Presented in 2017, the TCFD’s recommendations are a non-binding guidepost for companies approaching climate issues responsibly. The general recommendations are further supported by detailed guidance published in the Supplemental Guidance for the Financial Sector, reflecting the high importance that the authors of the recommendations place on financial institutions.

The TCFD standards are based on four pillars, around which this report has also been arranged for the sake of clarity:

  1. Governance – a description of the bank’s management of its responsibility in the area of climate change risks and opportunities.
  2. Strategy – a description of the actual and potential impact of climate-related risks and opportunities on the organisation’s operations, strategy and financial planning.
  3. Risk Management – the processes used by an organisation to identify, assess and manage climate risks.
  4. Metrics & Targets – disclosures on metrics and targets used to assess risks and opportunities, including information on CO2 .

The basic premise of the recommendation is that consistent and structured disclosures related to the financial sector climate would contribute to:

  • improving the process of responding early to risks and exploiting opportunities associated with climate change;

  • improving market communication practices on climate risks;

  • improving the availability and transparency of climate-related data that can be systematically analysed to assess the materiality of climate risks facing the financial sector.

Being financial intermediaries, banks are exposed to climate-related risks through lending and other financial intermediation, as well as through their own operations. According to the TCFD, banks may assume exposure to significant climate-related risks from their borrowers, customers or counterparties. Furthermore, banks that lend to companies directly exposed to climate risk (e.g. fossil fuel producers, real estate owners or agri-food companies) or trade in the securities of such companies may accumulate climate risk precisely through the aforementioned loans and holdings in these companies. TCFD stresses that fossil fuel-related credit exposure in particular merits disclosure in bank reports.

In terms of methodology, in order to present the identified climate risks in a consistent and transparent manner, the TCFD recommendations suggest to divide risks into two groups: physical and transformational.

Physical risks related to the climate can be sudden (resulting from specific events) or chronic (intensifying over the medium to long term).


  • Sudden physical risks are particularly weather-related and include natural disasters, storms, floods, fires or heat waves. They can destroy production facilities and disrupt supply chains.

  • Chronic physical risks manifest themselves through long-term weather patterns, changes in extreme precipitation, higher average temperatures, sustained heat waves and elevated water levels (seas and oceans).

Transformational risks relate to, among other things, legislative changes induced by climate change, fluctuations in market sentiment and consumer expectations and choices. In other words, it is the risk arising from the transition towards a low-carbon and climate-resilient economy. Within this group, we can distinguish the following risks:

  • Regulatory and legal – the legislators’ response to climate change may reduce or increase the cost of doing business, as well as materialise the risk of litigation for not avoiding or not limiting adverse climate impacts or not adapting to climate change.

  • Market-based – changes in the supply and demand trends, including increased consumer awareness of environmental issues, can reduce the viability of some projects.

  • Technological – a possible switch to technologies less harmful to the climate involves additional costs.

  • Reputational – an irresponsible approach to climate can put a company’s good name at risk when a company’s climate commitments are not too ambitious or are not translated into actions.

It should be borne in mind that both types of risk have the potential to affect the bank and its customers in the short-, medium- and long-term perspective.

At the same time, efforts to mitigate and adapt to climate change present opportunities for businesses and organisations, due to the scale of investment that will need to be made to achieve the goals of the Paris Agreement.

The TCFD identifies the following areas of opportunity:

  • efficient management of raw materials,
  • investment in renewable energy sources,
  • new products and services,
  • access to new markets,
  • increasing the resilience of the organisation.

These opportunities will vary depending on the company, the industry and region of business activity, as well as the adopted time horizon.

Scenario analysis

Below is an explanation of the assumptions underlying the scenarios of future climate trends we have chosen.

Scenario Assumptions
Below 2°C

In line with the Paris Agreement

  • A scenario in which global average temperatures stop below 2°C compared to pre-industrial levels. The scenario assumes implementation of the Paris Agreement through aggressive emissions reductions driven largely by regulatory change; it is characterised by global cooperation between governments, society and industry to achieve radical decarbonisation.
  • We assume that transformational risks are predominant, but there are also market opportunities.
Below 4°C
  • This scenario assumes global warming of 4°C. We refer to how global emissions would change if governments made no changes to existing policies and agreed to delay accomplishment of the Paris Agreement targets (delayed mitigation).
  • Physical risks (which trigger market risks) are predominant.

Selected sectors and risk assessment method

  • fuel sector
  • energy sector
  • metals and mining sector
  • soft commodities sector
  • automotive sector
  • real estate sector
  • materials and chemistry
  • production of packaging
  • furniture industry
  • food industry
  • agro sector
  • public sector
  • transport and logistics sector
  • cosmetics industry
  • e-commerce
  • trading
  • tourism (mainly hotels)
  • waste management, and
  • financial sector

In each area, we analysed the physical and transformational risks and rated them on a scale from 1 (lowest risk) to 5 (highest). The method for assessing the level of climate risk in each sector is shown in the table below.

RAG (red-amber-green) classification of physical and transformational risk assessments
Physical risks Result Transformational risks
The sector has a low sensitivity to physical risks.
very low risk
The sector is low carbon and independent of fossil fuels.
It is closer to achieving zero carbon than other sectors.
The sector is to some extent sensitive to physical risks, but these can occur infrequently
low risk
The sector has lower greenhouse gas emissions than other sectors.
It is doubtful that climate policies or changes in consumer preferences will significantly affect the sector.
There will be some kind of climate-induced disruption to the sector’s operations which the sector will experience systematically (such disruptions can last for weeks at a time).
medium risk
Major investments are needed in the sector to achieve zero-carbon.
It is likely that the sector will experience some negative impact from climate policies or changes in consumer preferences.
The sector is highly exposed to physical risks and will have long-term exposure and cost exposure due to climate change events.
high risk
The sector has higher emissions compared to others and will experience adverse demand responses.
The sector during decarbonisation warrants a low-carbon policy, technological innovation and/or investment to achieve net-zero.
not applicable
very high risk
The sector relies heavily on fossil fuels. Significant investment and climate policy interventions are needed for the transformation to take place.Emphasis is on action from a wide range of stakeholders. Increased risk of premature asset write-downs. Uncertainty regarding the ability to participate in the transition and achieve net-zero.

Sectoral risk analysis method

The following explanation refers to the method of risk analysis in our client sectors, which is set out in the table in the Risk Management chapter.

The assessment of each sector was first made in the short term (2025). Given the small time interval, climate scenarios were not included in the short term. The evaluation of physical risks (FR) and transformational risks (TR) includes a rating on a scale of 1-5 (the logic behind the assignment of a rating is explained in the table above).

We conducted the analysis for the medium term (2030) and long term (2050) in two scenarios: under 2°C (aggressive emission reduction) and 4°C (delayed mitigation). Due to the significant uncertainty for the long-term (2050) outlook, we conducted a trend analysis (increasing risk (+), no change (-)).

To show the materiality of the sector, the last three columns of the sector risk analysis table indicate the percentage represented by the sector in the portfolio of the 19 sectors analysed in one of the three categories – Santander Corporate and Investment Banking (SCIB), Corporates and Small and Medium Enterprises (SMEs). The sectors with a greater than 5% share of the category portfolio are highlighted in dark grey.

Method and scope for calculating the carbon footprint

The Greenhouse Gas Protocol and Corporate Value Chain (Scope 3) Accounting and Reporting Standard were used to calculate CO2  levels from the Metrics and Targets section of this report.

Emission factors developed by the UK Department for Environment Food & Rural Affairs (DEFRA 2021)1 , the National Balancing and Emissions Management Centre2 and the Energy Regulatory Authority3 were used. The table below describes the scope of the emission calculations, the emission sources and the calculation methodology:


SCOPE 1 Leakage of refrigerants R410A Emissions calculated on the basis of replenished R410A refrigerant volume data provided by Santander and an emissions indicator from DEFRA 2021.
Emissions from mobile sources
  1. diesel
  2. petrol
Emissions calculated using diesel and petrol consumption data for the transport fleet, provided by Santander and an emissions indicator from DEFRA 2021.
Emissions from stationary sources
  1. natural gas
  2. fuel oil
  3. diesel fuel
Emissions calculated on the basis of heating oil and natural gas consumption data for heating, diesel for emergency generators and the emission factor from DEFRA 2021.
SCOPE 2 Electricity Offices Emissions calculated on the basis of electricity consumption data and an emissions indicator from the KOBiZE.

Market Based emissions calculated based on supplier fuel structure data. Due to a lack of information about suppliers in some of the premises used by Santander, the % supplier structure in the bank’s branches was used.

Remote work No actual data available – estimate based on person-days spent working remotely and assuming that a person working remotely consumes 0.12 KWh per working hour.

Emissions calculated on the basis of estimated consumption and the grid emission indicator obtained from the NERC.

District heating Offices No real-life data available – estimation based on benchmarks of annual heat consumption per m2 area (from the 2020 Statutory Energy Audit) and area of premises in use (heated with district heating). Calculations include locations abandoned during 2021, but only for the number of days they were used by the bank.

Emissions calculated on the basis of estimated consumption and the emissions indicator from DEFRA 2021.

SCOPE 3 Business trips Car hire Emissions calculated on the basis of distance travelled in leased cars, provided by Santander, and an emissions indicator from DEFRA 2021.
Bus transport No real-life data available – a distance of 100 km was assumed for each bus journey purchased.

Emissions were calculated as the product of the estimated route length multiplied by the number of trips purchased and the emissions indicator from DEFRA 2021.

Rail transport Emissions calculated from data on distance travelled by rail, provided by Santander and the emission indicator from DEFRA 2021.
Air transport Emissions calculated on the basis of domestic distance travelled (broken down by domestic, European and international flights) provided by Santander and the emissions indicator from DEFRA 2021.


Table with references to TCFD recommendations

Recommended disclosures Place in the raport
Disclose the organisation’s management policies on climate-related risks and opportunities.
a. Describe the management board’s oversight of climate-related risks and opportunities.
b. Describe the role of management in assessing and managing climate-related risks and opportunities.
Disclose the actual and potential impact of climate-related risks and opportunities on the organisation’s operations, strategy and financial planning, if such information is relevant.
a. Describe the climate-related risks and opportunities that the organisation has identified in the short, medium and long term.
b. Describe the impact of climate-related risks and opportunities on the organisation’s operations, strategy and financial planning.
c. Describe the resilience of the organisation’s strategy, taking into account different climate-related scenarios, including a 2°C or lower scenario.
Disclose how the organisation identifies, assesses and manages climate-related risks.
a. Describe the organisation’s processes for identifying and assessing climate-related risks.
b. Describe the organisation’s processes for managing climate-related risks
c. Describe how the processes for identifying, assessing and managing climate-related risks are integrated into the overall risk management of the organisation.
Disclose the measures and targets used to assess and manage relevant climate-related risks and opportunities, if such information is relevant.
a. Disclose the indicators used by the organisation to assess climate-related risks and opportunities in line with the risk management strategy and process.
b. The extent of greenhouse gas emissions and the associated risks must be disclosed.
c. Describe the objectives used by the organisation to manage climate-related risks and opportunities and performance against the objectives.