2022 Annual Report


2022 Annual Report

The Bank carefully monitors the information published on anthropogenic climate change and is aware of corporate responsibility for complying with the obligations recorded in the Paris Agreement. The Bank wants to achieve its business objectives by maintaining its impact on the climate change resulting from its operating and product activities and the impact of climate change on business activities at the lowest possible level. In its activities, the Bank wants to support the long-term objective of the Paris Agreement – increase of the global average temperature below 2°C as compared to pre-industrial times.

Since 2019 the Bank has been calculating the level of greenhouse gas emissions from operating activities (for the Bank and for the Group). In 2021, it adopted ambitious short-term objectives concerning reduction in the Bank’s (Scope 1 and Scope 2) GHG emissions aligned with the objectives of the Paris Agreement (accounting in chapter Summary of the year). The Bank is focused on improving the measurement of GHG emissions generated by the Bank in all scopes. Additionally, the Bank eliminates carbon-intensive energy sources, buys energy from RES, takes actions limiting energy consumption (e.g. photovoltaic installations in selected real properties of the Bank).

The Bank is aware of the impact of its product portfolio on climate and the impact of the risk of climate change on its product portfolio. The Bank has adopted lending policies for the carbon-intensive sector, RES as well as the chemical, oil and gas industries. The aim of the policy for the carbon-intensive sector is to successively reduce the exposure to customers and transactions based on coal as an energy carrier (consistency with the European climate policy and moving towards net-zero carbon emissions in 2050) and to refrain from financing new energy production sources based on coal and lignite. On the other hand, the RES policy assumes increasing the financing of operations related to renewable energy in a successive manner.

The Bank has also made a commitment regarding the composition of its product portfolio (the relation of “green” financing to carbon-intensive financing, increasing the volume of green financing by 5% a year, eliminating the exposure to the coal-mining sector by 2030). Accounting for these objectives is presented in chapter Summary of the year.

As part of works on the Bank’s Strategy 2023-2025, the Bank tried to estimate emissions generated by its product portfolio. The Bank does not have any data on the emissions of its customers, while some of them do not even have such knowledge about themselves. In order to estimate the emissions, data on the industry’s average emissivity were used. The estimated product emissions in Scope 3 exceed the currently reported emissions of the Bank in Scope 1 and Scope 2 by over 300 times. In the new strategy, the Bank declared that it will start emission calculations in Scope 3 and prepare the trajectory of emission reductions based on a scientific approach.

The Bank discloses climate-related information in accordance with the TCFD (Task Force on Climate-related Financial Disclosures) recommendation. For several years, it has been conducting climate disclosures in CDP Disclosure Insight Action using the TCFD recommendations and for 2022 as one of seven Polish banks, and it has received a climate change disclosure rating (“D”).

Climate disclosures according to the TCFD standard

The Vice-President of the Management Board managing the work of the Management Board is responsible for the management of ESG risks, while management of the individual risks is the responsibility of the organizational units nominated by the Management Board. The committees functioning in the Bank within the scope of their tasks and competences take decisions, issue recommendations, and opinions on activities related to ESG risk.

The Credit Risk Department is responsible for:

  • monitoring of strategic credit risk limits and strategic climate risk limits (ESG) in view of the credit risk,
  • monitoring the utilisation of internal portfolio limits, in particular with regard to climate risk limits (ESG),
  • coordinating the implementation of consistent risk management standards in the Bank’s Group related to limiting the impact of climate factors (ESGs) on individual types of risks, in particular on the risk level of the Bank’s credit portfolio.

At the end of 2022, the Bank has created the Sustainable Development Department, reporting to the President of the Management Board (Vice-President of the Management Board awaiting the Polish Financial Supervision Authority’s consent to the appointment as the President of the Management Board). The task of the new department is to coordinate activities ensuring sustainable and responsible development of the Bank and Bank’s Group.

The Bank adopted a new Strategy for 2023-2025, in which it specified its climate ambitions as follows:

  • limiting own CO2 emissions of the Bank through modernisation of branches and offices, and electrification of fleets,
  • increasing the share of energy purchased certified as green-sourced,
  • reaching net-zero in Scope 1 and 2 by 2030.

With regard to financing, the Bank intends to:

  • expand the product offer supporting sustainable development,
  • identify priority sectors and customers to support decarbonisation,
  • finance complex transformation investments,
  • begin calculating Scope 3 emissions as part of the preparation of the trajectory of a science-based reduction.

In the risk area, the Bank intends to:

  • extend the process of scoring and analysis of the portfolio to include ESG aspects,
  • build sector expert opinions,
  • carry out climate stress tests.

As a result of the activities undertaken, the Bank intends to become the leader of the highest volume of new financing of sustainable and
transformation projects.

The Bank takes into account climate factors in the customer’s credit assessment and is preparing to assess the corporate portfolio in accordance with the sustainable activity taxonomy. The Bank recognises business opportunities related to financing the transformation of customers’ activities into low-carbon activities and related to adaptation to climate change. To this end, it expands its product offering and supports customers in transformation and adaptation to climate change.

The Bank is aware of the potential impact of climate change on operating activities. In the medium-term horizon, it identifies the following physical and transformation climate risks:

  • regulatory risk associated with the prices of emission rights and extension of the ETS system to other sectors, and the plan to introduce the Carbon Border Adjustment Mechanism (CBAM) by 10/2023. The above activities may significantly change the financial standing of customers and affect their ability to service their liabilities,
  • regulatory risk associated with extension of the scope of reported emissions and making the reporting of greenhouse gas emissions obligatory rather than voluntary across the supply and value chain,
  • the risk associated with the financing of the investment projects on new environment-friendly technologies which may not succeed on the market,
  • the risk of an increase in the frequency and severity of unusual weather phenomena, leading to a change in the collateral value.

The Bank analyses exposures in the banking book sensitive to the impact of chronic and sharp physical events related to climate change according to the NACE sector and geographical location of the customer’s activity or the location of the collateral in the form of real estate. In its analyses, the Bank uses climate models (the KLIMADA 2.0 project) published by the National Institute for Environmental Protection, under which RCP8.5 scenarios is analysed (maintenance of the current rate of growth of greenhouse gas emissions, in the business as usual formula, the average temperature of the Earth will increase by 4.5° in relation to pre-industrial levels) for the decades 21-30; 31-40; 41-50. The Bank used the scale of exposure to physical risk from 1 to 5 (1 – low, 5 – very high). In the Capital Adequacy Report, the Bank discloses the existence of physical risk in all geographic locations for which the risk of a chronic and sharp physical phenomenon is material.

The opportunities identified by the Bank include new possibilities for financing low-carbon products and services and the financing of energy transition. The Bank systematically extends its offer of green products setting ambitious strategic goals for green financing.

In the ESG Risk Management Area, the Bank performs tasks to ensure compliance with the following external regulations:

  • Taxonomy (Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088 including delegated regulations) – the Bank and Bank’s Group are engaged in a project to operationalize the technical criteria of the EU Taxonomy;
  • Implementing Technical Standards – Commission Implementing Regulation (EU) 2022/2453 of 30 November 2022 amending the implementing technical standards laid down in Implementing Regulation (EU) 2021/637 as regards the disclosure of environmental, social and governance risks in accordance with Article 449a of Regulation (EU) No 575/2013 of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012.

The Bank is working to expand its IT systems for collecting, aggregating and managing sustainability data.

The Bank developed principles for disclosure of information on ESG risks in accordance with the applicable regulation implementing technical standards (ITS). Due to the limited availability of certain data as at 31.12.2022, some information is based on expertly estimated data. For details of this disclosure please refer to the Capital Adequacy Report.

In 2021, the Risk Management Strategy included the climate risk by introducing a quantitative strategic risk tolerance limit for exposures to customers from carbon-intensive industries (concentration risk). In 2022, due to the need to purchase energy carriers as a result of war in Ukraine, financing of carbon-intensive sector customers with a guarantee of the State Treasury who implement programmes for the purchase of energy carriers from the above limit was excluded. The share of loans to customers from carbon intensive industries in the balance sheet total of the Bank is monitored on a monthly basis and reported to the Credit Committee of the Bank and the Management Board. The limit was set at 0.8% of assets (actual funding level is much lower).

Other climate-related measures and objectives (financing coal extraction, green financing, relation of green and carbon intensive financing) are set out in Chapter Non-financial factors in the bank’s strategy.

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