Grupo Aval Acciones y Valores S.A. (AVAL): PESTLE Analysis [Nov-2025 Updated]

You're looking for a clear-eyed view of Grupo Aval Acciones y Valores S.A. (AVAL), and honestly, the landscape is complex but manageable if you know where to look. As a seasoned analyst, I see near-term risks in political uncertainty and the lingering effects of high interest rates, but the long-term opportunity is defintely in their digital transformation and Central American diversification.

Here's the quick math: AVAL's scale, with total assets projected to be around $105 billion to $110 billion by late 2025, gives them a massive cushion against regional volatility. But still, the political and economic headwinds require clear, actionable steps now.

Political Analysis: Navigating Reform Uncertainty

The core challenge for Grupo Aval is the Colombian government's reform agenda. This creates regulatory uncertainty for banks, especially around how profits are taxed and how services are delivered. You have to anticipate new tax reforms that could affect corporate income and capital gains, which directly hits your return on equity (ROE).

Also, geopolitical stability in Central American markets-places like Panama and El Salvador-directly impacts AVAL's regional revenue. If a government pushes for financial inclusion, that's great for the public, but it could mandate new, costly service requirements for AVAL. It's a cost-of-doing-business trade-off.

Keep an eye on Bogotá; the regulatory wind shifts fast.

Economic Analysis: The Rate and Currency Squeeze

The economic environment is the most immediate pressure point. High benchmark interest rates in Colombia, projected near 7.0% to 8.0% in late 2025, are the main headwind. Higher rates pressure loan growth because borrowing gets more expensive for everyone.

Persistent inflation, even if easing, still erodes consumer purchasing power, and that increases the risk of non-performing loans (NPLs). Plus, volatility in the US Dollar-Colombian Peso (COP) exchange rate affects AVAL in two ways: it changes the value of their dollar-denominated debt and messes with the translation of foreign earnings.

Slower Colombian GDP growth, forecast around 1.5% to 2.0% for 2025, simply limits the overall demand for credit. That's the reality of a tightening cycle.

Sociological Analysis: The Digital Demand Shift

The biggest sociological trend is the increasing demand for digital-first financial services, especially from younger demographics. Grupo Aval needs to meet customers where they are, which is on their phones, not in a branch.

But to be fair, there's a significant financial inclusion gap in rural and low-income areas. This requires AVAL to create tailored products that are both accessible and profitable, not just one-size-fits-all apps. Honestly, high unemployment rates, particularly youth unemployment, increase credit risk and the number of non-performing loans, so AVAL has to balance growth with caution.

Empathy in pricing is now a core business strategy.

Technological Analysis: The FinTech Race

Grupo Aval is in an aggressive race to digitize. They are investing heavily in digital platforms like Dale! and leveraging partnerships to compete with FinTech (financial technology) startups. This is a must-win battle.

The trade-off is cost and risk. Escalating cybersecurity threats require continuous, high-cost upgrades to protect millions of customer accounts. Also, the use of Artificial Intelligence (AI) for credit scoring and personalized customer service is a core focus, but legacy core banking systems-the old tech infrastructure-pose a challenge to rapid product deployment and operational efficiency.

Tech debt is the silent killer of innovation.

Legal Analysis: Compliance Complexity

The legal environment is getting tighter across the board. Grupo Aval faces stricter Anti-Money Laundering (AML) and Know Your Customer (KYC) compliance mandates across all their operating countries. This isn't optional; it's the cost of staying in business.

New data privacy and protection laws, similar to the European Union's General Data Protection Regulation (GDPR), increase compliance costs and data management complexity. Plus, there is regulatory pressure to reduce interchange fees and transaction costs for consumers and merchants, which directly cuts into a key revenue stream.

Managing diverse banking regulations in six different jurisdictions is a cross-border legal nightmare.

Environmental Analysis: The ESG Imperative

Environmental, Social, and Governance (ESG) is no longer a niche concern; it's a mandatory reporting standard for listed companies, and the pressure is only increasing. Grupo Aval needs to map its climate change risk exposure, especially in loan portfolios tied to agriculture and infrastructure.

Growing shareholder and public pressure means AVAL must finance green projects and issue sustainability-linked bonds to remain competitive for institutional capital. Also, they need to reduce the operational carbon footprint of their extensive branch network and data centers.

Finance: draft 13-week cash view by Friday to assess immediate liquidity against potential regulatory fines.

Grupo Aval Acciones y Valores S.A. (AVAL) - PESTLE Analysis: Political factors

Colombian government's reform agenda creates regulatory uncertainty for banks.

You need to watch the Colombian government's legislative push very closely; it's the single largest political risk for Grupo Aval Acciones y Valores S.A. (AVAL) in 2025. President Petro's administration has a broad reform agenda, and while the focus has been on health and pensions, the financial sector is defintely not immune. This creates regulatory uncertainty (the risk that new rules will negatively impact profitability) that affects capital planning and lending decisions.

The primary concern is the potential for new regulations from the Financial Superintendency of Colombia (Superfinanciera) that could cap interest rates or mandate changes to fee structures. For a bank holding company like AVAL, which reported a net income of approximately COP 1.9 trillion (about $490 million USD) for the nine months ended September 30, 2024, even a small regulatory change to net interest margin (NIM) can cut deeply into profits. Here's the quick math: a 50 basis point (0.50%) reduction in NIM across its loan portfolio could translate to hundreds of millions in lost revenue annually.

Geopolitical stability in Central American markets (e.g., Panama, El Salvador) impacts regional revenue.

Grupo Aval Acciones y Valores S.A.'s exposure to Central America acts as both a diversification benefit and a geopolitical risk. The region, primarily through its subsidiary BAC Credomatic, contributes a significant portion of the group's earnings. For the nine months ended September 30, 2024, the Central American operation accounted for roughly 47% of the total loan portfolio, making political stability there critically important.

Political shifts in key markets like Panama and El Salvador directly affect AVAL's regional revenue. If a government introduces capital controls or nationalizes certain services, the impact on AVAL's regional net income, which was a substantial portion of the group's total, would be immediate and severe. Still, the current political environments are relatively stable, but you must factor in the potential for rapid change.

The stability of the operating environment is key. One clean one-liner: Political stability in Central America is half of AVAL's balance sheet risk.

Potential for new tax reforms affecting corporate income and capital gains in Colombia.

The Colombian government has consistently sought to increase tax revenue, and further tax reforms are always on the table, even after the significant 2022 changes. You should anticipate legislative proposals in 2025 that target the financial sector for higher contributions. The 2022 reform already established a corporate income tax rate of 35% for banks, plus a temporary surtax that was set to phase out but could be extended or increased.

Any new reform could specifically target capital gains, which would affect AVAL's investment portfolio and divestitures. Also, an increase in the corporate income tax rate, even by a few percentage points, would directly reduce the net income attributable to shareholders. For example, if the corporate tax rate were permanently raised to 38%, it would immediately compress AVAL's margins, making it harder to maintain its dividend payout ratio, which was around 50% in 2024.

Government focus on financial inclusion could mandate new, costly service requirements.

A key policy objective of the current administration is financial inclusion-bringing more of the unbanked and underbanked population into the formal financial system. While this presents a long-term opportunity for market growth, the near-term political risk is the method used to achieve it. This focus could mandate new, costly service requirements for banks like Grupo Aval Acciones y Valores S.A.

These mandates often involve new rules on minimum branch presence in rural or low-income areas, or the requirement to offer low-fee or no-fee basic banking accounts. These services are typically low-margin or loss-leaders, increasing the bank's operational expenditure (OpEx). For AVAL, which operates a vast network of branches and digital channels, the cost of compliance could be substantial.

• Mandate new rural branch openings, increasing real estate and staffing costs.
• Require subsidized or free basic accounts, reducing fee income.
• Impose strict digital accessibility standards, requiring significant technology investment.

What this estimate hides is the potential for a new, government-backed digital banking platform that could compete directly with AVAL's existing digital offerings, forcing a costly and rapid response to maintain market share.

Grupo Aval Acciones y Valores S.A. (AVAL) - PESTLE Analysis: Economic factors

High benchmark interest rates in Colombia, projected near 7.0% to 8.0% in late 2025, pressure loan growth.

You're operating in a high-interest-rate environment, which is the most immediate headwind for a bank like Grupo Aval. The Banco de la República (Colombia's central bank) has maintained a restrictive stance, with the benchmark rate holding at 9.25% as of October 2025. This is significantly higher than the pre-pandemic norm, and while a gradual cut cycle is anticipated, market expectations for the year-end 2025 rate still hover around 9.00%. Here's the quick math: a higher cost of funding and a higher rate for borrowers means less demand for credit, especially for large commercial projects and mortgages.

This high-rate environment directly impacts Grupo Aval's core business. The company's gross loans saw a modest 3.2% growth year-on-year as of June 30, 2025, reaching 199.4 trillion pesos, a slowdown from previous periods. Management had already revised its full-year 2025 loan growth forecast downward due to this persistent economic uncertainty. The rate environment is a double-edged sword: it helps Net Interest Margin (NIM) in the short term but crushes volume growth. That's the trade-off we're watching.

Persistent inflation, though easing, erodes consumer purchasing power and loan quality.

Inflation is the silent killer of purchasing power, and even as it slows, it remains a major risk. Colombia's annual inflation rate was still high at 5.51% in October 2025, which is well above the central bank's 3% target. Forecasts suggest it will close 2025 around 4.9%.

This persistent inflation means consumers have less real income to service debt, increasing the risk of default. To be fair, Grupo Aval has shown resilience, with the consolidated 90-day Non-Performing Loans (NPLs) ratio actually improving to 3.5% as of June 2025, down from 4.2% in June 2024. Still, the pressure is visible in the bottom line: the company's net income for the first nine months of 2025 plummeted by approximately 87.7%, dropping to just 1.37 billion pesos, a stark indicator of the difficult operating environment and higher credit costs.

Volatility in the US Dollar-Colombian Peso (COP) exchange rate affects dollar-denominated debt and foreign earnings translation.

The fluctuating US Dollar-Colombian Peso (USD/COP) exchange rate is a critical factor for a conglomerate with significant international operations, particularly in Central America. The peso has seen periods of significant volatility, weakening to around 4,750 USD/COP in September 2025. This volatility creates two main risks for Grupo Aval:

• Debt Service Risk: Grupo Aval Limited guarantees USD 1.0 billion in bonds, with the total outstanding amount converted to 4,121.8 billion pesos as of June 30, 2025. A weaker peso makes servicing this dollar-denominated debt more expensive in local currency terms.
• Translation Risk: Earnings from its Central American operations, a key diversification strategy, are translated back into a volatile Colombian peso, which can obscure the true underlying performance of those units.

Slower Colombian GDP growth, forecast around 1.5% to 2.0% for 2025, limits credit demand.

While the initial economic slowdown has moderated, the consensus forecast for Colombian GDP growth in 2025 is around 2.5%, which is an improvement from 2024 but remains modest. This slower economic expansion means less business investment and lower consumer confidence, which directly limits the demand for new credit products across all segments.

The financial and insurance services sector itself is projected to be one of the more dynamic, expected to grow by 6.3% in 2025. This suggests that while overall credit demand is soft, the banking sector can still find growth pockets, especially in consumer and mortgage lending where Grupo Aval has focused. For context, here is a summary of key 2025 economic forecasts:

Grupo Aval Acciones y Valores S.A. (AVAL) - PESTLE Analysis: Social factors

Increasing demand for digital-first financial services, especially from younger demographics.

You are seeing a relentless push toward digital-first financial services, driven by younger, mobile-native customers who expect instant, seamless experiences. Grupo Aval is responding, with digital transformation as a core strategic priority for 2025. The challenge is not just launching an app, but achieving high-volume adoption that shifts transaction costs away from the expensive physical network, which still includes 996 Branches and 2,833 ATMs.

The company is leveraging its in-house tech firm, ADL Digital Lab, which is actively developing new platforms in 2025. This focus is critical, especially after reporting a 25% increase in mobile banking users during 2024. Plus, the authorization of GOU PAYMENTS S.A. EASPBV (a specialized electronic deposits and payments company) in 2025 shows a commitment to the low-value digital payments space. This is a race for the customer journey.

Here are the key metrics driving this digital shift:

• Total consolidated customer base: Over 15.2 million.
• 2024 Mobile Banking User Growth: 25% increase.
• Strategic Focus: Digital transformation is one of six corporate priorities for 2025.

Significant financial inclusion gap in rural and low-income areas requires tailored products.

The financial inclusion landscape in Colombia is a story of two economies, creating both a social obligation and a market opportunity for Grupo Aval. Access to basic deposit products is near-universal in urban areas, but drops sharply in rural regions to just 65.6% of adults [cite: 7 from previous search]. This exclusion is a major barrier to economic growth (productivity, growth, and well-being) for millions of Colombians.

To bridge this gap, the group relies heavily on its extensive physical network, which includes 120,085 Banking correspondents as of December 2024. These correspondents are crucial for providing basic services in remote areas. However, the real opportunity is in credit access: only 36.2% of adults in Colombia have access to any formal credit product [cite: 11 from previous search]. This low credit penetration demands tailored, micro-loan and simplified product offerings that manage the higher risk profile of the informal economy.

High unemployment rates, particularly youth unemployment, increase credit risk and non-performing loans.

Macroeconomic employment trends directly impact the stability of the loan portfolio, especially in the consumer segment. While the overall unemployment rate in Colombia improved to 8.2% in September 2025 [cite: 2, 3, 8 from previous search], the youth unemployment rate remains stubbornly high at 14.6% for the same period [cite: 2, 3, 8 from previous search]. This large cohort of underemployed or unemployed young people represents a significant credit risk pool.

This social factor translates directly into the group's asset quality metrics. While the consolidated 90-day Non-Performing Loan (NPL) ratio improved to 3.5% as of June 2025 [cite: 9, 12 from previous search] (down from 4.2% a year earlier), the cost of risk for consumer loans remains elevated at 4.2% for the second quarter of 2025. That's the quick math on social stress impacting the balance sheet.

The table below shows the clear link between the social environment and credit risk:

Growing public scrutiny on bank fees and service transparency drives a need for empathetic pricing.

Public sentiment in Colombia is increasingly focused on the fairness of financial services, particularly regarding fees and pricing transparency. This is not just consumer grumbling; it is a regulatory driver. The Superintendencia Financiera de Colombia (SFC) is actively monitoring the impact of recent reforms on low-value payment systems and fees. This focus means banks must offer empathetic pricing (low- or no-fee products) to maintain public trust and avoid regulatory intervention.

For Grupo Aval, fee income is a substantial part of non-interest revenue, with the Fee income ratio reaching 20.5% for the second quarter of 2025. This revenue stream is directly exposed to public and regulatory pressure. The SFC's role in managing Petitions, Complaints, Claims, Suggestions, and Reports (PQRSD) makes customer dissatisfaction a defintely measurable operational risk. The group must balance its fee-based revenue with the social demand for accessible, low-cost banking. A single, poorly managed fee structure could invite a regulatory review and damage the brand.

Grupo Aval Acciones y Valores S.A. (AVAL) - PESTLE Analysis: Technological factors

Aggressive investment in digital platforms like Dale! to compete with FinTech.

Grupo Aval has adopted an aggressive digital-first strategy to compete with the rapid growth of non-traditional financial technology (FinTech) players like Nequi and Daviplata. The spearhead of this effort is Dale!, the group's own digital wallet and Banking-as-a-Service (BaaS) platform. This is not a partnership with Nequi, but a direct competitive response to the neo-banking trend. Dale! has demonstrated significant traction, consolidating its position with more than 4 million users as of October 2025.

The platform's success was recently validated by a Platinum Prize in Digital Transformation at the Fintech Américas 2026 gala, which was announced in late 2025. This aggressive push is essential, as its main competitors, Nequi and Daviplata, already command a massive user base, with Nequi reporting approximately 13.5 million users. The strategic focus is on creating a comprehensive digital ecosystem that integrates services like bill payments, concert pre-sales via #ExperienciasAval, and remittances, making the platform sticky for retail clients. One clean one-liner: The fight for the digital wallet customer is fierce.

Here is a quick comparison of the competitive landscape based on available user data:

Escalating cybersecurity threats require continuous, high-cost upgrades to protect millions of customer accounts.

The rapid digital migration and the sheer scale of the customer base make cybersecurity a continuous, high-cost operational imperative. Grupo Aval serves a massive population, including approximately 15.8 million banking customers and 17.6 million members of its pension and severance funds manager, Porvenir. Protecting these millions of accounts from increasingly sophisticated threats, like those leveraging generative Artificial Intelligence (GenAI) for hyper-realistic phishing and adaptive malware, demands a substantial and non-negotiable budget.

While a specific 2025 budget for Grupo Aval is not disclosed, the global trend confirms the pressure: worldwide cybersecurity spending is projected to reach approximately $213 billion in 2025, a clear indicator of the escalating investment required just to maintain a baseline of digital defense. You defintely can't skimp on this. The cost of a major breach-in fines, reputation damage, and customer churn-far outweighs the cost of continuous, high-end security upgrades, including advanced threat detection and automated incident response tools.

Use of Artificial Intelligence (AI) for credit scoring and personalized customer service is a core focus.

Artificial Intelligence is no longer a future concept; it's a core operational tool at Grupo Aval, particularly for managing risk and enhancing customer interaction. In the first quarter of 2025 (1Q25), the company announced a strategic partnership with Microsoft specifically to boost the use of AI in everyday operations. This initiative is designed to achieve three key goals:

• Enhance customer experience.
• Improve operational efficiency.
• Strengthen data-driven decision-making.

Specifically in the lending business, AI is already integrated via advanced scoring models. For the mass-market consumer portfolio, these models leverage behavioral information, sociodemographic variables, and a customer's profile to assess credit risk. This allows for more precise and faster credit decisions, which is crucial for consumer loan growth, expected to be in the 8.5% area for 2025. The group is also exploring generative AI for customer self-service channels to increase the effectiveness of sales leads generated through their digital applications.

Legacy core banking systems pose a challenge to rapid product deployment and operational efficiency.

Despite the aggressive investment in customer-facing FinTech like Dale!, the underlying core banking systems (the foundational technology that processes transactions and maintains accounts) across Grupo Aval's multiple banks pose a structural challenge. The push toward Open Finance (OpenBanking) and NeoBanking models requires a fundamental 'Transformation of the Technological Architecture,' as noted by the group's digital lab, ADL Digital Lab. Here's the quick math: older, siloed systems slow down the speed at which new, competitive products can be launched.

The complexity of integrating four separate commercial banks (Banco de Bogotá, Banco de Occidente, Banco Popular, and Banco AV Villas) under a single, seamless digital experience is substantial. The need to transform the core architecture is a strategic priority to achieve the following:

• Enable rapid product deployment (time-to-market).
• Improve operational efficiency and reduce the cost-to-serve.
• Support the full vision of an Open Finance ecosystem.

This architectural evolution is a multi-year, multi-million-dollar capital expenditure (CapEx) project, still a major strategic hurdle that must be overcome to maintain long-term competitiveness against born-digital FinTech rivals.

Grupo Aval Acciones y Valores S.A. (AVAL) - PESTLE Analysis: Legal factors

Stricter Anti-Money Laundering (AML) and Know Your Customer (KYC) compliance mandates across all operating countries.

You are facing a significant ratcheting up of Anti-Money Laundering (AML) and Know Your Customer (KYC) requirements across your core markets, especially in Colombia and Central America. This isn't just a paperwork issue; it's a major technology and operational cost center. The Colombian National Directorate of Taxes and Customs (DIAN) issued Resolution No. 000204 in April 2025, which mandates more granular reporting on foreign exchange (FX) transactions.

This new rule requires the reporting of specific data points like the name of the beneficiary or recipient, the sender, and the city and country of the receiving or sending bank account. This level of detail forces a substantial upgrade to your transaction monitoring and customer data systems to ensure compliance with the new reporting deadlines, such as the one for the 2025 quarters by January 2026. Here's the quick math: more data fields mean more false positives, requiring more human analysts.

The constant global push for transparency means your AML/KYC infrastructure needs to be defintely top-tier.

New data privacy and protection laws (similar to GDPR) increase compliance costs and data management complexity.

The global trend toward comprehensive data privacy legislation, similar to the EU's General Data Protection Regulation (GDPR), is hitting your operating jurisdictions hard, increasing both compliance costs and the risk of significant fines. In Colombia, the maximum institutional fine for non-compliance with personal data legislation is substantial, reaching up to 2,000 monthly legal minimum Colombian wages, which translates to approximately USD 695,000 for 2025.

Plus, your US presence exposes you to a patchwork of new state laws, with eight new comprehensive privacy laws taking effect in 2025 in states like Delaware, Iowa, and New Jersey. These laws often have varying definitions of sensitive personal data and introduce new consumer rights, forcing a fragmented, costly compliance strategy. For the financial sector, non-compliance with regulations that contribute to a data breach incurs an average cost of almost $220,000 more than a compliant breach, according to industry reports.

Regulatory pressure to reduce interchange fees and transaction costs for consumers and merchants.

Regulatory bodies are actively pushing to lower the cost of digital transactions, which directly pressures your revenue from card and payment processing fees. In Colombia, card fees currently average between 3.3%-3.5% plus a fixed fee for merchants, while the local electronic payment system, PSE (Pagos Seguros en Línea), is typically lower at 2.65% plus a small fixed fee. These figures represent the current high-margin environment that regulators and consumer groups are targeting.

The global G20 roadmap for improving cross-border payments, which is a major driver of regional policy, aims to reduce the global average retail cross-border payment cost to no more than 1% by 2027. This long-term goal signals an inevitable squeeze on the current fee structure, forcing you to find operational efficiencies to maintain profitability as interchange fees decline.

Cross-border legal complexity managing diverse banking regulations in six different jurisdictions.

Operating in six distinct jurisdictions-Colombia, Panama, Costa Rica, El Salvador, Honduras, and Nicaragua-means you must navigate six different sets of banking, consumer protection, and labor laws, plus the US regulatory environment for your ADRs. This is a massive overhead. The complexity is compounded by the global adoption of new standards.

The sheer volume of new international regulations, like the EU's Digital Operational Resilience Act (DORA) effective January 17, 2025, for financial entities, sets a high bar for digital resilience and third-party oversight that often becomes a de facto global standard for large financial institutions. Also, the ongoing transition to the ISO 20022 messaging standard for cross-border payments is a significant, mandatory systems overhaul that requires simultaneous, coordinated implementation across all six countries to avoid operational delays.

• Manage six unique national banking superintendencies and central banks.
• Implement new FX reporting rules (DIAN 2025) across all relevant cross-border flows.
• Coordinate the transition to the new ISO 20022 global payment standard.
• Align data protection policies with both local laws and the US state-level privacy patchwork.

Finance: draft a 13-week cash view by Friday to model the impact of a 50-basis-point reduction in average interchange fees.

Grupo Aval Acciones y Valores S.A. (AVAL) - PESTLE Analysis: Environmental factors

Mandatory Environmental, Social, and Governance (ESG) reporting standards are increasing.

You are seeing a clear, non-negotiable shift from voluntary disclosure to mandatory, globally-aligned ESG reporting, and Grupo Aval is defintely responding. The pressure isn't just from Colombian regulators, but from US investors who demand transparency under SEC rules.

Grupo Aval is already reporting under multiple international frameworks, which is smart risk mitigation. They use the GRI Standards (Global Reporting Initiative) and the SASB framework (Sustainability Accounting Standards Board), specifically for the Commercial Banking industry, which represents about 79.8% of their consolidated assets.

Crucially, they align their climate risk management with the recommendations of the TCFD (Task Force on Climate-related Financial Disclosures), now being adopted and strengthened by the International Financial Reporting Standards Foundation's (IFRS) IFRS S2 standard. This means their climate data is moving from a sustainability report footnote to a core financial disclosure. The Colombian Finance Superintendence's External Circulars 031/2021 and 012/2022 also mandate specific information elements.

Here's the quick math on their strategic alignment:

• Core Reporting: GRI Standards (Essential option) and SASB.
• Climate Risk Standard: TCFD/IFRS S2.
• 2025 Action: The exercise to update the double materiality analysis will be carried out in 2025, ensuring their priorities match stakeholder impact and financial risk.

Climate change risk exposure in loan portfolios, especially those tied to agriculture and infrastructure.

The transition risk from climate change is a direct credit risk for a bank of Grupo Aval's size. Their total gross loan portfolio was Ps 199,357.1 billion as of June 30, 2025, and a significant portion of that commercial book is tied to climate-vulnerable sectors.

The group's banks are implementing the Environmental and Social Risk Management System (ESRMS), with full implementation expected in 2024 across Banco de Occidente, Banco Popular, and Banco AV Villas. This is their primary tool to manage this exposure.

We see the risk already surfacing in key commercial segments. For example, the infrastructure sector drove a 38.5% quarterly decrease in the commercial loan book in 4Q2024, partly due to lower work progress in some concessions, which can be exacerbated by climate-related delays or regulatory shifts.

To give you a sense of the scale, Banco de Bogotá assessed $31 trillion pesos of its loan portfolio at the end of December 2023, categorizing 18.5% of that amount as high environmental and social risk. That's a substantial block of capital requiring heightened scrutiny.

Growing shareholder and public pressure to finance green projects and issue sustainability-linked bonds.

Shareholders are demanding a clear path to a low-carbon economy, and Grupo Aval is actively channeling capital toward this transition. Their commitment is visible in their sustainable financing numbers, which exceeded $23 trillion Colombian pesos in 2024 for projects like renewable energy, sustainable mobility, and environmental conservation. That's real money making a real impact.

Issuing green and sustainable debt is a core strategy. Banco de Bogotá, a subsidiary, was a pioneer, issuing Colombia's first sustainable subordinated bond in the international market for USD$ 230 million. This not only raises capital but also signals a credible commitment to the market.

While green bonds remain strong globally in 2025, the market for sustainability-linked loans (SLLs)-where the interest rate is tied to the borrower's achievement of ESG targets-is experiencing relative weakness. This suggests that investors are becoming more discerning and demanding higher quality, verifiable metrics, so the bank must ensure its targets are robust.

Need to reduce the operational carbon footprint of their extensive branch network and data centers.

The operational footprint of a large financial conglomerate is significant, mostly driven by energy use in their extensive branch network and data centers. Grupo Aval has set an aggressive near-term target: achieving carbon neutrality in scopes 1 and 2 by 2025. This is a firm, actionable commitment.

Their longer-term goals are equally clear: a 51% reduction in emissions by 2030 and moving toward a Net Zero by 2050 target. They are not just talking; they are measuring and offsetting.

The holding company's total carbon footprint in 2024 was 599.2 t CO2 (tonnes of CO2 equivalent). To meet their 2025 neutrality goal, they offset their 2024 footprint (Scopes 1, 2, and partial 3) by purchasing 600 carbon credits. This is a necessary, albeit short-term, measure for neutrality.

Operational efficiency is improving, too. In 2024, the holding company reduced energy consumption by 3.9% and water consumption by 17.7%. Still, the energy used by the holding company in 2024 was 166.28 MWh, and 100% of it came from non-renewable sources, highlighting the next big hurdle in their transition plan. They need to start shifting that energy mix.