SUSTAINABILITY REPORT 2018

From Words To WE DRIVE COSTA RICA’S SUSTAINABLE PROGRESS

Banco Nacional de Costa Rica Banco Nacional’s headquarters is located in San José, Costa Rica, between streets 2 and 4, and 1rst and 3rd avenues. The bank has operations in the 7 provinces of Costa Rica.

Contact for questions about this report: Social Responsibility Office, phone: (506) 2212-2000 Margarita Murillo Vargas, Executive / [email protected] www.bncr.fi.cr

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Introduction...... 4 Notes from the CEO...... 6 Organizational Profile...... 16 Ethical and Sustainable Banking...... 25 A Bank for Everybody...... 31 Employee Development...... 33 Transforming Communities Program...... 38 Together We Can Achieve More...... 40 Financial Freedom...... 42 Sustainability Advertising...... 44 Green Bank...... 47

INDEX Productive Bank...... 52 Business and Institutional Banking...... 55 Development and Retail Banking...... 56 BN Mujer (Women entrepreneur)...... 61 Trust Funds for Sustainability...... 64 Sustainable Value Chain...... 66 Annexes...... 69 GRI index...... 81

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INTRODUCTION

Banco Nacional’s 2018 Sustainability Report corresponds to the period from January 1 to December 31, 2018. The publication of this report has an annual periodicity.

This report was prepared in accordance with the standards of the Global Reporting Initiative (GRI), in its core option. The report coverages the operations of Banco Nacional in Costa Rica. It includes the profile of the organization and the four dimensions of sustainability, which in the organization have been named:

1. 2. 3. 4. ETHICAL AND A BANK FOR PRODUCTIVE GREEN BANK SUSTAINABLE EVERYBODY BANK BANKING Social Dimension Environmental Economic The basis of the Dimension Dimension sustainability strategy

With the presentation of this report, Banco Nacional makes public its commitments and hopes that year after year its clients, collaborators and other strategic partners follow up on this evolution and also participate in the construction of progress with a vision of sustainability.

Throughout the document you will find links to expand the information of the report or to have access to audiovisual material about our programs.

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WE WORK TO Dear Friends, It is a great satisfaction to present the first Nacional and are vital for the socio-economic GENERATE Sustainability Report of the Banco Nacional development of Costa Rica. The Central Bank, VALUE FOR OUR Financial Conglomerate, designed following the National Production Council, the Institute international indicators of the Global Reporting of Agrarian Development, the National Institute STAKEHOLDERS Initiative. In it, we show the growth that the of Housing and Urban Development and the institution has achieved in terms of sustainability, National Institute for Cooperative Development, its achievements, failures, and the objectives that which are convincing examples of the mark left we will have to accomplish in the next few years. by Banco Nacional along with its 105-year history. Since its creation in 1914, the purpose of Banco These organizations originated in Banco Nacional has been to work for the economic Nacional, as our institution aimed to satisfy progress of the country, consolidating as a the needs of our target audiences. The work development bank firmly committed to the is done considering the maximization of generation of economic, social, and environmental resources and adequate risk management to value. The Sustainability and Business Strategy avoid compromising the wellbeing of future based on these three dimensions is the way to generations. Along the same lines, the Banco take responsibility for the decisions and impacts Nacional conglomerate is currently working to caused by the activities of the Conglomerate guarantee a balance between economic growth, on the environment, society, economy, and its care for the environment, and social welfare. public interests. Costa Rica needs to count on a robust, stable Ethical and transparent behavior is the starting and secure bank, but, above all, one that is point of Sustainability, complemented by aware of the needs of our stakeholders, the continuous improvement management, protection of the environment, an adequate and which seeks to optimize the operation of the efficient use of our resources, the strengthening Conglomerate. of our collaborators, and the empowerment of micro, small and medium-sized enterprises. We The aim is to strengthen the level of keep ethics at the heart of the business and competitiveness of the institution, reinforcing its are committed to the country. To improve the commitment to sustainability, while contributing quality of life of the most significant number of to development and promoting a more people, the Banco Nacional Conglomerate will prosperous economy in the country, leveraging strive to become Carbon Neutral by 2021 while Message from the President of our customers and generating a multiplier effect maintaining its leadership in the financial sector. the Board of Directors of responsible practices between collaborators, the value chain and interest groups. Banco Nacional works for a common goal, making Costa Rica great. Thank you very much María Jeannette Ruiz Delgado For those unaware of the indelible mark of for your trust. Banco Nacional, it is only necessary to take a look at history, the best evidence of its sustainable management. For the bank and its triple usefulness goal, it is essential to remember other institutions that were conceived at Banco 5 WE DRIVE COSTA RICA’S SUSTAINABLE PROGRESS

WE CONTRIBUTE WITH 2018 was a very tough year for the national financial system, with a challenging economic PROGRESS TO COSTA RICAS’S environment for banking; however, the robustness of Banco Nacional allowed the SUSTAINABLE ROUT indicators to be kept at adequate levels ensuring the stability of customers and employees.

An effective business management generates profits that allow responding to a demanding economy, financing major projects, and supporting companies and individuals that need Banco Nacional to be present and capable of lending. From the perspective of sustainability called Productive Bank, this document reports data that demonstrate management’s commitment at all levels.

Clients comprise a very dynamic audience, and in pursuit of responsible indebtedness we have implemented financial education initiatives to avoid the unwanted impacts of inadequate money management. Banco Nacional does not see its clients from a solely commercial relationship perspective; the organization is inclusive and adapts its services to be accessible -digital applications for blind Gustavo Vargas Fernández people and automatic tellers in indigenous General Manager language have democratized our services.

The highest award an organization can receive is to know that its actions generate a positive impact, and having absolute clarity that sustainability is the ability to be profitable,

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meeting current needs without compromising I am convinced that we have moved in the the resources of future generations. In 2018 right direction to consolidate an efficient Banco Nacional received seven awards for and responsible management for all our making responsible and inclusive banking, stakeholders. I invite all partners and customers through which thousands of people benefitted. to join our sustainability actions, because that’s a relationship where everyone wins. The route towards sustainability is drawn, and This achievement is the result of rigorous and covers three dimensions: 1) Economic, which committed work in different areas of Banco means that Banco Nacional promotes the Nacional. creation of jobs and wealth to meet the needs of the stakeholders. 2) Environmental: Takes Banco Nacional is clear about this premise, care of institutional resources, decreases and from it we have decided to support its carbon footprint and waste, invests in the construction of a more successful, environmentally friendly technologies; and productive, just and responsible society. To 3) Social: Looks after its employees, human move towards this aspiration, the Board and rights, and the most vulnerable communities General Management have defined we want through specific programs or working with to be a preeminent bank, a bank that stands grassroots organizations. out by offering services and products that meet, with excellence, the financial needs of We continue to make efforts to achieve our customers, but with a different view, a carbon neutrality plus; we joined the country’s sustainable vision. initiative, and we are confident that, in 2021, we will reach the goal. Social investment moves local economies that have been depressed, and Banco Nacional remains a role model in the regional economy.

The pillar of our employees is critical, and their commitment is evident in the implementation of actions, from the development of innovative technology products, credit counseling and the safeguarding of securities and efficiency, but also the volunteer hours that have transcended the operation. I sincerely appreciate this effort.

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THE ACCOMPLISHED PROGRESS ALONG 105 YEARS OF HISTORY Banco Nacional of Costa Rica (BNCR) was established by Executive BN FONDOS (Investment Funds): Decree No. 16 on October 9, 1914, during the beginning of the It was founded on April 29, 1998, in order to manage First World War. Faced with the threat of decreased exports investment funds registered with the General Superintendence in the country, the government began to stimulate domestic of Securities (SUGEVAL). It is authorized by the National Council demand by putting cash in the hands of Costa Rican families, of Supervision of the Financial System at meeting 61-99, held but currency emission was in the hands of private banks. on December 17, 1998. Therefore, then President of the Republic, Alfredo González Flores, decided to create the first state bank under the name BN VITAL (Pension Funds): Banco Internacional de Costa Rica (International Bank of Costa In 1993, Banco Nacional of Costa Rica launched a “trust” for Rica). In 1936, a decree transformed it into the International voluntary pensions called BN VITAL. It was established in 1998 Bank, It had three departments: Issuer, Commercial and as BN Vital Operadora de Pensiones Complementarias Sociedad Mortgage. It was then that the institution changed its name Anónima. to Banco Nacional de Costa Rica (National Bank of Costa Rica). BN CORREDORA DE SEGUROS (Insurance Broker): Banco Nacional is subject to the Law on Government, in It began operations in October 2009, authorized by the General accordance with Articles 188 and 189 of the Constitution. Its Superintendence of Insurance (SUGESE) under license number legal and material endeavors as a commercial bank are defined SC-09-102. by the Organic Law of Banco Nacionaling System, No. 1644, of September 26, 1953. Banco Nacional (National Bank): With 105 years of experience, Banco Nacional and its 5294 employees currently serve over 2 million customers in locations BN Valores: across the country, including 4 subsidiaries: Websites https://www.bnvalores.com of Banco BN Fondos: Nacional and www.bnfondos.com BN VALORES (Securities): its subsidiaries It was incorporated as a limited company in 1998. It is a founding BN Vital: member and concessionaire of the National Stock Exchange for http://www.bnvital.com over 40 years. BN Corredora de Seguros: https://www.bncr.fi.cr/CorredoraSeguros

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OUR STRATEGY

MISSION: VISION: VALUES: Improve the quality of life of the To be the country’s Integrity, creativity, largest possible number of people, best bank in terms perseverance, teamwork, offering financial services of customer service. service quality. with excellence that foster sustainable wealth creation. ASPIRATION: Be the preeminent Bank of Costa Rica, strengthening their critical role in the development and welfare of the country, with a significant boost to profitability, by offering customers superior service at a price in line with the market and with exemplary organizational health and financial strength. I II III IV V

Change Drive Improve Operate as Grow with a the business mix productivity customer an integrated sense of social (products and and efficiency experience conglomerate responsibility segments) through digital leadership

CORPORATE RETAIL AND DEVELOPMEN SUBSIDIARY ORGANIZATIONAL FINANCIAL SUPPORT BANKING ENTERPRISE BANKING HEALTH SOUNDNESS FUNCTIONS BANKING

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WE ARE ALL OVER NATIONAL TERRITORY

Banco Nacional has a network of 173 branches and over 400 ATMs located throughout the country. There are 1,200 commercial establishments affiliated to the BN Services 2 system, providing over 200 payment options 1 3 with public and private companies. This system also offers the possibility of making cash withdrawals, card payments, and credit 4 operations. 5 8 GEOGRAPHICAL BREAKDOWN 9 10 6 1 Liberia Commercial Zone: Offices 19 11 2 Ciudad Quesada Commercial Area: Offices 15 7 3 Alajuela Commercial Area: Offices 12

4 Heredia Commercial Area: Offices 14 8 Puntarenas Commercial Area: Offices 13

5 Limon Commercial Area: Offices 12 9 Eastern Commercial Area: Offices

6 Cartago Commercial Area: Offices 20 10 Central Commercial Area: Offices 1

7 Perez Zeledon Commercial Area: Offices 15 11 Western Commercial Area: Offices 20

SUBSIDIARIES Banco Nacional owns 100% of the shares of BN Valores (Stock Banco Nacional has a 49% stake in the International Bank Brokerage), BN-Vital (Pension Fund Operator), BN-SAFI (Investment of Costa Rica Limited (BICSA), a company located in the Funds) and BN Corredora de Seguros (Insurance Broker). Republic of Panama.

10 Office locations: https://www.bncr.fi.cr/Documents/Sucursales%20BN.pdf SUSTAINABILITY REPORT 2018

PRODUCTS OFFERED BY BANCO NACIONAL

PRODUCTS SERVICES BN Derivatives BN Savings Credit BN Internet Banking BN Scheduled Savings BN Corporate Internet Banking BN Connectivity SERVICES AND BN Mobile Banking BN Custody PRODUCTS BN Education OFFERED BN Corporate Mobile BY BANCO BN PAR (Scheduled Payments) BN Earn more NACIONAL BN Integrated Custody Services BN Mortgage Banco Nacional has a list Night mailbox BN Solutions of sustainable (green) Security boxes BN Vehicles products and services, Credit letters Balance Purchase which are detailed in Fit Deadlines Growth Fund the Banco Verde (Green Check Certification Checking account Bank) section of this CDP Time Deposit Certificate Classic e-account report. International bank check Salary e-account Cashier’s Check Smart Account Collections Money fund E-commerce Trust ATM Deposits Deposit fund Digital signature Demand Investment fund International Warranties Demand investments at agreed rate Inter-currency Redifund Pension payments of the US Government Self-issued insurance Preparation, transport and delivery of remittances at the customer’s home Super fund Receipt of check deposits from banks domiciled abroad Super fund plus Remittances abroad Credit Cards BN PAS (Automatic Payment of Wages) Debt Unification Deposit collection service at the customer’s home Withdrawal service from PayPal accounts Quick Pass Service SWIFT Service Transfer Check ATM Transfers International transfers SINPE Transfers 11 WE DRIVE COSTA RICA’S SUSTAINABLE PROGRESS

BOARD OF DIRECTORS OPERATION

From left to right: Marvin Arias Aguilar, Rodolfo González Cuadra, Víctor Hugo Carranza Salazar, Mario Carazo Zeledón, Ana Isabel Solano Brenes, Jeannette Ruiz Delgado, Ruth Alfaro Jara

According to the provisions of the Organic Law of National Banking System (Law No. 1644), state commercial banks -and, therefore, Banco Nacional- operating under the direction of a Board of Directors composed of seven members appointed by the Governing Council . The period of work of this Board is eight years, period in which the President of the Board of Directors may not hold any executive position within the Banco Nacional de Costa Rica conglomerate.

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The General Board is constantly monitoring processes regarding The committees in which the members of the Board participate the timely and appropriate care given to actions designed in are: to influence the development of the country, through the knowledge and approval of reports, like the following: • Corporate Audit Committee • Corporate Compliance Committee • Presentation on advancing the strategy of the Directorate • Compensation, Nomination and Governance Committee of of Social Responsibility. Banco Nacional Conglomerate. • Financial report on overall and economic performance • Corporate Risk Committee • Comprehensive Risk Assessment Report and Statement • Special Committee on Budget Analysis of Placements • Evaluation report of the Strategic Plan Documents that guide the Board • Verbal report on Minae’s recognition for the Bank’s environmental management and environmentally • Code of Conduct and Ethics of Banco Nacional Conglomerate sustainable strategies. (includes regulations for conflicts of interest) • Report on resource placement results of the Development • Corporate Governance Code. Banking System. • Article 38 regulates the Corporate Governance and Conflicts • Document: We drive the sustainable progress of CR of Interest policies. • The Organic Law of National Banking System (Article 32 In 2018, issues related to the macroeconomic environment details the issue of conflicts of interest) of the country were dealt with. The Bank supported the Government, as far as possible, to funds its liquidity needs. The General Board is responsible for the approval of purpose, Also, work was done to promote credit growth, despite the mission, values, strategies, and policies, and the organization’s difficult economic situation, which was intended to achieve objectives relating to economic, environmental and social impacts, economic recovery. as appropriate, according to proposals presented by management.

Members of the Board of Directors • Mrs. Jeannette Ruiz Delgado. President • Mrs. Ruth Alfaro Jara, Vice-president • Mr. Rodolfo González Cuadra, Secretary • Mr. Marvin Arias Aguilar. Director More information on our Board of Directors in the Transparency Portal: • Mr. Mario Carazo Zeledón. Director https://www.bncr.fi.cr/transparencia/Paginas/Junta-Directiva.aspx • Mr. Víctor Hugo Carranza Salazar, Director • Mrs. Ana Isabel Solano Brenes. Director

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CORPORATE GOVERNANCE STRUCTURE

General Board of Directors Representation on the BICSA (Shareholders Assembly) General Board

Internal Audit External Audit

Subsidiary Boards of Support Committees Directors

Corporate Committees External Audit Internal Audit Nomination and Audit Committee Compensation Committee

Risk Committee

Compliance Committee

BN General Management Management

BN BN BN BN Corredora Fondos Vital Valores Seguros

The annual reports of Corporate Governance and committees, as well as the Corporate Governance Code, are available on the Transparency Portal at Banco Nacional’s website. https://www.bncr.fi.cr/transparencia/Paginas/GobiernoCorporativo.aspx

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PARTNERSHIPS

Member of: • Costa Rican Banking Association • Chamber of Banks of Costa Rica. • National Advisory Council on Social Responsibility • National Partnership for Development • Latin American Association of Development Financing Institutions (ALIDE) • Chamber of Investment Funds (CAFI) • Latin American Banking Federation (FELABAN) Partnerships: • Development Banking • Central American Bank for Economic Integration (CABEI) • Claro • National Council on Indigenous Affairs • Costa Rican Association of Pension Operators (ACOP) • National Council of People with Disabilities (CONAPDIS) • International Federation of Pension Fund Administrators (FIAP) • National Directorate of Community Development (DINADECO) • Ecolones • National Forestry Financing Fund (FONAFIFO) • Environmental Bank Foundation (FUNBAM) • Dehvi Foundation • Omar Dengo Foundation • Government of Costa Rica • Water and Sewage Institute (AyA) • Costa Rican Chamber of Industries • National Women’s Institute (INAMU) • Ministry Of Environment And Energy (MINAE) • Ministry of Science & Technology (MICIT) • Ministry of Economy, Industry and Trade (MEIC) • Ministry of Education (MEP) • Ministry of the Presidency • Ministry of Labor and Social Security (MTSS) • United Nations • BN Sociedad Corredora de Seguros S.A. is incorporated into the • OMIN Chamber of Insurance Intermediaries Costa Rica. • Foreign Trade Promotion Office (COMEX). • University of Costa Rica • Universidad Latina

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SUSTAINABILITY STRATEGY OF BANCO NACIONAL

In 2008, the Bank incorporated the triple dimension vision (social, the sustainability of Banco Nacional, considering a materiality environmental, and economic) in their management, and since analysis, stakeholder consultations, and commitment with the 2016 this vision at a strategic level was formalized by establishing Sustainable Development Goals and country targets. growth with a sense of social responsibility as the fifth pillar of organizational strategy . A cross-cutting axis of Ethical, Sustainable Bank was defined, with three dimensions: Productive Bank, Green Bank, and A Bank for From this guideline, in 2017 the strategy was established regarding Everybody.

8 Material Issues

A committed bank BN SUSTAINABILITY POLICY S S P Banco Nacional Conglomerate is committed to economic, social and environmental development, adopting the best practices of sustainability in its strategy, value chain and EEN AN TE AN A AN F EE immediate environment, in line with the country initiatives Sustainable Employees: (approved at Bard meeting Eco-efficiency : 1 3 Growth: 6 S No. 12.190 of September 11, Incorporation in 100% of the work life and personal life. 2017). environmentally efficient Customers: Education, Sustainable products 4 Enhance their experience financial inclusion 2 and services 7 and social investment: Development of products, Supply chain: P 5 Add best practices penetration and social that are environmentally

Ethical and Sustainable Banking

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OUR SUSTAINABLE PROGRESS IN 2018

To promote the advancement of the sustainability strategy, a management Responsibility for meeting the goals is distributed across different areas model consisting of 63 indicators and targets has been established to of the organization, ensuring the cross-cutting aspect of the sustainability measure, every month, the performance of Banco Nacional in each of the strategy. material issues. The following chart shows the fulfillment of the goals set for 2018:

TE AN EEN AN A AN F EE E d ss AN 97.8% 100.0% 94.3% 98.0%

95.3% 98.0% 100.0% 100.0% 100.0% 89.9% 99.6% 98.0% FINANCIAL SUSTAINABLE CLIENTS SUPPLY CHAIN ECO-EFFICIENCY BN ECOBANKING COLABORADORES INCLUSION AND CORPORATE GROWTH EDUCATION GOVERNANCE

96.9% 98.4% 98.4% 100.0% 100.0% 100.0% 100.0% 95.0% Digital transformation Purchases with Water consumption Financial products that Work conditions Investment for Development Act as a conglomerate 95.7% 100.0% sustainability criteria 97.1% - Environmental impacts 100.0% protection 100.0% Productivity Information on purchases S Financial solutions 100.0% and efficiency to consumers and fair Fuel consumption (Women's Banking) 100.0% Ethics marketing practices 98.4% 100.0% 100.0% Professional 100.0% Fair Competition 95.6% Promoting social Power consumption Financial Education 100.0% Customer Experience responsibility 100.0% in SME suppliers 100.0% 100.0% 100.0% 100.0% and customers Paper consumption Financial inclusion Analysis of social and O T 100.0% environmental risk in Data security and 99.4% credit and investment consumer privacy 100.0% 100.0% Operational Risks that E Inclusion and accessibility operations Renewable Energy to the services for people affect sustainability 96.1% 100.0% with disabilities 100.0% 95.0% Support for SMEs Waste Management 100.0% and ventures 100.0% P 100.0% Occupational health ventures and safety mitigation 100.0% 100.0% Financial support and Respect for human solutions for women rights and non-discrimination 100.0% 0.0% Financial support and Due process and solutions for indigenous populations evaluation 100.0% Financial support and solutions for Note: In Bank for Everyone, the indicator “Due process and performance evaluation” has a score of zero because there is the model and referenced incentive, but on the reporting date the annual reviews were still closing.

In early 2019, an update of the Institutional Strategic Plan was made, ratifying the fifth strategic objective of growth with sustainability, which Banco 18 Nacional maintains and strengthens its commitment to economic, social and environmental development of Costa Rica, with a view to the targets for 2021 and in accordance with the National Development Plan. SUSTAINABILITY REPORT 2018

RISK MANAGEMENT WITH A SUSTAINABILITY VISION

Banco Nacional has a comprehensive management process, • Institutional processes in which these risks could cause categorizing risks as follows: impairment were identified. • SR as a specialized area managed, with each process, guidelines, internal rules, guidelines, and tools, among others, to address these risks. Financial Non-Financial Cross-cutting • The Directorate of Operational Risk updated the process risk mapping included in the 2018 operating plan. Market Operating (legal Strategic (rates, prices, and information Methodologically speaking, if after the analysis the risks are not exchange rate) technology) of a high correlative evaluation, the design of a control activity will not be required. More recently, there is an improvement Credit Reputational Capital in the risk mapping methodology to incorporate the criteria of impact, eventual effects on institutional image regarding social Liquidity responsibility and sustainability topics, which would give a more cross-cutting coverage to the analysis. The Bank’s precautionary approach in managing risks includes: All the risks mentioned in the table above have economic and social impact, given the driving role the BNCR plays regarding • Process Governance: clear delineation of lines of defense development in the country. In addition, proper risk management • Risk appetite statement: the Board defines the risk appetite at the BNCR contributes to the stability of the financial system, that wants to take in pursuit of the objectives of the because of its systemic importance. organization. • Continuous risk monitoring: periodic risk measurement is With respect to the portfolio of sustainability risks, the area of performed, comparing the profile with the limits approved Social Responsibility and the Risk and Internal Control Directorates by the Board, with results reported to the Risk Committee defined a methodology for identifying the risks associated with the and Board of Directors. topic of sustainability. The SR area as a specialized technical area defines the specific guidelines to affected process owners for the In this process, the existence of a strong risk culture that allows adequate management of the identified risks. deep understanding of the exposures of the organization is essential for risk elements to be present in decision-making at all The process of identifying and monitoring Social Responsibility levels of the organization. in coordination with Risk Management is based on the following aspects:

• The baseline on the portfolio of the 10 BNCR sustainability risks was defined together with the Social Responsibility Directorate.

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THE 10 SUSTAINABILITY RISKS MANAGED BY BANCO NACIONAL OPERATIONAL AREAS: 1 2 3 4 5 Inefficient or Practices that do not Lack of interaction Non-compliance Non-compliance inappropriate use of promote channels with with international with laws and resources from fair opportunities stakeholders human rights regulations the perspective of for minority groups standards regarding sustainability to hold positions competition at all levels of the aspects organization 6 7 8 9 10 Lack of adequate Consumers not Non-compliance Providers performing Not taking and efficient support educated about the with legal guidelines practices against measures to reduce and advice systems proper use of the relating to the sustainability pollution within its to consumers (after- financial products environment (technologies, control influence sales service) they acquire processes, (recoverable waste relationships with management, their employees and consumption of BN customers) paper, ink, water and electricity)

The team (Social Responsibility and Operational Risk Management directorates) made the decision to initiate the full assessment of the portfolio starting in 2018.

Sustainability risk analysis and management apply to the entire Banco Nacional Conglomerate.

The Annual Risk Report of Banco Nacional can be found at: https://www.bncr.fi.cr/BNCR/Transparencia/InformeAnualRiesgo.aspx

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WE BUILD PROGRESS WITH THEM

As part of its STAKEHOLDERS Sustainability Strategy, and considering the challenges of the country, Banco Nacional has identified the following priority segments in Press Clients Providers Employees Allies That will focus their of funds programs: Written press, Corporations and Development Union and State-owned Radio stations and institutions, large, Banking (FINADE), staff associations, enterprises, Television medium and small IMAS (FIDEIMAS), seasonal personnel private businesses, preferential IDB, CABEI, KFW. and permanent companies, and customers (individuals), staff. non-governmental BN SOStenibilidad and mass customers. organizations.

Elderly Youth and Children Indigenous Population Employees Regulatory Communities Suppliers Government Competition People with bodies disabilities Immediate Strategic, critical, SUGEF, SUGESE, Central Government State-owned banks, Women and community, basic and SUGEVAL, SUPEN, Legislative Assembly private banks and women living surrounding towns replaceable. Central Bank and Ministries cooperatives. in poverty and public opinion.

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AWARDS AND HONORS

Costa Rica Incluye (Costa Rica Includes) Banco Nacional is aware that disability is not a matter of others, nor The prizes awarded are: of a few. We must all get involved to understand that what we have in mankind are differently abled people. The commitment to this • Inclusive hiring understanding, translated into action, is made public and sealed • Accessibility in new and remodeled physical with the awards given by the Costa Rica Includes program to Banco spaces Nacional in seven different categories for its implementation of best • Access to websites practices in social and workplace inclusion. • Inclusive customer service • Accessible products Among the Bank’s best inclusion practices, the activities called BN • Community and inclusion Dialogues with people with disabilities are highlighted. Officials from • Inclusive journalism Social Responsibility and Institutional Relations developed dynamic meetings to obtain feedback on experiences and expectations with specific customers, visually impaired persons and even athletes, with the aim to meet and respond to the demands of these groups. In addition, of note were the information campaigns and communication actions seeking to promote the rights of persons with disabilities, to dignify their image, demystifying beliefs about disability and promoting social and workplace inclusion. The distinction of Costa Rica Includes is promoted by the Office of the Second Vice-President, the Business Alliance for Development (AED), the Ministry of Labor and Social Security (MLSS), and the National Council of Persons with Disabilities (CONAPDIS), in partnership with the United Nations Program for Development (UNDP) and the International Labor Organization (ILO).

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• Blue Flag award with • Environmental Blue Flag • Environmental Blue Flag • ISO 9001:2015 Certification distinction of an additional with five stars and a green Program, Climate Change on Quality Management star. star, the highest honor plus four stars. Systems. Requirements • Awards from the NATIONAL awarded for the category. • It also earned score over • G30:2008 Certification INSURANCE INSTITUTE • ISO 14001:2015 Certification 90 in the Institutional National standard on for first place in premium of the Environmental Environmental Management principles for investment growth in 2017 in General Management System, ISO Program of MINAE. and management of Insurance and Labor Risk 9001:2015 of the Quality • Recognition from the operational and financial Insurance, first place in Management System, and National Power and risks of the funds managed greatest production of Carbon Neutral since 2014. Light Company for its by entities regulated by Commercial Insurance in • With the new version of commitment to energy the Superintendence of 2017, and second place in the “Carbon Neutrality saving. Pensions. Requirements. greatest total production in 2.0” Country program, • BN Valores was recertified in • INTE B5:2016 certification 2017. BN Fondos obtained the ISO 9001-2015 for its Quality on Standard to demonstrate • Award from ASSA maximum category, called Management System. • Carbon Neutrality. COMPAÑÍA DE SEGUROS “Carbon Neutral Plus”. Requirements SA, for second place in • Energy Efficiency Award • Environmental Blue Flag LIONS TO EXCELLENCE 2017, from the CNFL for efforts to Program, Climate Change BUSINESS. make virtual communities, category. • Award by MAPFRE to CNFL neighbors and • Great Place to Work BN Corredora (broker), technical services. Certification. PLATINUM CLOVER FOR EXCELLENCE IN PERFORMANCE 2017. • Recognition by the National Power and Light Company (CNFL) for Energy Efficiency.

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OUR COMMITMENT TO SDGS

The sustainability agenda of Banco Nacional is aligned with the global for each of the 17 SDGs; however, it has prioritized its work on the aspirations set out in the Sustainable Development Goals (SDGs). following goals, considering their impacts and the opportunities provided by its line of business, to make a significant contribution to The Bank has programs that have an impact on specific objectives these challenges.

The annexes to this report provide details about our contribution to the SDGs, broken down by target.

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ETHICS AS A CROSS-CUTTING AXIS

According to Article 13 of the Code of Corporate ETHICS MANAGEMENT PROCESS Governance, the Financial Conglomerate of Banco Nacional de Costa Rica is committed to both sustainable development, the comprehensive well-being of the Periodic Corporate country, and of their employees, by applying the Revision and Compliance highest ethical and behavior standards in each of its Committee Updating of the activities. 1 Code of Ethics To achieve this goal, Banco Nacional has a Code of Conduct and Ethics which aims to: General Board of • Facilitate formal communication, stating expected Adoption Directors and Boards of Directors of behaviors that its employees must show in of the Code Subsidiaries accordance with the organization’s values, ethical and start its principles, strategic corporate plan, and the laws 2 implementation that govern Banco Nacional. • Define guidelines on the expected relationship Directorate Human Communication and Occupational regarding each of the stakeholders (employees, Health heads, suppliers, customers, community, and Training government and regulatory bodies, among others) Implementation of as well as its commitment to the environment. 3 Mechanisms for control It is mandatory for members of the steering and management bodies of Banco Nacional Financial Conglomerate. The Conglomerate’s staff is required Monitoring Conglomerate Heads to know and comply with the Code and must facilitate compliance its implementation, including the report of any known with the Code infringement. 4

They are responsible for implementing and maintaining the Code of Conduct and Ethics, and include: Article 14 of the Corporate Governance Code, and section 1.4 of the Code of Conduct and Ethics. 26 SUSTAINABILITY REPORT 2018

Respect for individual dignity and their inherent rights Equitable Loyalty respect for all people and their diversity

ETHICAL Correct use of PRINCIPLES powers and OF BANCO authorization NACIONAL Law compliance OF COSTA RICA

Responsibility duty Professional Objectivity

Honesty

The Code of Conduct is available at https://www.bncr.fi.cr/transparencia/Paginas/Gente-BN.aspx This document was updated and approved by the General Board of Directors session 12.205 held on December 4, 2017. 27 WE DRIVE COSTA RICA’S SUSTAINABLE PROGRESS

TOOLS AND CHANNELS OF BANCO NACIONAL TO GUARANTEE ETHICAL AND LAWFUL CONDUCT:

MANAGEMENT TOOL FOR OPENING INVESTIGATIONS:

This may include requests to investigate regarding ethical matters, various management levels in the organization in different aspects, unlawful conduct and regulatory breaches. The final result, including ethics and integrity, as well as to provide answers to which is established in procedural framework, is an input with customer questions or incidents that are submitted. recommendations for managing the opening of administrative or criminal proceedings, and recommendations to the organization’s management in order to mitigate risks or future events. Meanwhile, the tool shows open information content for the internal public on different topics, including those related to ethics and integrity. This SERVICE COMPTROLLER: tool is managed by the risk area. In response to the provisions of Law No. 9158 “Law Regulating the National System of Service Comptrollers” in accordance with Law No. 9097 “Law Regulating the Right of Petition”, the Service Comptroller is established as a communication mechanism CONFIDENTIAL REPORTS TOOL: between the Bank, customers, and any person using the services of Banco Nacional Conglomerate. Various mechanisms and channels Access mechanism for all institution personnel. Its main function have been created for reporting any unethical and / or illegal is to file complaints of illegal or fraudulent conduct, with the conduct, including: social networks, e-mail, phone calls, contact guarantee of absolute confidentiality of whoever complains, center, and the institution’s internet home page. Also, customers because the tool itself does not display information about the can make their complaints in person at different bank branches, at complainant. Once the report is made, by procedure it has a set the main office of the Service Comptroller, the Ombudsman Office, time to be solved. and the General Superintendence of Financial Institutions.

E-MAIL:

It can be used both by officials and customers to file complaints about irregular acts in Banco Nacional. Also, by specialized bodies internalized to provide advice and recommendations to the

28 SUSTAINABILITY REPORT 2018

OFFICES EVALUATED DURING 2018 Banco Nacional performs evaluations on the controls implemented by the The following table shows the number and percentage of offices where offices to ensure proper use of resources and to comply with Law 82-04 (“Law risk assessments related to corruption were performed, and how many on narcotics, psychotropic substances, illegal drugs, money laundering, significant risks have been detected. related activities and financing of terrorism”.

# Processes % of # Processes processes Completed with risks Relevant Visit Type Scheduled Progress evaluated classified as with Risks Risks in 2018 classified as Tier 1: Support 67 65 97% Internal Fraud Internal Fraud Tier 2: Support and 63 51 81% 24 11 45.83% 17 Evaluation Note: Significant risks are those whose residual risk assessment is equal to or greater Tier 3: Support, 10 20 200% than 12. Both cases according to the internal methodology of Banco Nacional, justified assessment and in AN01-PR225GR02. diagnosis

Special Reports 6 6 100% 29 WE DRIVE COSTA RICA’S SUSTAINABLE PROGRESS

NATIONAL TRANSPARENCY NETWORK

Banco Nacional is the first and only bank in national banking system The ITSP (Index on transparency in the public sector) score for to join the Institutional Transparency Network, an initiative promoted Banco Nacional improved in 2018. This is a sign of more transparent by the Ombudsman Office of Costa Rica. The objective of this network management that involves the entire conglomerate, considering that is to strengthen the accountability of public institutions and ensure transparency is an essential element in the accountability process, the human and constitutional right of access to information. In 2018, which strengthens the credibility of organizations, improves efficiency, Banco Nacional strengthened its transparency portal in compliance and contributes to better markets performance. with the guidelines established by the Institutional Transparency Network, Regulatory Entities, and the provisions of the Code of Corporate Governance.

NOTA 2016 2017 2018

29,02 42,3 45,1

According to the Sustainability The Transparency Strategy, the Banco Nacional was Enhances the Portal was Transparency Portal Improved ITSP the first bank to join potential of the strengthened responds to score the network public value the Bank public policies on is called to generate Accountability

Transparency Portal: https://www.bncr.fi.cr/BNCR/Transparencia/Intro.aspx

30 SUSTAINABILITY REPORT 2018

31 WE DRIVE COSTA RICA’S SUSTAINABLE PROGRESS

INTERNAL SOCIAL DIMENSION

OUR WORK TEAM 2017 2018 %2018

2918 2780 52.51%

5294 2521 2517 47.54% EMPLOYEES All over the country TOTAL 5439 5294 100.00%

PERSONNEL BY GENDER AND AND JOB CLASSIFICATION NUMBER OF EMPLOYEES

TOTAL EMPLOYEES 47% 53% TOTAL SUPERIOR AUDIT AND TRUST REGIME 20% 2018 80% 2018 BN Corredora de 41 48 89 Seguros S.A. TECHNICIAN 48% 52% BN Fondos 39 41 80 EXECUTIVE 23% 77% BN Vital 96 74 170 EXECUTIVE 33% BN Valores 36 33 69 MANAGEMENT 67% 53% ADMINISTRATIVE 47% NEW HIRINGS 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 2017 2018 259 212 99% of employees are covered by the collective agreement. 66% of senior executives hired come from the local community.

32 SUSTAINABILITY REPORT 2018

EMPLOYEE DEVELOPMENT

I’M BN People with quality of life, who care for physical, mental and emotional well-being, to be happy and have high job performance. Celebrate Your People motivated Future and proud of their People identified achievements, and committed with working with passion their desire to make to achieve a difference from extraordinary their new job. ENGÁNCHATE PROGRAM results. ENGÁNCHATE is Banco Nacional’s strategy to recognize the value of people and their work, promote a healthy work environment, and increase motivation, satisfaction, and employee performance. Key To Breaking ENGÁNCHATE is developed around 5 axes fully addressing the Success the Mold personnel development of the Conglomerate. People with the People open to desire to learn and change, creative and grow, who visualize innovative, ready to and take advantage reinvent themselves of opportunities and find new ways at a personal and of doing professional things. level.

33 WE DRIVE COSTA RICA’S SUSTAINABLE PROGRESS

INTEGRATION OF PEOPLE WITH DISABILITIES DRIVING OUR TALENT The Talent program has the objective of providing the Bank There are currently 45 persons with disabilities working at Banco with a high-potential talent base to ensure the business’s Nacional, which represents 0.5% of total payroll: continuity and effectiveness over time.

TYPE OF DISABILITY NUMBER 2017 2018 NUMBER OF PARTICIPANTS FOR 2018: Hearing 2 4 Participant distribution per axis Cognitive 1 1 38 Degenerative Disease 1 1 16 Motor 15 26 Sensitive 4 3 Future Leaders Talent Visual 7 10 In 2018, 11 training events took place for this group of people, as part of their development plan that is defined for a 3-to- Total 30 45 5-year term.

SUCCESSION NUMBER OF EVENTS PER QUADRIMESTER, 2018: The Succession Program allows the organization to have trained 12 personnel to assume critical positions. For 2018, 17 positions of high 9 relevance to the organization were defined, involving 26 people. 1

I Quadrimester II Quadrimester III Quadrimester

34 SUSTAINABILITY REPORT 2018

TRAINING Banco Nacional promotes the professional development of its employees through a training program covering the different levels and areas of the organization.

RESULTS OF THE TRAINING PROGRAM

790 161,013 EVENTS 46,985 TRAINING EXECUTED PARTICIPATIONS HOURS

TRAINING HOURS BROKEN DOWN PER SCALE

Training hours INDEX HRS / in subsidiaries SCALE MEN WOMEN TOTAL HRS PEOPLE Administrative 19.581 23.316 42.897 28 1,481 44 4,446 875 Senior management 344 84 428 71 BN CORREDORA BN BN BN Coordinator 11.168 3.948 15.116 33 DE SEGUROS FONDOS VALORES VITAL Technical 49.224 50.984 100.207 31

1 For 2018, BN Fondos did not count training hours; in 2019, an Fiscal Supervision 1.544 818 2.362 1.181 adjustment was made in the way trainings are recorded. Trust Regimen 4 0 4 1 Total 81.864 79.149 161.013 30

PARTICIPANTS TRAINING HOURS INTERNATIONAL TRAINING 11 464 SPECIALIZATIONS CARRIED OUT 29 5,429

35 WE DRIVE COSTA RICA’S SUSTAINABLE PROGRESS

TELECOMMUTING RESULTS 2018

2017 2018 450 842 REGISTERED TELEWORKERS

281 2.06 6.72 New Average days of Tons of applications telecommuting CO2compensated for telecommuting per week per week

PARENTAL LEAVE

NUMBER OF EMPLOYEES WHO TOOK PARENTAL LEAVE

2017 2018 In the case of subsidiaries, during 2018 they showed a 100% return rate of the staff that enjoyed parental leave. 76

105 128

Of employees who took parental leave in 2018, 2 men and 4 women left the institution

36 SUSTAINABILITY REPORT 2018

PERFORMANCE EVALUATION REMUNERATION OF WOMEN VERSUS MEN 100% of the active staff of Banco Nacional undergoes an individual There is no difference between the base salaries of men and women. performance evaluation. The assessment consists of an attitudinal They are defined by category, both for base salary and bonuses as measurement, a group evaluation (which measures the Bank’s market wages (single salary). management) and a measurement of individual goals.

OCCUPATIONAL HEALTH & SAFETY CASES OF DISCRIMINATION AND CORRECTIVE ACTIONS UNDERTAKEN Banco Nacional has an Occupational Health Committee made up of two union representatives and 2 members of management (the company During this period, no cases of discrimination based on age, gender, doctor and an occupational health professional). ethnicity, social status, religion, appearance or economic status were reported. The subsidiaries have established formal occupational health and safety committees in each of the offices, attached to the Occupational SOCIAL BENEFITS Health Council under the Ministry of Labor and Social Security. Regardless of the type of contract the employee has with Banco Nacional, all employees receive the following benefits:

RESULTS 2018 OCCUPATIONAL HEALTH AND 1. Work-related insurance SAFETY 2. Medical insurance 3. Labor capitalization fund 4. Family benefit fund INDICADOR Resultado 2018 5. Christmas bonus 6. School salary Number of employees who reported 85 7. Guarantee and retirement fund a work-related injury to the INS 8. Unemployment contribution to the Association by the employer 9. Article 26, payment of holidays Total work-related injury days 10. Solidarista Association reported 2846 11. Retirement and guarantee fund Accident rate percentage 12. Decreased workday (assuming an average payroll of 1.55% 13. Vacations in additions to those mandated by law 5500 employees) 14. Company doctor Average duration of annual accident rate 33.48

At the website: https://www.bncr.fi.cr/transparencia/Paginas/Gente-BN.aspx Updated information on pay scales, breakdown of staffing and performance evaluation can be found. 37 WE DRIVE COSTA RICA’S SUSTAINABLE PROGRESS

EXTERNAL SOCIAL DIMENSION

TRANSFORMING COMMUNITIES PROGRAM

The Transforming Communities Program has been operating for nearly Costa Rican Institute of Aqueducts and Sewers was signed to support 10 years at Banco Nacional as a mechanism to support community- the reactivation of several aqueducts, which were selected by the based productive projects by providing seed capital. Its aim isto AyA and funded through a financial contribution by Banco Nacional promote entrepreneurial development or strengthen initiatives from existing businesses to transform them into community SMEs, thereby generating productive chains, new jobs and better opportunities for improving the quality of life of the community’s inhabitants. ALLIANCE: : Banco Nacional and DINADECO (National Direction for Community Development) The program operates primarily with Integrated Development Associations or Cantonal Unions under Law 3859. In 2018, the Administrating Associations of Community Water Supply and Sewerage Systems, also known as ASADAS, were incorporated into the program. They work as non-profit organizations to manage drinking water and sewerage services, as well as taking care and conserving water resources in the communities. Declaration of Public interest On September 29, 2018, the expanded Governing Council signed the Declaration of Public Interest for the work done by Banco Nacional and ALLIANCE: Banco Nacional and AyA Dinadeco with the only program that transforms community-based (National Institute of Aqueducts) associations in SMEs. This accomplishment was achieved through public partnerships and public-private partnerships in coordination with community-based organizations.

National Network of Community Enterprises Jointly drove the creation of the first national network of community The incorporation of ASADAS into the Transforming Communities enterprises, which brings together Integrated Development Program was a response to Storm Nate, which left behind a large Associations and Cantonal Unions working on productive projects number of damaged aqueducts and families without access to drinking that are -or are becoming- the first enterprises whose owners are the water. The cooperation agreement between Banco Nacional and the communities themselves.

38 SUSTAINABILITY REPORT 2018

2018 RESULTS Community Business Expo As part of the annual celebration of community servants, the 2017 2018 first community business expos was held, with the participation Total number of projects executed 12 35 of grassroots organizations that have a community enterprise as well as other actors such as Banco Nacional, Dinadeco, Investment made CRC 250.000.000 CRC 450.000.000 Procomer, which are an important part of the machinery that Projects by Development Associations 11 11 drives the development and growth of community enterprises. Projects by ASADAS 1 24 Total people affected 92.592 104.284 Number of faucets 0 8.007

39 WE DRIVE COSTA RICA’S SUSTAINABLE PROGRESS

“TOGETHER WE ACHIEVE MORE” PROGRAM

The purpose of Together We Achieve More is to contribute to social and economic development through the direct involvement of Gente BN (BN People), focusing on priority population segments identified: women in poverty, indigenous people, people with disabilities, children, youth, and business segments.

By 2018, a goal was established by which every Bank employee completed 8 volunteer hours; at the end of the period the target was achieved by 114.8%.

2018 RESULTS

49,915 HOURS 114.8% of the target DISTRIBUTION OF HOURS PER DIMENSION

13,040 PRODUCTIVE 17,242 BANK BANK FOR EVERYONE

19,633 GREEN BANK

To achieve this, there was implementation of collaboration and knowledge transfer activities associated with the dimensions and programs of the sustainability strategy of Banco Nacional.

40 SUSTAINABILITY REPORT 2018

LABOR@ (WORK) Training for students from Technical high schools, in partnership with the Omar Dengo Foundation and MEP, using BN Labor@, an Internet Banking simulation platform so students can perform financial operations

MUJERES ALCANZANDO SUEÑOS (MAS) Banco Nacional sponsors this program in partnership with the Dehvi Foundation to promote productive paid work for 70 unemployed women who are heads of household. Training was provided on the management of financial resources and empowerment.

VOLUNTEER WORK WITH INDIGENOUS POPULATIONS TOGETHER As part of the engagement process Banco Nacional maintains with the Bribri and WE Cabecar indigenous peoples, and to complement the installation of voice-guided ATMs ACHIEVE in their native languages, Bank officials were organized to give support in education MORE: and financial accessibility and the use digital platforms, among other topics. Highlighted projects

VOLUNTEER WORK IN DEVELOPMENT ASSOCIATIONS Training given by Bank experts on topics such as basic finance, budget, cash flow and financial analysis, effective communication, customer service, and marketing. The topics were defined from a needs assessment with beneficiaries.

TECHNOLOGICAL GRANDPAS

Several offices of the Bank visited nursing homes and organized groups of elderly people to bring them training on the use of Banco Nacional’s technology platforms such as ATMs and Sinpemóvil.

41 WE DRIVE COSTA RICA’S SUSTAINABLE PROGRESS

FINANCIAL FREEDOM

Our country has seen a significant increase in the rate of indebtedness To achieve its objectives, Financial Freedom uses different teaching of the population, which threatens the ability of consumers to meet strategies, such as presentations by experts, visits (including virtual their financial commitments. In response, Banco Nacional has ones) to institutions and education centers, use of audiovisual support implemented the strategy of financial education and inclusion known material, recognition or awards, and educational games. Activities in as Financial Freedom Program. 2018 focused on the following topics:

The program wants to develop skills in the population, enabling them • Technological Grandpas to make better use of the financial tools available in the market and • Inclusive ATMs understand the benefits, costs and risks associated with services such • Entrepreneurship and financial freedom. as credit cards, investments, loans, and savings instruments, among • Technology Tools • Financial Freedom others . • Financial Education Fairs • Youth Expo To improve the management of their personal finances, Costa • Empowerment and Entrepreneurship Ricans will get better use of financial products and services to bring • Presentation of Works on Financial Freedom economic stability to their homes and foster personal growth -and, • BN Labora consequently, the national economy. Thanks to the establishment of working partnerships with various business, academic, and civil society organizations, the following goal was achieved: PROGRAM PILLARS: 103,790 • Correlation between income and expenses BENEFICIARIES IN 2018 • Delve deeper into the importance of saving • Indebtedness versus buying strategies • Investments linked to financial solutions that Banco Nacional makes available to all • Creating products and services available to everyone, achieving effective financial inclusion ADULT INDIGENOUS WOMEN • Inclusion in the digital channels of Banco Nacional

YOUTH PEOPLE WITH ELDERLY AND CHILDREN DISABILITIES

42 SUSTAINABILITY REPORT 2018

PROGRAM PARTNERSHIPS DURING 2018

PRIVATE BUSINESSES: Ricardo Saprissa stadium, Claro, Metropak Heredia, Torre Cordillera, Zona Franca America

NATIONAL LIBRARY SYSTEM: Cartago, Hatillo, Goicoechea, Naranjo, San Pedro, Liberia, Desamparados, Sarchí

COMMUNITIES: San Gerardo de Rivas, San Francisco Cajón de Pérez Zeledón, San Rafael de Heredia, San Carlos Pejibaye Pérez Zeledón, San Luis de Monteverde, Oreamuno, Alajuela, Carate de Puerto Jiménez EDUCATION CENTERS: Colegio Técnico Profesional de Santo Domingo y de Ulloa Heredia, Escuela de San Juan de Grecia, Escuela Eulogia Ruiz Ruiz, Sedes Don Bosco GOVERNMENT: Ministry of Education, DINADECO, INS, Correos de Costa Rica, Municipality of Heredia, National Stadium MEDIA: Radio Columbia OTHER ORGANIZATIONS: Parque La Libertad, Centro Cívico por la Paz Santa Cruz, Estado de La Nación, Cuadrangular por el Futuro, Casa de la Cultura Cahuita, Fundación Omar Dengo, Teletón, Museo de los Niños. 43 WE DRIVE COSTA RICA’S SUSTAINABLE PROGRESS

During this period, no cases of non-compliance related to the information and labeling of products and services were reported. SUSTAINABLE ADVERTISING The Advertising department is responsible for all advertising actions Concrete actions that took place during 2018 required by the Bank, including Corporations; it works with the guidelines of the current strategic plan and a tactical plan where all activities for • The department completely eliminated printing, so no the different areas are scheduled. This includes advertising campaigns, reams of paper are requested sponsorships and participation in expos. • All departments were encouraged to not consider printing materials in their advertising actions. During 2018, we participated in 122 expos or fairs in which no printed All the organization’s advertising campaigns consider the institutional materials were used. objectives and one or more of the objectives of social responsibility • Our commercial included aspects that would promote within their content. inclusion, highlighting the diversity in gender, ethnicity, age and disability. During 2018, the Institutional Sponsorship Policy of Banco Nacional • Within the established guidelines with communication Conglomerate was updated with new guidelines on the definition of what provider, the campaigns or materials produced, should a sponsorship is, types of sponsorships (commercial, institutional loyalty, not promote any discrimination towards other people or local or rural), technical criteria defined for acceptance or rejection, as vulnerable sectors. well as the type of events in which the Bank cannot participate because of their nature, such as religious or political events, where senior Campaigns carried out in 2018 with social and environmental management has direct interference, or that contravenes Article 12 of vision. the General Law on the Control of Tobacco and Its Harmful Effects on • Image campaign: Juntos somos progreso (Together we are Health (IAFA). All sponsorships must comply with the Code of Ethics and progress) Sustainability Policy of Banco Nacional Conglomerate. • Paperless ads: International Day of People with Disabilities • Program, Women of a thousand battles In all expos where Banco Nacional participated in 2018, a “zero paper” • ATM in Bribri and Cabécar language policy was implemented, so all information is provided through digital media. This allows us each day to develop more technological and Participation in other activities in 2018 environmentally-friendly activities. • 90 minutos por la vida (90 minutes for life) • CIMAC: Institutional fair for disabled artisans, held within the framework of the Day of People with Disabilities • Participation in the Festival of Light with an allegorical float: The whole process was guided by the Sustainability department.

44 SUSTAINABILITY REPORT 2018

SPONSORSHIPS Sponsorships are strategic partnerships that provide the opportunity to benefit and build a positive relationship with different stakeholders. For this reason, Banco Nacional has linked its sponsorship directly to topics such as sports, health, entrepreneurship, innovation, and training.

Sponsorships had an impact on more than 5,000 people in 2018, including young students with the potential to generate new ideas for the development of Costa Rica and talented athletes who excelled in different disciplines. Additional support was provided to initiatives that analyzed reputation trends and business analysis from an academic perspective.

CHIRRIPO 2,000 468 MOUNTAIN RACE Spectators and Athletes visitors ACHIEVEMENTS COMPETITION 24 HOURS OF INNOVATION THE HEART 2018 RACE 126 Students 1,164 (5 public universities) Including athletes and people NATIONAL OLYMPIC attending the fair. COMMITTEE 280 Olympic Athletes

LATIN AMERICAN COUNCIL OF BUSINESS SCHOOLS SEMINAR ON CORPORATE REPUTATION 600 350 29 Attendants, both People at the People in the national and seminar following workshop international 5017 INVESTMENT PEOPLE ¢87.400 500

45 WE DRIVE COSTA RICA’S SUSTAINABLE PROGRESS

DEMOCRATIZATION OF INFORMATION REACH OF THE MEDIA WHERE ADS WERE PLACED

In the exercise of institutional communication, the 45 39 democratization of resources allows the participation 40 of regional and alternative media throughout the country. Regional media are mostly ventures that make 35 communication their line of business, with the intention of 30 improving conditions and the immediate environment of their communities for the benefit of their inhabitants. Banco 25 Nacional makes a strategic distribution of resources allocated 20 to ads, positioning issues such as sustainability, security, 15 financial education and credit supply for ventures. 8 12 8 12 10 4 6 5 An 11% growth was recorded in 2018 with respect to 2017, 5 meaning that information from Banco Nacional impacted more people, with presence throughout the country, 0 7 Provinces Alajuela Cartago Guanacaste Heredia Limón Puntarenas San José highlighting Guanacaste and San Jose among the provinces with the highest investment in ads.

TOTAL MEDIA WHERE ADS WERE PLACED

2017 2018

81 90

46 SUSTAINABILITY REPORT 2018

47 WE DRIVE COSTA RICA’S SUSTAINABLE PROGRESS

ENVIRONMENTAL MANAGEMENT

In 2018, Banco Nacional strengthened its environmental commitment, The main environmental management frameworks used by Banco implementing a strategy to further reduce the environmental impact Nacional are the Institutional Environment Management Program of its operations and contribute to the country’s goals in this area. (PGAI) and the National Carbon Neutrality Program.

Our environmental commitment is backed by internal regulations and From a diagnosis that considers the organization’s inherent a working structure involving the different organizational levels. environmental aspects, institutions must establish mitigation, compensation or restoration measures for environmental impacts.

High-level Environmental TEAM WORK ON Committee comprised of Managers, Assistant Managers PGAI 2018 SUSTAINABILITY and Mid-level Managers MINAE SCORE: 96.7

Work Team with representation Moreover, Banco Nacional has signed the country’s Carbon Neutrality from Project Management, Office NEUTRAL of the Assistant Operations 2.0 program as the mechanism to manage their greenhouse gas CARBON Manager, Directorate of emissions and contribute to climate change mitigation. For 2018, the Continuous Improvement, Human measurement, reporting and verification by a third party (INTECO) of COMMISSION Development, Sustainability the carbon inventory in 45 offices took place. The goal for 2019 is to Directorate, and IT include 100% of the Bank’s premises.

2574 ENVIRONMENTAL 182 working committees for each TONNES OF CO2 EQUIVALENT COMMITTEES of the offices nationwide IDENTIFIED 45 PREMISES

https://www.bncr.fi.cr/transparencia/Paginas/ResponsabilidadSocial.aspx 48 SUSTAINABILITY REPORT 2018

ENVIRONMENTAL RESULTS 2018

WATER

WATER CONSUMPTION 2016-2018 160.000,00 140.000,00 Saving 2017 – 2018: m³ 120.000,00

³ 100.000,00 m 15.112,74 m³ 80.000,00 Savings equivalent to filling 6.05 Olympic swimming pools 60.000,00 40.000,00 20.000,00

WATER 2016 2017 2018 CONSUMPTION m³ 145.970,50 126.899,70 111.787,00

ELECTRICITY

ELECTRICITY CONSUMPTION 2016-2018

35.000.000,00 30.000.000,00 Saving 2017 – 2018: Kwh 25.000.000,00 20.000.000,00

5.067.677,10 kwh 15.000.000,00 Equivalent to the monthly consumption of 16,892 households 10.000.000,00 5.000.000,00 0,00

2016 2017 2018 CONSUMPTION kwh 28.898.127,00 27.496.372,00 21.639.786,00

49 WE DRIVE COSTA RICA’S SUSTAINABLE PROGRESS

FUEL FUEL CONSUMPTION (GASOLINE AND DIESEL) 2016-2018

50.000,00 45.000,00 Saving 2017 – 2018: liters 40.000,00 8.045,55 35.000,00 Liters Equivalent to filling the tank with 30.000,00 50 liters for 160.91 vehicles 25.000,00 20.000,00

FUEL 2016 2017 2018 CONSUMPTION 44.585,00 48.428,80 40.383,32

PAPER PAPER CONSUMPTION 2016-2018

60.000,00 Saving in reams 2017 – 2018 40.000,00 Resms 20.000,00 19.952 REAM 2016 2017 2018 CONSUMPTION 49.904,00 41.628,00 21.676,00

WASTE

2018 165.876 KILOGRAMS Collected waste Equivalent to 5.1 containers 32.5 tons

50 SUSTAINABILITY REPORT 2018

DEVELOPED PROJECTS ZERO PAPER PROGRAM This paperless program aims to minimize, to what is strictly BN CLETAS (BIKES) necessary, the use of paper in the operations of Banco Nacional At Headquarters and the La Uruca Complex bicycle spaces were Conglomerate to reduce the impact on the environment and enbled so they can be used by employees, contractors and increase administrative and operational efficiency. customers.

OPEN SPACES MODEL AIR CONDITIONING PROJECTS The implementation of open spaces in the offices optimizes As part of the infrastructure initiatives Banco Nacional has physical space and helps improve relations between employees implemented to optimize on-premise air conditioning, in 2018 and their processes. At an environmental level, the use of air an institutional guideline was issued setting the temperature at conditioners and artificial lighting is reduced, recycling areas are which air conditioners should be kept at 24 degrees Celsius. consolidates, and a telecommuting model is promoted.

BN AMBIENTADOS (ENVIRONMENT) Ten Bank buildings established a collection center, which receives, twice a month, recoverable waste not only from employees and their families, but from members of the communities where they operate.

51 WE DRIVE COSTA RICA’S SUSTAINABLE PROGRESS

GREEN PRODUCTS Financial institutions have the opportunity to contribute to energy generation, prevention and control technologies, substitution environmental challenges not only by reducing the direct impacts of of chemicals with organics, water treatment, eco-tourism, emission- their operations, but through products and services that promote the reducing technologies, and waste management. adoption of environmental practices in individuals and businesses, or to support conservation programs nationwide. For this reason, Banco Environmentally friendly housing Nacional has the following portfolio of green products available to its Credit for the purchase or a home, purchase of lot and construction or customers: construction involving low-environment-impact materials or efficiency aspects such as environmentally friendly design, solar panels, and Sustainable Biodiversity Fund Credit/Debit card smart water-saving faucets, among others. For every purchase with these cards, 10% of the net commission the bank receives goes into a trust fund called “Fund for Sustainable BN Eco-technology Solutions Biodiversity”, used to plant and maintain trees in protected forest areas. Financial solutions through which investments in clean technology equipment for the home can be financed, such as solar panels and solar Biolabel water heaters, wind turbines, water-, gas- and energy-saving devices, The initiative stems from an agreement between the Environmental thermal insulation, etc. Bank Foundation (FUNBAM) and Banco Nacional to make available to vehicle owners a voluntary alternative to offset greenhouse gas (GH) Electric Vehicles emissions generated by fuel consumption during one year. The funds Loans at a preferential rate for the purchase of electric vehicles. Banco are allocated to the “Fund for Sustainable Biodiversity” trust fund. Nacional also participates in the Program for the Acquisition of Efficient Vehicles (PAVE), whose purpose is to replace vehicles over 15 years old Green SMEs: with efficient vehicles. Preferential credit conditions for SMEs who want to make environmentally friendly investments. Some of the investments that can be financed by this loan are: energy efficiency projects, renewable

52 SUSTAINABILITY REPORT 2018

53 WE DRIVE COSTA RICA’S SUSTAINABLE PROGRESS

OUR HORIZON IS SUSTAINABLE ECONOMIC PROGRESS Banco Nacional continues to improve to become a universal bank that The cross-cutting axis remains technology improvement as one of the main provides services to all sectors in the country. The goal is that more and more mechanisms to provide services through: personal, business, corporate and sectors and people have access to services so that, through responsible institutional banking, stock market, pension funds, insurance brokerage, placement, they can continue to generate wealth in a sustainable and international services, and electronic services. equitable manner.

INDIRECT EMPLOYMENT GENERATED BY OUR PRODUCTS

Sustainable Products for the products base of the 3.175 placed pyramid JOBS 186.858 8.361

NUMBER OF CUSTOMERS DIGITAL CHANNELS Customer Affiliation 2017 2018 Natural persons (individuals) 2.057.474 (Use of cell phones, 2018 Legal persons (businesses) 2.139.590 computers, etc.) 198.000 174.479

BN SERVICES 2017 2018 New affiliated 578 636 merchants

The breakdown of the audited financial statements, budget reports, and monthly accounting reports are available in full at the Transparency Portal: https://www.bncr.fi.cr/EstadosFinancieros/Paginas/Auditados.aspx 54 SUSTAINABILITY REPORT 2018

BUSINESS AND INSTITUTIONAL BANKING We support the development of Costa Rica by financing productive sectors that promote the local and national economy

COLONES FROM JANUARY 01 TO DECEMBER 31, 2018 Construction 0% Number of Services 10% Type of activity Amount formalized loans Trade CRC 13.202.000.000,00 3 Trade 29% Financial services CRC 10.000.000.000,00 1 Industry 17% Energy CRC 9.742.000.000,00 1 Industry CRC 7.930.921.728,20 4 Services CRC 4.337.750.000,00 4 Construction CRC 40.000.000,00 1 Service Total CRC 45.252.671.728,20 14 Financial 22% Energy 22%

DOLLARS

ROM JANUARY 01 TO DECEMBER 31, 2018 Agriculture 5%

Number of Tourism 10% Type of activity Amount formalized loans Construction 26% Construction USD 50.900.000,00 5 Services USD 48.732.970,00 9 Industry USD 35.394.000,00 5 Trade 17% Trade USD 33.756.000,00 7 Tourism USD 19.500.000,00 2 Agriculture USD 10.879.589,00 3 Total USD 199.162.559,00 31 Industry 18% Services 24%

In terms of environmental impact, applicable standards are met with the request of relevant environmental feasibility studies for all these projects, 55 minimizing their impact on the environment. WE DRIVE COSTA RICA’S SUSTAINABLE PROGRESS

DEVELOPMENT AND RETAIL BANKING

MASS SEGMENT:

In CDP During 2018, the mass segment Regarding vehicle, Consumption, support In savings, Generation of was able to finance financing for was provided to 436.602 74.455 FAMILIES, 1.223 2.860 15.141 customers started or investments for a total amount of customers during 2018, expanded their savings for customers, people for a total of for a total of in 2018, for a total of representing CRC 46.099.817.982 CRC 32.783.342.575 CRC 45.419.312.658 CRC 479.840.139.610 CRC 450.903.750.418

PREFERENTIAL SEGMENT:

The preferential segment, which represents less than 1% of Banco Nacional In vehicles, In savings, Social Interest customers, we were able to financing for creation of And a total of finance 293 10 FAMILIES were benefit during 113 HOMES 163 VEHICLES 13.928 investment funds 2018, for a total in with a balance of for a total of for a total of accounts for a total balance Bonds of Homes of CRC 8.480.799.755 CRC 2.493.180.849 CRC 177.643.899.507 CRC 8.217.768.115 CRC 54.455.000

56 SUSTAINABILITY REPORT 2018

MICRO AND SMALL BUSINESSES

PRODUCTIVE FINANCING BALANCE OF CURRENT PRODUCTION LOANS FOR MICRO AND SMALL BUSINESSES BY ACTIVITY (DEC/2018)

In 2018, loans INDUSTRY 3% 17.275 were placed in different productive activities by micro and small AGRICULTURA 20% businesses, for a total amount of CRC 136.106.119.910,43 SERVICES 49%

TRADE 24%

In addition, the distribution of productive financing is described per commercial area: DISTIBUTION OF CURRENT PRODUCTION CREDIT BALANCE FOR MICRO AND SMALL BUSINESSES PER ZONE (DEC/2018)

PÉREZ ZELEDÓN 9% PUNTARENAS 9%

OESTE SANTA ANA 5% ALAJUELA 9%

LIMÓN 10% CARTAGO 18%

LIBERIA 10% CENTRAL 5%

HEREDIA 9% CIUDAD QUESADA 10%

EASTERN SAN PEDRO 12% Source: Planning and Control Directorate, SGBDP 57 WE DRIVE COSTA RICA’S SUSTAINABLE PROGRESS

DEVELOPMENT BANKING FAMILY FINANCING Banco Nacional is the main funding operator for the National Development PLACEMENT OF OTHER CREDIT TO MEET THE NEEDS OF MICRO Banking System (DBS). In 2018, 36.93782 billion colones were placed with AND SMALL BUSINESSES (2018). more than 13 thousand customers

Number of loans Amount placed 2018 placed PLACEMENT IN DEVELOPMENT BANKING 2018 TYPE OF CREDIT PERSONAL EXPENSES 11.805.449.658,00 1.907 Balance Placement 2018 December/2018 Ongoing Loans FUNDING (billion colones) (billion colones) December/2018 VEHICLES 13.598.833.003,94 955 FCD 21.510,04 31.391,23 7,934 HOUSING 22.495.362.249,01 596 FOFIDE 7.843,24 41.170,65 3,115 TOTAL 47.899.644.910,95 3.458 FINADE 7.319,71 33.775,67 2,587 FINADE EMERGENCIES 264,83 6.810,19 27 TOTAL 36.937,82 113.147,74 13,908 Source: Coordination between Regulatores and Credit Bases

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MUNICIPALITIES BUSINESS SUPPORT SERVICES

At the end of 2018, Banco Nacional had a financing balance for municipal As part of the range of services Banco Nacional provides, there are projects in the amount of CRC 51,781,557,398.08, corresponding to 108 opportunities for different types of training and trade promotion activities loans used by 47 local governments. for micro and small businesses.

This funding applies to investment plans such as maintenance and repair of In 2018, this segment had 6,678 spaces, distributed as follows: road infrastructure, bridges, storm drains, surveillance systems, software and hardware to improve administrative efficiency, waste collection, water supply, municipal infrastructure, among the main ones. TRAINING FOR MICRO AND SMALL BUSINESSES 2018 It highlights the case of the Municipality of Naranjo, which, with this financing, was able to speed up the paving of ballast roads and highways, TYPE OF ACTIVITY PARTICIPANTS resulting in better living conditions for the communities -which no longer have to live with dust-, better roads for farmers to transport their production, Agricultural sector 543 and decongestion of roads from downtown by enabling additional roads in Financial literacy 244 good condition. Entrepreneurs 379 This type of financing also allowed the Municipality of Alajuela to take care Business encounters 2049 of the drawbacks generated by the rains in an area of the canton. Export 45 Corporate management (virtual)Corporate 1914 management (attendance-based) 1321 Trade Promotion 183 TOTAL 6.678

In addition, with the expanded use of the Virtual Platform, for 2018 a goal of 5,000 participants was established, which was fulfilled by 134%.

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OTHER PROGRAMS

• To serve people in poverty that have productive projects, financing • Rural Support Council: it is a partnership with co-responsible by FIDEIMAS is available, providing up to 100% of the guarantee organizations (Development Associations, ASADAS, and others), to required for each case. At the end of 2018, there were 1,676 promote credit in rural areas outstanding loans with a balance of CRC 2,146,774,285.81. • BN Emprendedor PYME (BN SME Entrepreneur): contains • Banco Nacional developed the BN PYME Verde (BN Green SME) components that differentiate it from traditional credit. In 2018, Program, which started with a line of credit from KfW (German work was performed with a group of 15 people to develop a pilot Development Bank). To December 2018, the balance of these loans process. Follow-up is performed and credit is given to those that was CRC 9,804,121,510.57, corresponding to 389 current loans. through the different stages; from the moment the credit is granted, This program finances the use of environmentally-friendly energy they are given assistace for 6 months to 1 year. In this process we sources, the use of input, and the development of environmentally work with INA; the National Development Banking System also friendly productive practices. The following projects are worked in participates. this field: • PYME Fácil (Easy SMEs): credit that is friendly to small and medium- 1. Banco Nacional applies funding for the promotion of sized businesses looking to refresh their working capital. This product good sustainable practices in conjunction with CORFOGA, does not require collateral and is especially suited for organizations Corporación Ganadera, that have a good credit history. 2. Nama Ganadería, livestock companies, working together with the Central American Bank for Economic Integration (CABEI) 3. Work is also carried out in Nama Café and sustainable production, together with CABEI (Central American Bank for Economic 60 Integration). 60 SUSTAINABILITY REPORT 2018

BN MUJER BN Mujer (Women entrepreneur) is a commercial approach of Banco BUSINESS SUPPORT Nacional to women’s banking, ensuring that the greatest number of The participation of women-led companies in credit placemet reached, women have access to financial services, which are tailored to their on a consolidated basis, 29% with respect to the number of cases needs, helping reduce the gender equality gap and achieving greater handled and 27% in the amount formalized. inclusion of women in the economy. To achieve this goal, work was carried out to answer specific needs In 2016, Banco Nacional transformed the “BN Banca Mujer” program expressed by the clients through previous experiences, and the into “BN Mujer”. This is now a cross-cutting segment with gender focus, delimitation of the characteristics of participants in micro andsmall opening integrated services for all women. BN Mujer should achieve enterprises (including freelancers). To strengthen the supply, work was positioning new and more varied customer segments (housewives, done in areas such as training, value proposition, marketing, organized freelancers, salaried women, students, pensioners, etc.), expanding groups, and financial literacy. its portfolio of approximately 136,000 women entrepreneurs to more than one million customers.

BN MUJER Clients Client portfolio with banking penetration of approximately 43% 2017 2018 of Costa Rican women, according to the National Institute of Statistics 1,021,127 1,048,437 and Census 61 WE DRIVE COSTA RICA’S SUSTAINABLE PROGRESS

CREDIT PLACEMENT BN MUJER 2018

New placements of credit products during 2018 amounted to 34,104 operations, distributed as follows:

Type of Credit CRC Amount

PRODUCTIVE ACTIVITY CRC 114.616.928.314,12 5.493 CONSUMPTION CRC 20.207.880.933,01 5.454 CREDIT CARDS CRC 8.267.547.387,34 20.763 VEHICLES CRC 19.464.128.480,00 1.677 HOUSING / APARTMENT CRC 28.424.555.800,50 717 Total general CRC 190.981.040.914,97 34.104

DEVELOPMENT BANKING SYSTEM: WOMEN IN POVERTY:

In 2018, the portfolio of women During 2018, we reached entrepreneurs who received funds from the Development Banking System 434 WOMEN amounted to in poverty, formalizing 3,641 transactions for CRC 748,609,946.00 CRC 27,190,383,722.30 million colones

RESULTS OF NON-FINANCIAL SERVICES

IDB program 5 Mujeres Líderes 1817 63 (Women Leaders) 2 Women trained 85 Activities (Organized groups Fairs (Regional and Expo Business Rounds Women in fairs and current clients) Women entrepreneur) 360 2,017 REACHED WOMEN 62 SUSTAINABILITY REPORT 2018

Revamping of the Site BN Mujer at the BN Portal

Provide post mastectomy breast reconstruction to women with low income status. It works Women of Battles with a campaign for the prevention of breast cancer; in addition to prevention, it provides real 1.000 benefits with the BN Mujer cards.

Resources were dedicated to support BN entrepreneurs during the last three years, as well as to strengthen different components to better serve this market. As part of this agreement and as IDB-FOMIN-BN Agreement Administrator of the Multilateral Investment Fund, a consultancy for the development of new products was hired.

Entre vos y yo (Between You and Me) Blog http://entrevosyyoblog.com

Program to strengthen the entrepreneurial skills of women in order to develop their potential in Program Mujeres Líderes sales growth and number of employees of the entities involved in the process. They benefited from participation in leadership mentoring processes, participation in boards of directors, (Women leaders) 360 business conferences, and access to grants for tailored consulting services.

Campaign Somos la Generación Its aim is to empower women in Costa Rica through the provision of financial and non-financial services, to empower women to fulfill their personal and professional goals, becoming promoters of economic development and reducing the gender inequality gap.

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TRUST FUNDS FOR SUSTAINABILITY

National Forestry Sustainable Financing Fund Biodiversity Fund Don Bosco Plus (FONAFIFO) (FBS) Aguatica Guarantee fund so students of It is broken down into It consolidates a long-term It contributes to the protection CEDES Don Bosco at social risk three elements: attracting Asset Fund that, with its yield, of water resources in Costa Rica can have access to university funds, managing funds, and would permit processes for the by supporting environmental degrees related to Science, financing for the payment protection and improvement services and strategies that Technology, Engineering and of environmental services of the environment and promote its conservation, Mathematics (STEM). provided by forests, forest natural resources, supporting protection, and recovery, plantations and other necessary programs on the payment through partnerships and joint measures to strengthen the for environmental services work between the parties. development of the natural provided by forests, forest resources sector. plantations, and important ecosystems in mitigating greenhouse gases.

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Manuel Antonio ICODER - BNCR Beach National Law No. 9124 – MEP – (National Stadium) Park SUTEL – BNCR BID – BNCR Its aim is the self-maintenance It provides custody and It manages funds from the Investment: of facilities at the National management of the National Telecommunications USD 167.524.233 Stadium, with the possibility of contributions made by the Fund (FONATEL) Education Centers: educational, recreational and Trustor, corresponding to fifty building digital infrastructure 103 health improvement of Costa percent (50%) of the revenues throughout the entire Ricans. Among the activities from tickets, to the Manuel country. 123 districts with Completed Projects carried out by the administration Antonio National Recreational Internet and fixed telephony 12 of the Trust Fund Directorate, Park. connection, more than 55 Students benefitted: this sports arena obtained its thousand beneficiaries received 35,000 Carbon Neutral Certificate. computers, tablets and smartphones.

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SUSTAINABLE VALUE CHAIN

Institutional Policy for Banco Nacional suppliers

“Banco Nacional shall establish commercial relationships with solid and competitive suppliers who meet their tax and social obligations, and who are committed to environmental conservation, for which it will gradually and progressively include environmental, social and PROGRAM OBJECTIVES: working conditions in its purchase criteria, considering 1. Align the strategic suppliers of our value chain with the their different impacts at different stages of the life cycle principles of corporate sustainability. of the goods or services.” 2. Determine, within their internal administrative procurement processes, the incorporation of social responsibility criteria to Approved by Article 17, session 11,889, on the Board’s maximize their level of alignment. session of February 18, 2014. 3. Encourage the gradual adoption of best practices on social responsibility through a win-win action platform. Starting from the implementation of the institutional policy for suppliers, the Social Responsibility Directorate will suggest the environmental, social and economic criteria that can be considered and used in the bids or tenders for goods and services as a means of promoting SUSTAINABLE PURCHASING: a sustainable procurement system, and, in turn, to foster It began with the fundamentals of the Institutional Policy for Suppliers, the growth of suppliers within the principles of social which allows the operationalization of concrete actions on bids and responsibility through the our responsible supplier procurement processes to generate a more sustainable purchase process. program. The Directorate of Infrastructure and Purchasing and the Directorate of Social Responsibility have worked with the Responsible Supplier Program since 2008. In 2018, Banco Nacional took action to strengthen strategic suppliers in its value chain, namely:

• Talks with strategic suppliers • Production chains • Responsible suppliers

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SUSTAINABILITY REPORT 2018

CERTIFICATION FOR STRATEGIC SUPPLIERS Starting in 2019, the Procurement Unit will include in the bids a document Within the Training Program in Corporate Sustainability, a certification was entitled “Institutional Guidelines on Sustainable Practices for Suppliers,” created whose goal was that, for the 2017-2021 period, Banco Nacional which will be annexed to the bids on cleaning, just-in-time and security, as would achieve the certification of 100% of strategic suppliers for the part of a pilot plan to analyze the behavior or reaction of the bidders. Conglomerate. In 2017, a training program with strategic suppliers was implemented, which allowed 43 to be certified in Corporate Sustainability. The bids for cleaning incorporated a clause in the evaluation criteria This process was developed in partnership with the Business Alliance for that bidders must meet to participate as bank suppliers or to obtain a Development (AED). higher score, such as including persons with disabilities in their roster, in accordance with Article 3 of the Law of Equal Opportunities. In 2018, 45 cleaning processes were processed, and in which this clause was inserted.

The General Directorate of Infrastructure and Procurement of the major items for the Just In Time (JIT) System to make changes for friendlier products. For example: Paper from certified plantations, cloth bags, biodegradable products like hand soap, etc.

PROCUREMENT AND TENDERS Two sustainability aspects were included in all bids:

• Non-discrimination and equality policy. • Environmental Management Plan.

22 suppliers were trained and certified in environmental topics.

Banco Nacional uses the government’s Green Purchase Manual https://www.hacienda.go.cr/comprared/manual_compras_verdes.pdf

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STRATEGIC SUPPLIERS PROGRAM: CERTIFIED SUPPLIERS

SERVICE SUPPLIER 2017 SUPPLIER 2018 Safety 2 1 Cleaning 1 2 Messaging/Transactional Support 2 0 Marketing/advertising 1 5 Construction 1 1 Just-in-time Delivery 1 0 Business Support 5 3 Technology and Information 5 13 Total 18 25

BENEFITS OF THE RESPONSIBLE SUPPLIER PROGRAM

REDUCTION OF COMPLAINTS RECEIVED, and their possible economic impact linked to their management.

SUPPORT FOR Business Continuity and minimizing associated operational and reputation risks.

INSURING the value chain towards the promotion of sustainable procurement.

REINFORCEMENT of the sustainability strategy

SCOPE OF COMMITMENT of Banco Nacional to its sphere of influence (local workforce).

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ANNEXES

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ANNEX 1

70 SUSTAINABILITY REPORT 2018

ANNEX 2

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ANNEX 2

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ANNEX 3

BUSINESS STRATEGY BUSINESS STRATEGY BUSINESS STRATEGY SDG TARGET “A BANK FOR EVERYBODY” “GREEN BANK “ “PRODUCTIVE BANK”

1.2 By 2030, reduce at least by half the proportion “BN Entrepreneur” of men, women and children of all ages living in Transforming Communities Program Financial Products and Services for the base poverty in all its dimensions according to national Integrated Development Associations (ADIs) of the pyramid. definitions

1.5 By 2030, build the resilience of the poor and “BN Municipalities those in vulnerable situations and reduce their Parafiscal National Emergency Fund BN Development Trust exposure and vulnerability to climate-related FIDEIMAS” extreme events and other economic, social and environmental shocks and disasters

1.a “BN Municipalities Ensure significant mobilization of resources “FONABE FIDEIMAS AVANCEMOS” BN Development Trust from various sources, including improvements in FIDEIMAS” development cooperation, to provide means that are both sufficient and predictable to developing countries, particularly least developed countries, to implement programs and policies to end poverty in all Parafiscal: Disability, Old age and Death “Health and Wellness Program” Law No. its dimensions Regime 9124-MEP-BID-BNCR

2.3 By 2030, doubling agricultural productivity and the revenue of small-scale food producers, Credit for agriculture Credit for livestock particularly women, indigenous peoples, family Credit for forestry Credit for fishing farmers, farmers and fishermen, including, among BN Desarrollo others, safe and equitable access to land, other (loans for micro and small enterprises) resources and production inputs and knowledge, BN Mujer financial services, markets, and opportunities to Corporate and business loans add value and obtain non-farm jobs.

2.4 By 2030, to ensure the sustainability of “Credit for agriculture food production systems and apply resilient BN Desarrollo agricultural practices that increase productivity (loans for micro and small enterprises) and production, contribute to the maintenance BN Mujer of ecosystems, strengthen adaptation to climate Corporate and business loans FONAFIFO trust change, extreme weather phenomena, droughts, fund floods and other disasters, and progressively Sustainable Biodiversity Trust Fund improve soil quality.

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BUSINESS STRATEGY BUSINESS STRATEGY BUSINESS STRATEGY SDG TARGET “A BANK FOR EVERYBODY” “GREEN BANK “ “PRODUCTIVE BANK”

4.3 By 2030, ensure equal access for all women Parafiscal for the National Commission for and men to affordable and quality technical, Education Loans (CONAPE) Credit for Education vocational and tertiary education, including university education

4.4 By 2030, significantly increase the number of youth and adults who have “Sponsorship Expo Engineering Sponsorship relevant skills, including technical and vocational Expotec “ Credit for Technology skills, for employment, decent jobs and entrepreneurship

4.5 By 2030, eliminate gender disparities in education “Devices for people with disabilities such as and ensure equal access to all levels of education ATM 474 (100%), BN Internet Banking and and vocational training for vulnerable people, Mobile SINPE; recognized by “Costa Rica including people with Includes” disabilities, indigenous peoples and children in Technological Grandpas Program“ vulnerable situations.

4.7 By 2030, ensure that all students acquire the necessary knowledge and skills to promote “Financial Freedom Program Labor@ sustainable development, including, among Program Sponsorship BN Youth Expo others, education for sustainable development Savings Caravans Program and sustainable lifestyles, human rights, gender equality, promotion of a culture of peace and non-violence, global citizenship and appreciation of cultural diversity, and the contribution of culture to economic development.

4.a Build and upgrade education facilities so they take into account the needs of children, persons with disability, and gender differences, and TRUST FUND LAW No. 9124-MEP-IDB-BNCR provide safe, non-violent, inclusive and effective learning environments for all.

4.b By 2020, increase significantly the number of scholarships available worldwide to developing countries, particularly least developed countries, small island developing states and African countries, so that their students can enroll in “FONABE higher education programs, including vocational “Avancemos” (Go Forward) scholarships training and technical, scientific, engineering and information technology and communications programs, from developed countries and other developing countries.

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BUSINESS STRATEGY BUSINESS STRATEGY BUSINESS STRATEGY SDG TARGET “A BANK FOR EVERYBODY” “GREEN BANK “ “PRODUCTIVE BANK”

5.5 Ensure the full and effective participation of women and equal opportunities for leadership at BN Talents program all decision-making levels in their political, economic, and public life.

5.a “BN Mujer Undertake reforms to give women equal rights Female Heads of Household BN Mujer to economic resources and access to ownership and control of land and other types of goods, financial services, heritage and natural resources, in accordance with national laws

5.c Approve and strengthen successful policies and “IDB-FOMIN-BN Agreement Women Leaders applicable laws to promote gender equality and 360 Program” the empowerment of women and girls at all levels.

6.1 By 2030, achieve universal and equitable access Transforming Communities program ASADAS “BN Municipalities Aguatica trust fund to safe water at an affordable price for all Corporate and business loans

6.3 By 2030, improve water quality by reducing pollution, eliminating dumping and minimizing “Aguatica trust fund AyA trust fund the emission of chemicals and hazardous Transforming Communities program ASADAS “Eco-efficiency Program Sanitation plant” materials, halving the percentage of untreated Credit for Green SMEs” waste water and increasing considerably both recycling and safe reuse worldwide

“Aguatica trust fund AyA trust fund Sanitation 6.4 Transforming Communities program ASADAS Eco-efficiency program plant Business and Corporate loans By 2030, substantially increase water-use BN Municipalities” efficiency across all sectors and ensure sustainable withdrawals and supply of freshwater to address water scarcity and substantially reduce the number of people suffering from water “Aguatica trust fund AyA trust fund Sanitation scarcity. Transforming Communities program ASADAS Eco-efficiency program plant Business and Corporate loans BN Municipalities”

6.6 By 2020, protect and restore water-related “National Forestry Financing Fund (FONAFIFO) ecosystems, including mountains, forests, trust fund Sustainable Biodiversity Fund (FBS) wetlands, rivers, aquifers and lakes trust fund

6.b Support and strengthen the participation of local communities in improving water and sanitation Transforming Communities program ASADAS management

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BUSINESS STRATEGY BUSINESS STRATEGY BUSINESS STRATEGY SDG TARGET “A BANK FOR EVERYBODY” “GREEN BANK “ “PRODUCTIVE BANK”

“BN Development Green SMEs Loans for large companies Corporate loans” 7.1 By 2030, ensure universal access to affordable, reliable and modern energy services. “BN Development Green SMEs Loans for large companies Corporate loans Investment funds”

7.2 By 2030, increase substantially the share of Green SMEs “Corporate loans BN Development renewable energy in the global energy mix. Mutual Funds”

7.b By 2030, increase substantially the share of “BN Investment funds Corporate loans” renewable energy in the global energy mix.

“BN Development 8.1 Loans for large companies Corporate loans Sustain per capita economic growth in accordance Investment funds with national circumstances and, in particular, at Term deposit certificates Insurance least 7 per cent gross domestic product growth BN Women brokerage firm per annum in the least developed countries Mutual Funds”

8.2 Achieve higher levels of productivity “Loans for Industry Loans for technology of economies through diversification, Commercial loans technological upgrading and innovation, Investment in the development of public including through a focus on high value added works Agricultural loans and labor-intensive sectors Loans for livestock Loans for tourism “

8.5 By 2030, achieve full and productive employment “BN Development and decent work for all women and men, Loans for large companies Corporate loans including for young people and persons with Investment funds disabilities, and equal pay for work of equal value BN Mujer “

“BN Development Loans for large companies Corporate loans 9.2 BN Mujer Loans for industry Commercial Promote inclusive and sustainable loans” industrialization and, by 2030, significantly raise industry’s share of employment and gross domestic product, in line with national circumstances, and double its share in least “BN Development developed countries Loans for large companies Corporate loans BN Mujer Loans for industry Commercial loans”

9.3 BN Desarrollo (Development) Increase the access of small-scale industrial and BN Mujer (Women) other enterprises, in particular in developing countries, to financial services, including affordable credit, and their integration into value BN Desarrollo (Development) chains and markets. BN Mujer (Women)

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BUSINESS STRATEGY BUSINESS STRATEGY BUSINESS STRATEGY SDG TARGET “A BANK FOR EVERYBODY” “GREEN BANK “ “PRODUCTIVE BANK”

9.4 By 2030, upgrade infrastructure and retrofit industries to make them sustainable, with increased resource use efficiency and greater BN Carbon Neutrality PLUS Program Loans for Industry adoption of clean and environmentally sound technologies and industrial processes, all countries taking action in accordance with their respective capabilities

9.c Significantly increase access to information and communications technology and strive to provide universal and affordable access to the Internet in SUTEL-BNCR trust fund least developed countries by 2020

10.1 By 2030, progressively achieve and sustain “Women heads of household Technological “BN Emprendedor (Entrepreneur) income growth of the bottom 40% of the grandpas Financial Freedom program” BN Desarrollo (Development) population at a rate higher than the national BN Mujer (Women)” average “IDB-FOMIN-BN Agreement Women Leaders 10.2 360 Program “BN Emprendedor (Entrepreneur) By 2030, empower and promote the social, Devices for people with disabilities such as BN Desarrollo (Development) economic and political inclusion of all irrespective ATM 474 (100%), BN Internet Banking and BN Mujer (Women)” of age, sex, disability, race, ethnicity, origin, Mobile SINPE; recognized by “Costa Rica religion or economic or other status Includes” Technological Grandpas Program”

10.5 “Profit Efficiency Improve regulation and monitoring of global Return on assets (ROA), return on equity financial markets and institutions and strengthen (ROE) weighed by risk implementation of such regulations Operativos expenses Credit portfolio Delinquency”

11.2 By 2030, provide access to safe, affordable, accessible and sustainable transport systems for all, improving road safety, notably by expanding public “Commercial loans Corporate loans transport, with special attention Credits for the Development of Public Works” to the needs of those in vulnerable situations, women, children, persons with disabilities and older persons 11.4 Strengthen efforts to protect and Manuel Antonio Beach National Park safeguard the world’s cultural and natural trust fund heritage. 11.5 By 2030, significantly reduce the number of deaths and the number of people affected and substantially decrease the direct economic losses relative to global gross domestic product caused by disasters, including Parafiscal National Emergency Fund water-related disasters, with a focus on protecting the poor and people in vulnerable situations.

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SDG TARGET BUSINESS STRATEGY BUSINESS STRATEGY BUSINESS STRATEGY “A BANK FOR EVERYBODY” “GREEN BANK “ “PRODUCTIVE BANK”

11.7 By 2030, provide universal access to safe, inclusive and accessible, green and public spaces, particularly for women and children, older BN Municipalities persons and persons with disabilities

11.c Support least developed countries, including through financial and technical assistance, for Environmentally sustainable housing sustainable and resilient buildings utilizing local Construction loans materials

12.5 By 2030, substantially reduce waste generation through prevention, reduction, recycling, and Eco-efficiency program reuse

12.7 Promote public procurement practices that are Sustainable Procurement and Responsible sustainable in accordance with national policies Supplier Program and priorities

13.3 Improve education, awareness raising and human and institutional capacity on climate change Carbon Neutral Plus program mitigation, adaptation, impact reduction, and early warning

14.6 By 2020, prohibit certain forms of fisheries subsidies which contribute to overcapacity and overfishing, and eliminate subsidies that contribute to IUU fishing, and refrain from Fishing loans introducing new such subsidies, recognizing that appropriate and effective special and differential treatment for developing and least developed countries should be an integral part of the WTO fisheries subsidies negotiation

14.b Provide access of small-scale artisanal fishers to BN Desarrollo marine resources and markets •Indicator

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SDG TARGET BUSINESS STRATEGY BUSINESS STRATEGY BUSINESS STRATEGY “A BANK FOR EVERYBODY” “GREEN BANK “ “PRODUCTIVE BANK”

15.a Mobilize and significantly increase from all “National Trust Fund for Forestry Financing sources financial resources to conserve and (FONAFIFO)” sustainably use biodiversity and ecosystems

15.b Mobilize significantly resources from all sources and at all levels to finance sustainable forest management, and provide adequate incentives Sustainable Biodiversity Trust Fund (FBS) to developing countries to advance sustainable forest management, including for conservation and reforestation

16.4 De aquí a 2030, reducir significativamente By 2030 significantly reduce illicit financial and arms Program on Risk Identification and flows, strengthen recovery and return of stolen Classification assets, and combat all forms of organized crime

16.6 Codes of Ethics and Corporate Governance Create effective, transparent and accountable Risk Control institutions at all levels Anticorruption Policies Quality Certification

17.1 Strengthen domestic resource mobilization, Eco-efficiency Program Green SMEs BN Development BN Women including through international support to Education and Financial Inclusion Program Eco-efficient Products & Services Miscellaneous Credit developing countries, to improve domestic Miscellaneous Trusts Funds capacity for tax and other revenue

17.8 Fully operationalize the Technology Bank and STI (Science, Technology and Innovation) capacity Digital platforms of Banco Nacional Financial building mechanism for LDCs by 2017, and Conglomerate enhance the use of enabling technologies in particular ICT

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ANNEX 4

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GRI INDEX GRI STANDARD DISCLOSURE NUMBER DISCLOSURE TITLE PAGE 102-1 Name of the organization 2 102-2 Activities, brands, products, and services 11 102-3 Location of headquarters 2 102-4 Location of operations 9 102-5 Ownership and legal form 8 102-6 Markets served 9 102-7 Scale of the organization 32 and 54 102-8 Information on employees and other workers 32 102-13 Membership of associations 15 102-14 Statement from senior decision-maker 5 and 6 102-16 Values, principles, standards, and norms of behavior 26 and 27 102-17 Mechanisms for advice and concerns about ethics 26 and 28 102-18 Governance structure 14 102-20 Executive-level responsibility for economic, environmental, and social topics 13 GRI 102: GENERAL 102-22 Composition of the highest governance body and its committees 12 and 13 DISCLOSURES 102-23 Chair of the highest governance body 12 102-4 Location of operations 12 102-25 Conflicts of interest 13 102-26 Role of highest governance body in setting purpose, values, and strategy 13 102-31 Review of economic, environmental, and social topics 13 102-33 Communicating critical concerns 13 102-40 List of stakeholder groups 21 102-41 Collective bargaining agreements 102-42 Identifying and selecting stakeholders 21 102-45 Entities included in the consolidated financial statements 8 The results of the materiality 102-46 Defining report content and topic Boundaries analysis were reported in the 2017 report. 102-47 List of material topics 17

102-48 Restatements of information Not applicable for this period

102-49 Changes in reporting Not applicable for this period 81 WE DRIVE COSTA RICA’S SUSTAINABLE PROGRESS

GRI INDEX GRI STANDARD DISCLOSURE NUMBER DISCLOSURE TITLE PAGE 102-50 Reporting period 3

102-51 Date of most recent report 3

102-52 Reporting cycle 3 GRI 102: GENERAL 102-53 Contact point for questions regarding the report 2 DISCLOSURES 102-54 Claims of reporting in accordance with the GRI Standards 3

102-55 GRI content index 81

No external verification of the 102-56 External assurance contents of this report was GRI 203: 203-1 Infrastructure investments and services supported 38, 59 and 64 INDIRECT ECONOMIC IMPACTS 203-2 Significant indirect economic impacts 54 - 65 205-1 Operations assessed for risks related to corruption 29 GRI 205: ANTI-CORRUPTION 205-2 Communication and training about anti-corruption policies and procedures 26 and 30

302-1 Energy consumption within the organization 49 GRI 302: ENERGY 302-4 Reduction of energy consumption 49

GRI 303: WATER 303-1 Interactions with water as a shared resource 50

305-1 Direct (Scope 1) GHG emissions 48 GRI 305: EMISSIONS 305-2 Energy indirect (Scope 2) GHG emissions 48

GRI 307: ENVIRONMENTAL Non-compliance not observed COMPLIANCE 307-1 Non-compliance with environmental laws and regulations during this period. New employee hires and employee turnover [This Standard includes a Standard 401-1 Interpretation on how to calculate the rates of new employee hires and employee turnover.] 32 GRI 401: EMPLOYMENT 401-2 Benefits provided to full-time employees that are not provided to temporary or part-time employees 37

401-3 Parental leave 36 403-1 Occupational health and safety management system 37 GRI 403: OCCUPATIONAL HEALTH AND SAFETY 403-2 Hazard identification, risk assessment, and incident investigation 37

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GRI INDEX GRI STANDARD DISCLOSURE NUMBER DISCLOSURE TITLE PAGE 404-1 Average hours of training per year per employee 35

GRI 404: 404-2 Programs for upgrading employee skills and transition assistance programs 35 and 36 TRAINING AND EDUCATION 404-3 Percentage of employees receiving regular performance and career development reviews 37

GRI 405: DIVERSITY AND EQUAL 405-1 Diversity of governance bodies and employees 32 OPPORTUNITY Operations with local community engagement, impact assessments, and development 413-1 programs 38 GRI 413: FS13 Access points in low-populated or economically disadvantaged areas by type 9 LOCAL COMMUNITIES Initiatives to improve access to financial services for FS14 disadvantaged people 42

GRI 414: SUPPLIER SOCIAL ASSESSMENT 414-1 New suppliers that were screened using social criteria 66

417-2 Incidents of non-compliance concerning product and service information and labeling 44 GRI 417: MARKETING AND LABELING 417-3 Incidents of non-compliance concerning marketing communications 44

PRODUCT Percentage of the portfolio for business lines by specific region, size (e.g. micro/sme/large) PORTFOLIO FS6 and by sector 57

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