Green finance takes root in Poland

With war in Ukraine, post-pandemic economic and social disruptions, and soaring inflation and energy prices, the shift to renewable energy sources is accelerating. Companies and financial institutions the world over are paying more and more attention to sustainability. Poland's first ESG initiatives took place as early as 2016, when the country launched the world's first EUR 750m government green bonds.

Poland's sustainability finance is run from the bottom up by banks rather than by government authorities. Polish banks annually publish their strategies, including activities, goals and milestones to be achieved to support sustainable development. One example is mBank, which has said that it will become fully climate-neutral by 2050 thanks to its strategy of introducing environmental covenants and financing conditions, but also of using renewable energy sources and eliminating plastic cards. Meanwhile, ING Bank Polski has declared that it will donate PLN 2m to support start-ups that implement projects related to sustainable development or support climate change education. It presented detailed statistics in its Environmental Declaration concerning CO2 emissions reductions by 91 tons through the purchase of energy only from renewable sources or the creation of CO2 absorbing murals in Katowice.

In addition to broad general strategies, banks are introducing many facilities for borrowers (especially consumers) in the form of lower margins or zero commissions on financing. Credit Agricole, for example, is offering a 1.8 % margin and zero commission in its "Green Home" programme. Borrowers must meet many requirements to obtain such financing, such as reporting the annual energy consumption of their house.

The Warsaw Stock Exchange is also supporting ESG development. In cooperation with the International Finance Corporation and a law firm, as part of the Green Bond Framework Programme, the WSE is offering free assistance in preparing a portfolio of green bond projects and reporting obligations. This is an opportunity for listed companies to develop their ESG positioning and proper operations supported by the WSE.

Sustainability Linked Loans (SLLs) are an important practical component that are becoming increasingly common in Polish transactions. The first took place in 2019 between Energa Group S.A. and a consortium of five banks comprising Santander Bank Polska, Bank Gospodarstwa Krajowego, PKO Bank Polski, Caixabank Branch in Poland and MUFG Bank N.V. This was the first financial initiative to use ESG mechanisms and take into account corporate social responsibility. The revolving credit amounting to PLN 2bln (EUR 460m) was earmarked for the development of renewable energy sources and further modernisation of the energy sector in Poland.

"This is the first loan agreement on the Polish market whose financial terms are strictly dependent on the borrower's commitment to the environment, society and corporate governance," Maciej Tarnawski, Managing Director of the Credit Markets Department in Santander Bank Polska's Corporate and Investment Banking Division said. "By introducing the ESG-linked financing model to Poland, Santander Bank Polska is implementing the assumptions of its strategy of a responsible bank supporting sustainable development initiatives in the Polish energy sector."

authors: Paula Weronika Kapica, Oliwia Jezierska