Section III Environmental and Social Risk

ENVIRONMENTAL AND SOCIAL RISK

Banks, in particular, face risks associated with occupational health and safety and with financing activities that could result in adverse impacts on the environment and society. Failure to address these risks in a timely and appropriate manner may result in reputational damage and consequently a loss of investor support and customer loyalty, among other challenges. Garanti BBVA sees its proactive management of these risks, such as those arising from climate change, not only as critical to its success but also as one of its most essential duties to its stakeholders. Through its effective approach to sustainability embedded throughout its organization, Garanti BBVA monitors a variety of environmental and social indicators, benchmarks itself against best practices worldwide, takes steps to close the gap, raises the awareness of employees and collaborates with its peers, financial institutions, customers and business associations.

Garanti BBVA also implements an Environmental and Social Risk Assessment Process (ESRAP) in line with international best practices to help drive improvement across its loan portfolios. The Bank implements a system designed to evaluate the Occupational Health and Safety (OHS) performance of the projects financed in addition to ESRAP.

Within the scope of ESRAP, Garanti BBVA ensures that the projects financed by the Bank satisfy the social and environmental standards required by legislation and the Bank’s policies. If necessary, the Bank also ensures that the project owners undertake an impact assessment, take prescribed measures and establish effective control mechanisms.

Garanti BBVA has a full-time Sustainability Team, which comprises of 5 full- time members and is responsible for embedding sustainability criteria into core business. Reporting to the Sustainability Committee chaired by a Board Member, the Team’s responsibilities regarding the management of environmental and social risk and occupational health and safety risk include the following: verify environmental and social risk management policies, strategy and implementation principles; ensure that risk management principles are widely embraced throughout Garanti BBVA and its subsidiaries through hard and soft controls; provide technical and implementation support on E&S risk-related measures to other departments as well as customers. Garanti BBVA's Wholesale Credit Risk Management Unit is also responsible for ensuring the effective implementation of Environmental and Social Impact Assessment Process (ESIAP).

For more information on the Environmental and Social Risk Management System Implementation Scope, please refer to Integrated Annual Report page 155.