Description of the processes to identify and assess material impacts, risks and opportunities (IRO‑1)

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  • Description of the processes to identify and assess material impacts, risks and opportunitiesIRO-1
    Description of the processes to identify and assess material impacts, risks and opportunities

In 2024, we conducted, together with experienced experts from an external consulting firm, a double materiality assessment in accordance with the ESRS and EFRAG guidelines*. The purpose of that assessment was to identify the material impacts, risks, and opportunities for the Group arising from sustainabilityrelated issues. Understanding the results of this analysis serves as the foundation for the Group’s disclosure of key ESG information. The assessment was carried out taking into account directional methodological assumptions consistent across the Banco Santander Group and included an assessment of:

  • the Group's impact on the external environment (impact materiality),
  • risks and opportunities affecting the Group (financial materiality).

The double materiality assessment process began with dialogue with key stakeholders, including employees, customers, investors, representatives of nongovernmental organizations, regulators, academic institutions and business partners. The analysis was conducted in multiple stages and included both dialogue sessions and survey research.

  • Employee survey: An online survey was conducted among employees of the Group between 10-14 June 2024, allowing participants to anonymously share their opinions on material ESG topics.
  • Stakeholder dialogue session: A dialogue session with stakeholders of the Group was held on 17 June 2024 via the MS Teams online platform. This was the 12th session dedicated to sustainability and responsible business practices. The session was conducted in accordance with the AA1000SES international standard, with the participation of independent moderators. During the dialogue session, discussions were organized into three thematic groups:
    • Responsible business relationships and their impact on the environment and society,
    • Responsibility for employees and the Bank’s social activities,
    • Sustainable financing and relationships with customers.

Incorporating the opinions of key stakeholders in the double-materiality assessment

Uwzględnienie opinii kluczowych interesariuszy w ocenie istotności
Stakeholder Group Impact Materiality Financial Materiality
Stakeholders affected by impacts Customers X
Non-governmental organizations (NGOs) X
Employees of the Group X
Users of reports Investors/stakeholders
(including Banco Santander Group)		 X
Top Management X
Regulatory and supervisory bodies X X

We also used portfolio analyses in the process. These included an assessment of impacts, risks and opportunities through the Group’s portfolio of products and services. The analyses focused particularly on our loan portfolio and served to identify impacts, risks and opportunities, as well as to assess the materiality of identified risks and opportunities. The portfolio analyses used recognised methodologies and analytical tools, as well as solutions developed by the Group. These included:

  • UNEP FI Impact Tool, for assessing the impacts, risk and opportunities of financial institutions,
  • ’Heat maps’ illustrating climate risks (including transition and physical risks), developed using, among others, the TCFD** methodology and NGFS*** climate scenarios,
  • Encore tool for assessing environmental risks,
  • Bank’s sales forecasts on, inter alia, green, social and sustainability-related financing.

* European Financial Reporting Advisory Group
** Task Force on Climate-Related Financial Disclosures created by the Financial Stability Board (FSB).
*** Network for Greening the Financial System

Stages of the Double Materia lity Assessment in the Group

The double materiality analysis serves as the foundation for the Group’s strategic approach to sustainability. It enables the Group to:

  • Identify key ESG topics that are material from the perspective of stakeholders and the Group’s operations,
  • Assess risks and opportunities associated with each ESG issue, facilitating effective management,
  • Prioritize actions in the area of sustainability.

The analysis process was conducted in four stages:

In this stage, we defined the assumptions for the analysis and identified the Group’s value chain, encompassing stakeholders across upstream operations, our own operations, and downstream operations. The analysis accounted for internal and external factors, such as regulations, stakeholder expectations and market trends. We used external sources mentioned above. We analysed the information gathered during the dialogue session and from the stakeholder survey on sustainability issues to use in the materiality assessment

In the second stage, we reviewed sustainability topics in line with ESRS. The contextual analysis initially identified 100 IROs. We categorised them and assigned them to a topic or sub-topic, and key impacts, risks, and opportunities – within ESRS 1, AR 16. We also analysed the Group’s portfolio of products and services, with particular focus on the loan portfolio.

Each IRO was:

  • mapped to the value chain, assigned relationships between impacts and risks, assessing whether and how impacts could lead to new risks and opportunities, with a particular focus on potentially negative human rights impacts,
  • assigned to the responsible unit within the organisation for the process in question,
  • estimated for the potential financial impact resulting from the risks or opportunities.

The methodology we used to measure materiality is based on EFRAG’s guidance on materiality assessment . After applying it at this stage, we classified 32 IROs as material.

We assessed impacts, risks, and opportunities based on the dimensions specified in ESRS: scale, scope, likelihood of occurrence, and, for negative impacts, the irrevocable nature. The assessment included both the impact of our activities on the external environment (impact materiality), and risks and opportunities that could affect the financial performance of the Group (financial materiality).

Finally, we ranked the identified material topics and developed a materiality matrix, which forms the basis for further strategic actions. To identify significant IROs, we adopted a threshold of 3.5 on a scale of 1 to 5 for both impact perspective and financial materiality. This means that IROs with materiality ranging from medium (3) to high or higher were considered material, taking as a reference point that values greater than 3.5 represent events of medium-high severity and events of medium-high probability of occurrence.

We also assessed the validity and consistency of the list of IROs identified as material. From a quantitative perspective, assuming that the distribution of materiality events follows a normal distribution (mean = 3 and standard deviation = 0.5), the probability of a value of 3.5 is approximately 16%, which is considered reasonable for a material event.

The results of the analysis were confirmed by top management representatives and approved by the ESG Committee. The materiality matrix is designed to help effectively manage ESG issues within the strategic directions and to target the areas of greatest importance to the Group and its stakeholders. As the identification of IROs took place with reference to 2024, the Group as of 31 December 2024 did not yet have processes in place dedicated to the ongoing monitoring and management of material IROs as part of the integration of IROs into the overall management processes specific to the Group. In 2025, the Group will be taking steps to supplement existing processes with the component of material IROs.

Materiality Matrix of the Group

As a result of the process described above, we developed a materiality matrix that enables the identification of key impacts, risks, and opportunities significant both from the perspective of their impact on the external environment and the financial performance of the organization. Each material topic was classified based on its relevance to the operations of the Group.

The resulting matrix serves as the foundation for integrated management of ESG issues, strategic decision-making, and the implementation of actions within the Group’s business model. The outcomes of the materiality analysis highlighted topics of critical importance as well as those of an informational nature. This allows for the prioritization of actions in a way that best addresses the risks and needs associated with the operations of the Group.

Based on the double materiality assessment, we classified five sustainability-related topics for inclusion in this statement.

The results of the assessment include distribution of impacts, risks, and opportunities according to the ESRS thematic standards.

Ryzyka – Zmiana klimatu (ESRS E1)
Material Subtopic Type of IRO Description and location of Impact, Risk or Opportunity (IRO)
Climate Change Mitigation Impact Negative environmental impact resulting from financing borrowers who are unable to adapt their business models to a low-carbon economy.
Impact Increase in greenhouse gas emissions related to portfolio activities (retail banking loans).
Impact Increase in greenhouse gas emissions related to portfolio activities (institutional banking loans).
Opportunity Increase in revenues due to (1) the growth in the volume of financing granted for real estate that meets the criteria of our Sustainable Finance and Investment Classification System, (2) financing and advisory services for the expansion of electric vehicle charging infrastructure, (3) financing and advisory services for the transition to electric vehicles, and (4) financing for water, waste, and soil treatment, improved energy efficiency, and lower emissions.
Opportunity Increased customer trust by offering loans and advisory services to help identify opportunities for property modernization.
Opportunity Market leadership through (1) funding of technologies to support low-carbon mobility and (2) funding and advice on emission reduction technologies in agriculture.
Opportunity Differentiation in the market through (1) encouraging and supporting clients across the entire value chain in adopting more sustainable business practices and (2) providing financing and advisory services for early-stage companies focused on solutions enabling the energy transition.
Opportunity Growth in green bonds, green loans, and sustainability-linked financial instruments.
Opportunity Increased revenue by financing the development of new technologies, such as hydrogen, carbon capture, utilization and storage (CCUS), biofuels, and energy storage in a broader sense.
Risk Reputational risk stemming from perceptions by customers, investors, and other stakeholders that banks are not doing enough to achieve low-carbon goals or are acting contrary to their policies.
Risk Reputational risk due to failure to achieve climate and environmental goals, including those related to the bank’s own operations and those of its clients, which may result in financial losses.
Risk Risks arising from activities in various sectors that hinder climate mitigation.
Energy Impact Contributing to environmental protection through increased use of renewable energy and other lowcarbon technologies.

Ryzyka – Własne zasoby pracownicze (ESRS S1)
Material Subtopic Type of IRO Description and location of Impact, Risk or Opportunity (IRO)
Working conditions Impact Flexible working conditions enabling employees to balance work with their personal circumstances.
Impact Promoting employee health and well-being through appropriate monitoring and best practices, as well as health and safety initiatives.
Impact Potential harm to employees through exposure to longer working hours, controversies related to corruption and human rights violations, or proven breaches.
Impact Protecting employees through adequate wages and benefits.
Impact Positive impact on employee wages due to adjustments aligned with the current economic situation in Poland.
Equal treatment and equal opportunities for all Impact Upskilling employees through training and professional development initiatives.
Impact Gender pay gaps and underrepresentation of women across all levels of employment.
Other work-related rights Impact Lack of employee privacy protection due to the database infrastructure and data management software used by the Bank to host and manage all operations.

Ryzyka – Dotknięte społeczności (ESRS S3)
Material Subtopic Type of IRO Description and location of Impact, Risk or Opportunity (IRO)
Economic, social, and cultural rights of communities Impact Human rights are not guaranteed due to financing activities with known past and recurring incidents, without prior validation processes.
Impact Failure to consider human rights issues in the assessment of financial projects.
Impact Lack of protection for affected communities due to the absence of monitoring mechanisms and compliance reviews for funds used in sectors and/or activities with a high risk of environmental and social impacts.
Impact Financing clients engaged in activities deemed unauthorized, contrary to the Bank’s policies and ethical standards, which could pose risks to society.
Impact Adverse impacts on human rights due to insufficient or preliminary evaluation and/or monitoring of financed projects.

Ryzyka – Konsumenci i użytkownicy końcowi (ESRS S4)
Material Subtopic Type of IRO Description and location of Impact, Risk or Opportunity (IRO)
Impact of information on consumers or end-users Impact Educating retail customers on online threats and ways to mitigate them.
Impact Quality of information and data protection are not guaranteed for vulnerable customers regarding how their data is used, stored, and shared, or ensuring that customers sufficiently understand how their data is managed.
Impact Customer inquiries, complaints, and claims are not addressed or do not result in necessary changes and modifications due to a lack of systems and processes.
Impact Lack of price transparency for customers caused by the Bank engaging in price abuses without prior notice or justification.
Impact Lack of customer privacy protection due to the database infrastructure and data management software used by the Bank to host and manage all operations.
Impact High trust among Polish customers in data security reflects the positive impact of banks on data protection.
Risk Risk of cyberattacks threatening customer data privacy.
Risk Risk of severe security breaches caused by malicious practices or human errors by employees, such as the use of unauthorized software, technical user violations, or data exfiltration and leaks.
Risk Risk of violating personal data protection regulations concerning vulnerable customers.
Risk Risk of not addressing customer inquiries, complaints, and claims due to ineffective systems.
Risk Risk of lack of price transparency for customers due to the Bank engaging in price abuses without prior notice or justification.
Inclusion of consumers or end-users Impact Lack of access to products and services for vulnerable customers due to the absence of inclusive and accessible product/service identification in the catalogue.
Impact Failure to ensure financial well-being, utility, and accessibility of financial services for customers due to a lack of product modifications or monitoring of their effective implementation.
Impact Insufficient reach and utility of products for the entire population and/or contributing to barriers in access to financial products due to product and service design processes.
Impact Lack of additional conditions for vulnerable customers in debt collection or recovery processes due to improper identification.
Impact Financial abuse of vulnerable customers due to a lack of preventive transaction monitoring for individuals with legal guardians.

Ryzyka – Postępowanie w biznesie (ESRS G1)
Material Subtopic Type of IRO Description and location of Impact, Risk or Opportunity (IRO)
Corporate Culture Impact Acting responsibly by considering not only the interests of investors and the Bank but also the impacts on employees, society, and the environment, including paying taxes.
Impact Failure to uphold commitments to respect human rights due to a lack of appropriate governance structures, communication channels, and scalability.
Risk Risk arising from the absence of adequate governance structures, internal regulations, and scalability to manage and address ESG issues.
Whistleblower Protection Impact Protecting the confidentiality of whistleblower information through an effective communication system where the Bank provides uniform information to authorities via robust, unified rules and procedures in whistleblowing channels.
Impact Increase in recurring incidents due to the lack of internal measures to effectively address issues reported through complaint channels and the failure to implement continuous improvements.
Supplier Relationship Management, including Payment Practices Risk Risk resulting from the failure to implement operational resilience solutions, such as meeting DORA (Digital Operational Resilience Act) requirements across the entire value chain.
Corruption and Bribery Impact Combating all forms of corruption.

During the double materiality analysis, we conducted an assessment of impacts, risks, and opportunities arising from various sustainability areas, based on the list of reporting topics indicated in ESRS 1, paragraph AR 16. As part of this analysis, we utilized tools such as UNEP FI Impact Analysis and Encore (providing data on dependencies between production processes and ecosystem services), opinions from our stakeholders (both internal and external), as well as an analysis of activities financed by the Group. Based on the results obtained, the following topics were not deemed material, meaning that the related impacts, risks, and opportunities do not meet the materiality thresholds:

  • ESRS E2: Pollution
  • ESRS E3: Water and Marine Resources
  • ESRS E4: Biodiversity and Ecosystems
  • ESRS E5: Resource Use and Circular Economy
  • ESRS S2: Workers in the Value Chain

The key considerations behind this assessment include:

  • Qualitative and quantitative analysis (including established materiality thresholds).
  • Portfolio structure, where approximately 60% of exposures relate to households, and the implemented ”Environmental, Social, and Climate Change Risk Management Policy” limits the Group’s exposure to financing companies from polluting or resource-intensive industries. As a result, the Group’s impact and exposure to issues related to pollution, water, biodiversity, and the circular economy were assessed as immaterial.
  • Stakeholder engagement sessions and surveys have shown that our stakeholders perceive the above-mentioned issues as less critical in the context of the Group’s activities.