7

8 Renewable Energies Banco Santander, within the scope of its climate change strategy, develops and offers financial products and services with added environmental value, through which it helps in the shift towards a low-carbon economy. These products may be divided into three main fields: funding of renewable energy projects, management of financing facilities in energy efficiency in collaboration with multilateral entities and other products and initiatives with added social or environmental value aimed mainly at individuals and SMEs. Renewable Energies An orderly transition towards a low-carbon economy means taking measures aimed at mitigating climate change across all sectors, particularly in those which have the most direct impact on global warming, such as the energy, transport, commodities and food sectors. The banking sector also plays an important role in this shift, due to its key role as funder of energy production infrastructure. As investment needed to carry out energy production infrastructure must be on such a large scale, these types of projects are usually funded through Project Finance, which is a funding mechanism sustained by a project's ability to create cash flow. There are other types of funding models, such as seed capital, issuance of bonds and bridge equity for these types of projects. According to the 2017 Global Investment Trends in Renewable Energy report of the United Nations Programme for the Environment, total global investment of 242 billion dollars was spent on renewable energies in 2016, creating GW of additional capacity, 9% more than in This means that renewable energies accounted for 11.3% of global electricity over the last year, preventing 1.7 gigatons of CO 2 from being emitted. According to this report, China was once again the leading country in investment on renewable energies (78.3 billion dollars) in 2016, followed by Europe (59.8 billion dollars) and the United States (46.4 billion dollars). In fact, renewable energies accounted for 86% of new energy installations in the European Union in 2016; they meet the growing demand for environmentally friendly energies and are aligned with the EU s commitment of reaching a level of 20% consumption of energy from renewable sources by Banco Santander has helped to bring about this increase in installations, by taking part in the funding of renewable energy projects of over 7,000 MW, thus halting the emission of 73 million tons of CO 21, equal to the electricity used by 9 million households over 1 year Emissions which the MW financed in 2016 will prevent over the course of the projects useful lifespans. 2.Equivalence calculated based on the installed power of renewable energies projects in which the Bank took part in 2016 (7,082 MW). Using the average electricity usage data in households of countries in which renewable energies projects have been funded published by the World Energy Council (2014). Employed capacity factors for the different energy types are: 35 % wind 45 % wind offshore 20 % photovoltaic solar 38 % solar thermal 80 % biomass Project Finance: funding mechanism for large-scale projects sustained by the project's capacity to create cash flows based on a structure of fixed contractors with customers, suppliers, market watchdogs, etc., so the loan can be repaid. Seed capital: early investment to support a project from the time it is created through shares, until the project is able to create its own cash flows. Bridge equity: credit granted as temporary funding with the purpose of providing immediate financing. Greenfield: project carried out from scratch or which completely modifies an existing one. Breakdown of MW of renewable energy funded through Project Finance by Banco Santander 7,362 7,082 5, CLIMATE FINANCE REPORT

9 Renewable Energies Breakdown of MW of renewable energies greenfields funded through Project Finance by sector % Wind % % % Biomass % Solar Thermal 6.40 % % 4.50 % Hydroelectric 7.20 % 9.30 % - MW of renewable energy greenfields funded by region UK 26 % Mainland Europe 6 % Latin America and the United States 68 % Most of the investment in energy production installations using renewable energies are in countries in which the Bank has a significant presence. Elecnor renewable project bond In December 2016, Banco Santander spearheaded the first private placement in Spain of a project bond in the renewable energies sector. Grupo Elecnor, through its subsidiary Celeo Concesiones, one of the biggest managers of renewable assets in Spain and worldwide, has entrusted the Bank with refinancing the current debt on its most important photovoltaic asset, Siberia Solar (10 MW, fixed structure in Badajoz), and the leverage of a portfolio of roof photovoltaic assets of up to 6MW, making a total of 16MW which are able to provide electricity to a population of 7,650 inhabitants or 2,550 families, similar to towns such as Trujillo in Extremadura, Briviesca in Burgos or Almodóvar del Río in Córdoba. This deal is an unprecedented development on the fixed income market as it is the only issue in Spain without a public financial rating CLIMATE FINANCE REPORT 9

10 Energy efficiency Energy efficiency Climate change mitigation is not just a question of using cleaner energies; it is also vital to bring down energy consumption and to set up energy efficiency measures. According to the International Energy Agency, in 2015 energy intensity improved by threefold compared to the average for the last decade. In fact, according to European Union calculations, actions taken to improve buildings energy efficiency might reduce the consumption of total energy in member countries by 5-6%, which would imply 5% lower emissions of CO 2. Energy efficiency measures are therefore a crucial part of achieving the Paris Agreement targets. In Banco Santander, most investments in energy efficiency are channelled through multilateral entities such as the European Investment Bank (EIB) or the European Bank for Reconstruction and Development (EBRD). These entities are adapting their agendas to gradually step up their investments in this field, creating an important business opportunity for Banco Santander. In 2016 new credit facilities were arranged with the EIB for a total amount of 275 million for energy efficiency and renewable energy projects in Spain and Poland. Bank Zachodni WBK issues green bonds Bank Zachodni WBK was the first commercial bank in Poland to issue what are known as green bonds, for a total value of 137 million euros. The Bank plans to use the income from the sale of green bonds to fund investments in the field of renewable energies and energy saving constructions. Programmes used For SMEs and companies: Helping to mitigate climate change In December 2016, Banco Santander began to negotiate with the European Investment Bank for the placement of 60 million euros over a 10-year period, aimed at disclosing measures to adapt to and mitigate climate change in Argentinian SMEs. Polish Sustainable Energy Financing Facility In June 2015, Bank Zachodni WBK received a 50mn loan from the European Reconstruction and Development Bank (EBRD). Seventy per cent of the loan was used to finance sustainability projects in small and medium-sized Polish companies. This loan is part of the Polish Sustainable Energy Financing Facility (Polseff) and is aimed at bringing down energy costs by using new and more efficient installations. Socio-environmental funding for small and medium-sized companies Santander Brazil promotes solutions for the socio-environmental financing of small and medium-sized companies. CDC Sustentável: Initiative focused on financing machinery to improve energy efficiency, water efficiency and waste treatment, bringing down production and operating costs for the Bank s customers. Capital de Giro Sustentabilidade: credit for works, projects, consulting and certifications relating to energy efficiency, water efficiency and corporate governance CLIMATE FINANCE REPORT

11 Energy efficiency Energy efficiency line for hotel installations Banco Santander has collaborated with the energy efficiency line of the European Investment Bank for hotel installations. Loans granted within this line have a duration of at least 3 years, and will be used to fund investments aimed at improving energy efficiency and energy saving: Heating, ventilation and air conditioning systems; Insulation of closed spaces; Electrical systems; Use of renewable energies for heating; Electricity generation. In addition to collaborating in placing EIB funds, the Bank also provides technical assistance during the initial phases of the operation, for example in preparing documentation and product definition. Programmes for individual customers: Polish Residential Energy Efficiency Financing Facility (Poland REFF) Bank Zachodni WBK signed an agreement with the EBRD to channel 75 million euros earmarked for funding energy efficiency projects. The individual loans department plays an active role in the Poland REFF programme and collaborates with developing the offering of products and customer service. On top of the loan in cash, customers who take part in the Polreff programme are given training on how to improve energy efficiency in their homes, as well as other useful tools, for example how to calculate energy savings. Credit facilities for efficiency projects In Brazil, individuals and companies can opt for two credit facilities provided by the financing department of Banco Santander. CDC Eficiência Energética de Equipamentos: This facility provides funding for the acquisition of machinery and services which use renewable energies or conventional, but more efficient, energies. CDC Processos Mais Limpos: Used for the purchase of machinery which helps reduce socioenvironmental impacts, such as water reuse systems and machinery for recycling and reduction of pollutant gases. In 2016, 1.2 million Brazilian reais (approx. 370,000 euros) were earmarked for 103 transactions for these two credit facilities CLIMATE FINANCE REPORT 11

12 Other climate products and initiatives Other climate products and initiatives Natural resource management Mitigating climate change is not just a question of reducing greenhouse gas emissions, but also requires a sustainable management of natural resources. In 2016, Banco Santander modified its general Sustainability and climate change policies, which spell out the Bank's commitment to developing products and services which enhance environmental conservation and mitigation of climate change. The Bank s soft commodities and energy policies establish the criteria to be applied to funding activity for energy and soft commodities sectors (the latter comprise products such as palm oil, soy, timber and livestock) so as to ensure that these resources are exploited in a sustainable way and to avoid deforestation. Banco Santander plays a key role in the business within the agricultural sector, helping to fund initiatives which are conducive to preserving natural resources. The use of sustainable techniques and high energy efficiency machinery in agriculture has a large-scale impact on global reduction of emissions. This is why Banco Santander launches funding programmes to modernise machinery and production techniques in the main countries in which it operates. Spain Portugal Brazil EIB Agro 2016 Line 60 million euros dedicated in 2016 Funding for SMEs in the agricultural and fishing sector (with fewer than 250 employees) who make an investment in Spain during up to three years. Investments in new or second-hand fixed assets which improve the technological and/or productive capacity of the exploitation, and which are executed within Spain. Solução Agricultura In 2016, the programme funded 3.2 million euros. Farmers are given the opportunity to receive their aid in advance at no extra cost, to fund their campaigns and cope with paying their investment expenses. Particularly relevant are the partnership with the IFAP (Agriculture and Fishing Financing Institute) and with the CAP (Agricultores de Portugal). Santander Agro Sustentável Since 2010 it has promoted an inclusive low-carbon economy by supporting sustainable agriculture businesses. Alternative agricultural and fishing methods which help create a balance between economic, social and environmental issues are encouraged. There are awareness-raising programmes for employees and customers on environmental topics in collaboration with specialised organisations. Produzindo Certo Page CLIMATE FINANCE REPORT

13 Other climate products and initiatives Produzindo Certo The Produzindo Certo Programme, which came about through a partnership between Santander, Bayer, Unilever, Yara Fertilizantes and an NGO called Aliança da Terra, creates an incentive for national soy producers to get in line with applicable laws and to respect international environmental regulations. Producers are supported and assisted in order to help them be awarded the RTRS (Round Table Responsible Soy) production certificate, thereby creating value added for this national product. The role played by Banco Santander in this multilateral collaboration is to create a more dynamic process for granting credit to the producers which are taking part in the scheme so that they can invest in improving their agricultural activities. Once the producers have aligned their agricultural practices with international laws, thus improving environment protection and following good practices in the fight against climate change, their products can be sold on international markets. Main milestones of Produzindo Certo in 2015/2016: 62 producers taking part in the programme, a total of 103,000 cultivated hectares of soy. 38 producers have already been awarded the RTRS certification. 186,000 tons of certified soy. Over 2 million Brazilian reais (over 600,000 euros) used in the inclusion of socio environmental criteria in activities by producers taking part in the scheme. Regeneration of over 2,000 hectares of autochthonous vegetation. Transfer of bonus funds of over 1 million reais (over 300,000 euros) for the 38 certified producers as a reward for their achievements CLIMATE FINANCE REPORT 13

14 Other climate products and initiatives Mobility of low emissions In the shift towards a low-carbon economy, all high energy-intensive sectors play a key role in bringing down emissions across the world. According to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC), the transport sector was responsible for 14% of global emissions in To mitigate the effects of climate change, fostering the development and dissemination of alternative transport systems and of low emission vehicles will be a global priority. Banco Santander is playing its part in shifting the auto sector towards a low-carbon economy through services such as vehicle leasing and renting, to promote the use of hybrid or electrical cars in the country in which it operates. It also promotes emission compensation tools in Brazil and sponsors the bike sharing scheme in London, an environmentally-friendly alternative to travelling by car. Global manufacturing of vehicles continued to rise in Against this background, the Bank is committed to funding efficient and environmentally friendly vehicles. Reduza e Compense CO 2 Through the Reduza e Compense CO 2 programme, anyone - they do not have to be customers - can calculate and compensate their greenhouse gas emissions by buying carbon credits from certified projects, which reduce emissions and also generate other social, environmental and economic benefits. The online platform within the Banco Santander Brazil website provides information on transport, waste generation, fuel and electricity expense habits, and also a tool used to calculate annual CO 2 emissions generated. The website not only encourages people to reduce personal emissions through their daily activities, but also shows them a list of projects through which they can buy carbon credits. The way in which Santander Brazil projects are selected ensures that the supported projects make a significant contribution to sustainable development: Only nationally and internationally recognised projects are accepted, to ensure that emissions are quantified pursuant to applicable laws. Although non-environmental projects are sometimes accepted, preference is shown towards projects which prove to be useful in bringing down atmospheric emissions. Special consideration is given to projects whose benefits go beyond carbon, and which also have a positive impact on social, environmental and economic dimensions. Since the time of its launch in 2013 and up to 2015, and with the participation of over 60,000 people, the project compensated over tons of CO 2. It was awarded the Epoca Empresa Verde prize in 2015 and also the Beyond Banking prize of the Inter-American Development Bank in CLIMATE FINANCE REPORT

15 Other climate products and initiatives Measuring the carbon footprint The Bank is committed to reducing its own carbon footprint, by means of minimising CO 2 emissions generated in its buildings and facilities. The Santander Group measures, controls and establishes targets to reduce the main consumption, waste and emissions of the facilities where its employees work. In 2016 energy consumption dropped by 8.5 %, CO2 emissions by 6.8% and paper consumption by 23.9% compared to These energy and emission reduction targets of the Plan were achieved quickly as a result of the immediate impact of implementing these initiatives, so the savings are not expected to be so dramatic in coming years. The technological advances and greater awareness have prompted numerous local initiatives from each organisation and each country that have resulted in a significant reduction in paper consumption (23.9 %), significantly increasing the average of recent years and the expectations of the targets set. A variety of projects were carried out, from the digitalisation of contracts and mortgages, changes in processes and internal and external reports that had to be printed out on several pages simultaneously, among other projects. In view of the Bank s staunch commitment to the environment, it will continue to set more ambitious targets which will help to bring down its emissions. Paper Emissions Energy 24 % 7 % 8 % Office complex in Mönchengladbach, Germany 2016 CLIMATE FINANCE REPORT 15

16 Other climate products and initiatives Projects with an environmental impact in communities» Santander Universities Support for higher education has been the hallmark of Banco Santander's commitment to communities since The Bank allocates over 77% of its Social Investment budget to Santander Universities, and so far it has spent a total of over 1,500 million euros in supporting higher education. In 2016 alone, it spent 157 million euros. Promoting entrepreneurship is one of the Bank s key areas, and in 2016 it was one of the most important objectives in the area of supporting young people. Numerous programmes in the area of entrepreneurship include environmental projects which help to adapt and mitigate climate change. For example, in 2016 the Bank supported enterprising ideas such as the development of a smart underfloor heating system which could save over 30% in heating costs, or the manufacturing of batteries for electrical vehicles and renewable energy applications which are better than those currently marketed. More information» Banco Santander Foundation. Through the Foundation, the Bank carries out a number of different initiatives to help protect and improve the environment. Santander Foundation has supported various projects aimed at protecting, conserving and recovering natural areas. Examples are the restoration of the Barranco del Hocino in Guadalajara, restoration and management of Atlantic forests, or the recovery of millennial olive trees and their surrounding environment in Castellón. According to the International Union for the Conservation of Nature, adaptation based on ecosystems is crucial to be able to deal efficiently with climate change and also help to mitigate it, reducing the impacts caused by climate change. More information» Santander Cycles Santander Cycles is a public bicycle rental programme based in London, the UK. Since 2015, Banco Santander has sponsored this bike sharing scheme in London. It is the second largest initiative of its kind in Europe, with 11,500 bicycles CLIMATE FINANCE REPORT

17 2016 CLIMATE FINANCE REPORT