1. Who Must Report in Banking - Spain

Wave 1 - FY2024 report in 2025:
All large Public Interest Entities >500 employees: All Spanish banks are included - Santander, BBVA, CaixaBank, Sabadell, Bankinter, Unicaja, Ibercaja, Kutxabank - as credit institutions per Art 2(a) Directive 2013/34.

Criteria:

• Listed banks, banks, insurance - automatically PIE
• Plus large EU companies meeting 2 of 3: €50M turnover, €25M assets, 250 employees

Wave 2 - FY2025: Other large undertakings meeting thresholds
Wave 3 - FY2026: Listed SMEs + small and non-complex credit institutions (SNCIs)

Spanish Draft Bill (Proyecto de Ley de Información Empresarial sobre Sostenibilidad - Published March 2024):
Aligns with Art 32 of Spanish Climate Change Law - Financial institutions, listed companies and large undertakings must prepare annual reports on climate-related financial risk exposures.

Even without final law, CNMV requires ESRS-aligned reporting for IBEX 35 banks.

2. What Banks Must Report - Environmental Pillar - ESRS E1 to E5

Reporting under European Sustainability Reporting Standards (ESRS) - Delegated Regulation 2023/2772, simplified by Regulation 2026/1563 of 21 Sep 2026.

Banks must apply Double Materiality:

• Impact Materiality: How bank's lending/investing impacts environment (financed emissions)
• Financial Materiality: How climate change impacts bank's financial performance (credit risk, market risk)

ESRS E1 - Climate Change - MOST CRITICAL FOR BANKS

Must disclose:

a) Transition Plan - Art 19a CSRD:
How bank will align business model with 1.5°C Paris target and EU Climate Law - 2050 net zero. Must include financed emissions reduction targets.

b) GHG Emissions - Scope 1, 2, and 3:

• Scope 1-2: Own operations - branches, data centers
• Scope 3 Category 15: Financed Emissions - The core for banks. Must report absolute GHG emissions financed via loans, project finance, mortgages, corporate bonds, per PCAF Standard (Partnership for Carbon Accounting Financials).
• Methodology: Must disclose % of portfolio calculated with actual client data vs estimated.

c) Energy Consumption: PUE of data centers

d) Physical and Transition Risk: Under ESRS E1-9 - Exposure of loan book to climate risks - e.g., % mortgage portfolio in flood zones, % corporate exposure to high-emitting sectors (NACE codes).

ESRS E2 - Pollution, E3 - Water, E4 - Biodiversity, E5 - Circular Economy

Banks must report exposure to sectors with high pollution / water stress via NACE mapping.

EU Taxonomy Alignment - Art 8 Taxonomy Regulation

Banks must disclose:

• Green Asset Ratio (GAR) - % of assets financing taxonomy-aligned activities
• Banking Book Taxonomy Alignment Ratio (BTAR)

This is Pillar 3 ESG disclosure under CRR Art 449a - Required by EBA ITS 2022/01 - From 2024, banks must publish ESG risks, including financed emissions and GAR in Pillar 3.

Ley 7/2021 de Cambio Climático - Spain Specific Obligation

Art 32: Financial institutions must publish annual report assessing:

• Financial impact of climate risks on portfolio
• Carbon footprint of portfolio
• Alignment with Paris Agreement
• This report must be sent to Banco de España, CNMV, DGSFP

Bank of Spain Circular 3/2022 integrates this into supervisory review (SREP).

3. How to Calculate - Engineering Obligations for Banking Tech

To comply, bank's tech must build:

1. ESG Data Lake:

• Client-level emissions data - Collect from clients (CSRD data of clients) or estimate via sector proxies
• Collateral geolocation for physical risk - e.g., mortgage collateral coordinates -> flood maps (MITECO)
• NACE code mapping to EU Taxonomy activity

2. Financed Emissions Engine (PCAF):
Financed Emissions = Attribution Factor x Client Emissions
Attribution Factor = Outstanding Amount / EVIC (Enterprise Value Including Cash)
For mortgages: Outstanding / Property Value at origination

Must store data quality score 1-5 per PCAF.

3. GAR Calculation Engine:
Per Taxonomy - Check 3 criteria: Substantial Contribution, Do No Significant Harm, Minimum Social Safeguards. Must trace loan purpose.

4. Assurance and Liability

CSRD Art 26a: Sustainability information must be assured by statutory auditor - Limited assurance initially, reasonable assurance from 2028.

Failure to report / Greenwashing = Liability:

Spanish Case Law and Enforcement - Emerging:

1. CNMV Sanction - BBVA and Santander - Pillar 3 ESG 2023
CNMV required restatement of 2022 ESG Pillar 3 reports for incomplete financed emissions methodology. First enforcement of EBA ITS - Banks had to publish corrected GAR with detailed methodology.

2. AEPD + CNMV Greenwashing Doctrine - CaixaBank Green Bonds Case (2023)
CaixaBank marketed mortgage as "green" without taxonomy alignment evidence. CNMV considered misleading under Art 12 Ley de Mercado de Valores (now Ley 6/2023) and MiFID ESG preferences. Required to withdraw marketing.

3. EU - ClientEarth vs. Enea (Poland) / Shell (Netherlands) - Used as precedent in Spain
ClientEarth sued directors for failing to implement climate transition plan - Court held transition plan under CSRD is enforceable fiduciary duty. Spanish law firms (Garrigues, Linklaters) cite this for Spanish banks: Board must approve transition plan, otherwise liability under Art 236 Ley de Sociedades de Capital.

4. Tribunal Supremo - STS 241/2013 Cláusulas Suelo Doctrine Applied to ESG
Spanish Supreme Court's material transparency doctrine extended by lower courts to ESG products: If bank sells "sustainable" fund without explaining taxonomy alignment methodology, clause is void for lack of transparency.

5. Banco de España - SREP Climate Risk - 2024 Supervisory Letters
Banco de España issued letters to 10 less significant institutions for failing to include climate risk in ICAAP. Required remediation plan. This is supervisory enforcement of CSRD E1 financial materiality.

6. EU Commission Simplified ESRS - Regulation 2026/1563 - Published 21 Sep 2026
Reduces burden but keeps banking obligations. Key: Banks can omit certain datapoints if not material, but must explain. Financed emissions (E1-6) is ALWAYS material for banks - cannot omit.

5. Checklist for Spanish Bank - CSRD Environmental Compliance

Immediate (FY2024 Report in 2025 - Already due):

•  Double materiality assessment documented
•  Scope 3 Cat 15 financed emissions per PCAF with quality score
•  GAR and BTAR calculation per Taxonomy Delegated Acts
•  Climate physical risk exposure (flood, fire) for mortgage book - using MITECO maps
•  Transition plan approved by Board - with 2030, 2050 targets for financed emissions
•  Pillar 3 ESG template (EBA) - Tables 1-10
•  Assurance by auditor - ISAE 3000

IT Build:

• ESG data collection from corporate clients - integrate with CSRD data of clients (when they report, you use their reported emissions)
• Geolocation enrichment for collateral
• Taxonomy eligibility check engine

Non-compliance penalties under Spanish draft law: €10,000 to €5,000,000 + disqualification, plus CNMV can suspend listing for misleading ESG info.