Banks representing 64% of the assets of the banking sector in Poland have already introduced elements of sustainable financing in their business strategies and product offer, and almost all have taken steps to include climate and environmental risks in their credit and investment processes, shows from the PwC report “Green finances in Polish. How will ESG change the banking sector and corporate financing?”.
“Our study, in which a group of the largest commercial banks in Poland took part, shows that most of them already take into account or intend to take into account climatic and environmental risks in granting loans, mainly to selected industries and sectors. This is a clear signal for companies applying for for financing their investments in the near future. Additional expectations will arise from them,” said Przemysław Paprotny, PwC partner, leader of services for the financial sector in Poland.
Polish banks are intensively preparing to meet EU regulations in the field of sustainable development. 86% of the surveyed banks made an overall assessment of compliance with the current ESG (Environmental, Social, and Corporate Governance) requirements and estimated their impact on business, and 64% are in the process of implementing the requirements set out in the EU legal framework European.
According to 86% of respondents, ESG factors and EU requirements will significantly affect, first of all, credit risk and the credit process. Importantly in this context, still 43% of institutions have not yet analyzed their loan portfolio in terms of meeting the ESG criteria.
The vast majority of banks positively perceive the emerging regulatory requirements with regard to ESG, believing that they constitute an interesting opportunity from their perspective (79%), as well as from the Polish banking sector and the entire country (71%).
Some see risks for the economy and for banks related to the implementation of ESG projects, especially in the situation of insufficient consideration of the challenges and costs of energy transformation in EU regulations, it was underlined.
The biggest challenge resulting from the requirements of implementing ESG factors into the risk set for banks are, according to the respondents: the lack or limited availability of data on ESG counterparties (86%), low quality of disclosures and counterparties’ awareness of sustainable development initiatives (79%), and also no final, transparent regulations (71%), according to the report.
All banks unanimously declared that for the implementation of ESG initiatives it would be useful to develop uniform rules for the interpretation of regulatory requirements in this respect in the banking sector.
According to PwC experts, sustainable financing will accompany the financial sector in the coming years, playing a key role in the transformation of the business.
“Following the Green Deal and other political declarations on the means and direction of activities aimed at achieving the goals of the Paris Agreement, including the zero emission 2050, there has been an avalanche of regulations for the financial sector. They are intended to integrate ESG risks into investment processes and risk management. ESG risks. and climate risk in particular, have become the focus of attention of EU bodies shaping regulations and guidelines for the financial sector (European Commission, EBA, ESMA, ECB). about ESG aspects, ” said Piotr Bednarski, director in the financial sector services team at PwC.
As he pointed out, the activity of Polish supervision in this area is modest so far, but in the next several months we should expect the guidelines of the Polish Financial Supervision Authority (KNF) along the line of increasing requirements at the European level, which will increasingly oblige regulated entities in Poland.
The implementation of new strategies and business models in the context of ESG requirements requires appropriate competencies, the acquisition of which can be a big challenge. The expectations are also growing for the bank’s authorities responsible for shaping and overseeing the business strategy and risk. It will therefore be necessary to provide banks with appropriate knowledge and skills, including scope.
As indicated, the appointment of dedicated committees is also observed more and more often to support ESG initiatives, as well as the creation of positions / units dedicated to climate risk management. Failure to do so will mean a slowdown in ESG development and an increase in regulatory risk.
According to the authors of the report, some banking business models and exposure portfolios may be particularly exposed to climate-related risks, especially if they are related to economic sectors sensitive to climate-related physical threats, EU CO2 regulations or the transition to a low-carbon economy.
The survey was attended by representatives of 14 commercial banks, including 11 largest commercial banks, two specialized banks and one bank from the top 20, which has financing “green” projects in its mission. These banks account for approximately 80% of all assets of the banking sector in Poland.
Source: PwC and ISBnews
