1/14 SECOND PARTY OPINION1 ON THE SUSTAINABILITY OF SANTANDER’S GLOBAL SUSTAINABLE BONDS FRAMEWORK2 May, 2020 SCOPE Vigeo Eiris was commissioned to provide an independent opinion (hereafter the “Second Party Opinion” or “SPO”) on the sustainability credentials and management of the Global Sustainable Bonds Framework (hereafter the “Programme” or “Framework”), created by Banco Santander S.A (the “Bank” or “Santander”) and including its Special Purpose Vehicle (SPV) Santander International Products PLC3 (Santander and Santander International Products PLC together referred as “the Issuers”), as a global framework to govern all the potential Green, Social and Sustainable Bonds to be issued under the Framework (the “Bonds”). Our opinion is established according to our Environmental, Social and Governance (“ESG”) exclusive assessment methodology, and to the International Capital Market Association’s Green Bond Principles and Social Bond Principles voluntary guidelines, edited in June 2018 (the “GBP 2018 ” and the “SBP 2018”, or the “Principles”). Our opinion is based on the review of the following components: 1) Issuers: we assessed Santander’s ESG performance4, its management of potential stakeholders-related ESG controversies and its involvement in controversial activities5. 2) Programme: we assessed the coherence between the Programme and Santander’s environmental and social commitments, and its alignment with the assessed elements of the four core components of the Principles (i.e. elements corresponding to the Process for Evaluation and Selection and Management of Proceeds, and some aspects of the Use of Proceeds and Reporting). Our sources of information are multichannel, combining data from (i) public information, gathered from public sources, press content providers and stakeholders; (ii) information from Vigeo Eiris’ exclusive ESG rating database, and (iii) information provided by the Issuers through documents and from interviews with Issuers’ managers and stakeholders involved in the Bonds issuance, held via a telecommunication system. We carried out due diligence assessment from March 10th to May 5th, 2020. We consider that we were provided with access to all the appropriate documents and people we solicited. To this purpose we used our reasonable efforts to verify such data accuracy. VIGEO EIRIS’ OPINION Vigeo Eiris is of the opinion that Santander’s Global Sustainable Bonds Framework is aligned with the assessed elements of the four components of the Green Bond Principles (GBP) 2018 and the Social Bond Principles (GBP) 2018 (i.e. elements corresponding to the Process for Evaluation and Selection and Management of Proceeds, and some aspects of the Use of Proceeds and Reporting). This opinion will be complemented with a Second Party Opinion on the alignment of Santander’s specific Bonds Frameworks with this Programme and with the GBP and/or SBP. We express a reasonable6 level of assurance (our highest level of assurance) on the Issuers’ commitments and on the contribution of the contemplated Bonds to sustainable development. This opinion is conditioned to the review of Santander’s specific Bonds Frameworks. 1) Issuers (see Part I)  As of February 2020, Santander’s displays an advanced ESG performance: it achieves an advanced performance in the Environment, Social and Governance pillars.  As of today, as commonly observed in the banking sector, Santander faces frequent allegations, regarding the Environment, Community Involvement, Business Behaviour and Corporate Governance 1 This opinion is to be considered as the “Second Party Opinion” described in the GBP voluntary guidelines (June 2018 Edition) edited by the International Capital Market Association (www.icmagroup.org). 2 The “Green Bond” is to be considered as the bond to be potentially issued, subject to the discretion of the Issuer. The name “Green Bond” has been decided by the Issuers: it does not imply any opinion from Vigeo Eiris. 3 The Bonds issued by this SPV will be 100% guaranteed by Santander SA. 4 The Santander SA ESG performance was assessed in February 2020 by a complete process of rating and benchmark developed by Vigeo Eiris. All potential evolutions and data published after this date are not included in the rating. 5 The 17 controversial activities screened by Vigeo Eiris are: Alcohol, Animal welfare, Cannabis, Chemicals of concern, Civilian firearms, Fossil Fuels industry, Coal, Gambling, Genetic engineering, High interest rate lending, Human Embryonic Stem Cells, Military, Nuclear power, Pornography, Reproductive medicine, Tar sands and oil shale, and Tobacco 6 Definition of Vigeo Eiris’ scales of assessment (as detailed in the Methodology section) Level of Performance evaluation: Advanced, Good, Limited, Weak. Level of Assurance: Reasonable, Moderate, Weak. 2/14 domains. The severity of these controversies is overall high, based on the analysis of their impact on the company and its stakeholders. The company is overall reactive: it reports in a detailed way on its position on most cases.  Santander appears to not be involved in any of the 17 controversial activities screened under our methodology. 2) Issuance (see part II): Santander has described the main characteristics of the Bonds within a formalised Global Sustainable Bonds Framework, which covers the four core components of the GBP 2018 (the last updated version was provided to Vigeo Eiris on April 27, 2020). Santander has committed to making this document publicly accessible on its Website7 as well as the related Second Party Opinions on the date of the issuance, in line with good market practices. We are of the opinion that the Sustainable Bonds Framework is coherent with Santander’s main sector sustainability issues, with its publicly disclosed strategic sustainable development priorities, and that it contributes to achieve its sustainable development commitments. Use of proceeds  The net proceeds of the Bonds will exclusively finance or refinance, in full or in part, Eligible Projects and/or Assets falling under Green, Social and Sustainable categories (“Eligible Categories”). We consider that the Eligible Categories are partially defined in the Global Sustainable Bonds Framework. However, Santander has committed that its Eligible Categories will be clearly defined before each Issuance in specific Bonds Frameworks (or “Annex”). Santander commits to obtaining a dedicated Second Party Opinion for each of the new categories issued within its Global Sustainable Bonds Framework.  The environmental and social benefits of the Eligible Categories will also be defined, assessed and quantified by Santander before each issuance in specific Bonds Frameworks, and will be subject to an external verification. In the case of Social or Sustainable Bonds, Santander commits to define the target population of social projects before each issuance.  Santander commits that the refinancing share of the Eligible Projects/Assets will not exceed 50% of the funds during the term of the bonds that will be issued. Santander will provide further information before each issuance in the specific Bonds Frameworks. Santander commits to respect a common look-back period of maximum 3-calendar years (from the issuance) for each Bond issued within its Global Sustainable Bonds Framework, in line with market practices.  The Eligible Categories are likely to contribute to the United Nations Sustainable Development Goals (“SDGs”). These contributions will be assessed by Santander for each of the dedicated Bonds Frameworks included in Santander’s Sustainable Bonds Framework. Process for Projects/Assets Evaluation and Selection  The governance and the process for the Projects/Assets’ evaluation and selection are formalised in the Global Sustainable Bonds Framework. We consider that the process is reasonably structured, transparent and relevant.  The process is based on explicit and relevant eligibility (selection and exclusion) criteria, although the exclusion criteria are partially defined.  The process for the identification and management of environmental and social risks associated at Framework level is considered to be good. Santander will include additional selection criteria and due diligence processes depending on the nature and typology of the new project categories and sub- categories under the Framework, and these will be assessed before each issuance. Management of Proceeds  The rules for the management of proceeds are clearly defined and will be verified. We consider that they would enable a documented and overall transparent allocation process. Monitoring & Reporting  The reporting process and commitments appear to be good regarding the funds allocation and limited regarding environmental and social benefits. However, Santander commits to define and report on dedicated indicators for each category (earmarked by each bond), as well as to obtain an external assessment. 7 www.santander.com 3/14 EXTERNAL REVIEW Santander has committed that its Global Sustainable Bonds Framework will be supported by external reviews: - A pre-issuance consultant review: the hereby Second Party Opinion delivered by Vigeo Eiris, covering all the features of the Bonds, based on pre-issuance assessment and commitments, to be made publicly available by the Issuer on its website8, at the date of issuance. - An annual verification an external verification performed by a third-party auditor, covering the allocation of funds, the compliance in all material aspects, of (i) the actual allocation of proceeds to the Eligible Green Assets and their alignment with the eligibility criteria and (ii) the impact reporting, annually and until the Bonds’ maturity and in case of any material change. - Post-issuance consultant reviews: ad-hoc Second Party Opinions, in the event that additional Eligible Categories are added to the existing Global Sustainable Bonds Framework. This Second Party Opinion is based on the review of the information provided by the Issuer, according to our exclusive assessment methodology and to the GBP voluntary guidelines (June 2018). Santander acknowledges that in case of changes of such standards and market practices and expectations, VIGEO EIRIS shall exclude any liability regarding the use of the concerned Second Party Opinion and its compliance with then-current standards and market practices and expectations. Project team For more information, contact: Rebecca SMITH Sustainability Consultant Gonzalo MARAMBIO Sustainability Consultant Project Manager Muriel CATON Senior Advisor Supervisor Sustainable Finance Team VEsustainablefinance@vigeo-eiris.com 8 https://www.santander.com Disclaimer Transparency on the relation between Vigeo Eiris and the Issuer: Vigeo Eiris has executed three audit missions for Santander until now. No established relation (financial or commercial) exists between Vigeo Eiris and the Issuer. This opinion aims at providing an independent opinion on the sustainability credentials and management of the Bond, based on the information which has been made available to Vigeo Eiris. Vigeo Eiris has neither interviewed stakeholders out of the Issuer’s employees, nor performed an on-site audit nor other test to check the accuracy of the information provided by the Issuer. The accuracy, comprehensiveness and trustworthiness of the information collected are a responsibility of the Issuer. The Issuer is fully responsible for attesting the compliance with its commitments defined in its policies, for their implementation and their monitoring. The opinion delivered by Vigeo Eiris neither focuses on the financial performance of the Bond, nor on the effective allocation of its proceeds. Vigeo Eiris is not liable for the induced consequences when third parties use this opinion either to make investments decisions or to make any kind of business transaction. Restriction on distribution and use of this opinion: The deliverables remain the property of Vigeo Eiris. The draft version of the Second Party Opinion by Vigeo Eiris is for information purpose only and shall not be disclosed by the client. Vigeo Eiris grants the Issuer all rights to use the final version of the Second Party Opinion delivered for external use via any media that the Issuer shall determine in a worldwide perimeter. The Issuer has the right to communicate to the outside only the Second Party Opinion complete and without any modification, that is to say without making selection, withdrawal or addition, without altering it in any way, either in substance or in the form and shall only be used in the frame of the contemplated concerned bond(s) issuance. The Issuer acknowledges and agrees that Vigeo Eiris reserves the right to publish the final version of the Second Party Opinion on Vigeo Eiris’ website and on Vigeo Eiris’ internal and external communication supporting documents. 4/14 DETAILED RESULTS Part I. ISSUERS Banco Santander S.A., founded in 1856, together with its subsidiaries, provides various retail and commercial banking products and services for individual and corporate clients worldwide. The Bank is headquartered in Madrid, Spain. Level of ESG performance Santander’s ESG performance was assessed through a complete process of rating and benchmark. As of February 2020 (date of the last rating cycle for the company), Santander’s displays an advanced ESG performance. Santander ranks 5th in our Diversified Banks sector, which covers 31 banks. Domain Comments Opinion Environment Santander’s performance in the Environment pillar is advanced. The Bank has made a formalised commitment to environmental protection that addresses all its responsibilities in its “General Sustainability Policy and Climate Change and Environmental Management Policy”. Santander has set targets for the 2018-2021 period, such as: Purchase 60% of its electricity from renewable sources in all countries where it is possible to do so, reduce total emission by 1.8%, reduce energy consumption by 3.3% taking 2018 as baseline. Also, Santander plans to raise EUR 120 billion funding by 2025 and EUR 220 billion by 2030 in green finance to help tackling climate issues. The Bank also has a formal commitment to support a low carbon economy and to integrate environmental issues in its financing activities, and discloses policies on sensitive sectors. The Bank has sectorial policies (defence, energy –including nuclear energy-, soft commodities, mining and metals) that apply to all transactions concerning lending, equity and wholesale banking advisory services, insurance and asset management. The corporate risk units are responsible for reviewing and approving the environmental risks of the projects in accordance to the Group’s policies and the Equator Principles. Santander SA is a signatory of the United Nations Principles for Responsible Investment and the Equator Principles III. Santander has participated in the Paris Agreement Capital Transition Assessment (PACTA) pilot lead by the 2º Investment Initiative, along with 16 other international banks. The PACTA pilot is in line with Santander becoming signatory to the Collective Commitment on Climate Action (CCCA) in the frame of the United Nations Environmental Programme for Financial Institutions (UNEP-FI) Principles for Responsible Banking. In addition, Santander is part of the Banking Environmental Initiative (BEI) project, “Bank 2030”, that aims to uncover what opportunities there are for banks to accelerate the financing of the reduction in greenhouse gas emissions. Santander has implemented processes to systematically consider the climate risks of its financed projects. In addition, it monitors and publicly reports on the climate related risks it faces and/or on the CO2 emissions of its portfolio. Santander developed a methodology to annually calculate the emissions avoided through its financing activity. Also, Santander participates in the UNEP-FI initiative to develop a pilot project to implement the recommendations of the TCFD (Task Force on Climate-Related Financial Disclosure). Advanced Good Limited Weak Social Santander’s performance in the Social pillar is advanced. Santander’s performance in the Human Rights domain is advanced, with formalized commitments to respect and promote human rights, freedom of association, the right to collective bargaining and non-discrimination included in its Human Rights Policy and in its General Code of Conduct. To prevent discrimination and promote diversity, significant measures such as affirmative action programmes, maternity/paternity pay, and flexitime initiatives are in place. With the assistance of the Responsible Banking, Sustainability and Culture (RBSCC) committee, the Board of Directors fulfils its responsibilities with respect to culture issues and inclusion. In addition, Santander has created a Global Executive Working Group and a global network of experts to manage and promote diversity & inclusion and has set targets such as eliminating the gender pay gaps by 2025 and increasing the percentage of women in executive position to 30% by 2025. The Bank has also developed policies Advanced 5/14 determining the requirements for providing finance to sectors, activities or potential clients that pose special social or human rights risks and excluding business relations with sectors violating human rights. In its Sustainability Policy, Santander refers to the rights of Indigenous people and its mining and metals policy gives special attention to activities that involve the resettlement of indigenous people and/or other vulnerable groups. The Bank's performance in the Human Resources domain is good. Santander has established a European Works Council and signed a joint declaration aiming at ensuring responsible labour relations and sustainable sale of financial products. Regarding management of restructurings, the Bank reports having implemented significant measures such as early retirement, outplacement services, internal mobility programmes and financial compensation measures to limit the impact of reorganisations, but has not been able to avoid layoffs. In merger processes, merger protocols are negotiated with trade union representatives to ensure dialogue with workers during the different stages of a restructuring process. In terms of career management, Santander has issued a formal commitment although it is not publicly available. Individual development plans, training programs and performance assessments are available to all the company’s employees. To improve the health and safety of its personnel, the Bank has established in its General Sustainability Policy and its Occupational Risk Policy, measures to prevent occupational disease and address issues such as stress at work and absenteeism, a situation that has decreased over the past year. Santander’s performance in the Community Involvement domain is good. The Bank has formalised its commitment to local social and economic development in its General Sustainability Policy, which is monitored by its Sustainability Committee and includes actions to support SMEs, micro-credits, sustainable investments and cooperation with NGOs, however, the Bank provides limited information on actions to mitigate the potential negative effects on local development from client tax advisory services. The Bank also cooperates with stakeholders to spread accessibility on financial literacy and has implemented additional efforts to increase financial inclusion such as a micro-credit programme for disadvantaged communities, preventing financial distress. Santander discloses relevant commitments and some measures to inform and manage customers’ relations responsibly and there is a plan, budget and training to ensure cyber security and to protect key information assets. A Cyber Security Committee and a global CISO that reports directly to the CEO and to the Board has been created. As for the Banks’ commitment to inform customers responsibly, the Bank address its main responsibilities in its General Code of Conduct and in its General Sustainability Policy, setting up some measures for customers to be informed properly at the moment of taking financial decisions. Also, the Products and Services Commercialisation Committee is in charge of preventing the inappropriate distribution of products and services and to ensure the protection of customers by validating products and services. Good Limited Weak Governance Santander’s performance in the Governance pillar is advanced. Most Board members are considered independent (66%) and the roles of Chairman and CEO are separated. Its diversity is considered advanced with 40% female directors. Furthermore, Santander SA has a Responsible Banking, Sustainability and Culture Committee chaired by the CEO that assists the Board on CSR issues. ESG issues are integrated at governance level, in terms of Board responsibilities, internal controls and remuneration policies. ESG performance objectives are considered in the determination of variable remuneration of senior executives, but information on performance targets is not disclosed. The audit and internal control system in place cover the standard issues related to financial, operational, and legal risks. Its internal control system covers most of the CSR risks inherent to the company’s business operations: Business ethics, Data security, Environmental & Climate Change risks, Social & Human Rights risks. Moreover, measures for the supervision of material risk-takers are in place and disclosed. Santander appears to have strong processes dedicated to managing ESG risks. The Bank communicates on systems in place to prevent corruption and money laundering. It is a founding member of the Wolfsburg Group, whose purpose is to establish international standards that increase the effectiveness of programmes to combat money laundering and the financing of terrorism in the financial community. Santander's relationship with the public authorities is limited to registration on the EU Transparency Register and to information on lobbying activities and approval procedures for gifts. Advanced Good Limited Weak