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Report 2022

Climate and environment

ESG risks in the credit business

Bank Pekao supports environmentally-friendly projects and takes into consideration ESG issues in the process of analyzing credit risk connected with transactions being executed and in the process of monitoring those transactions.

The Bank supports customers and green projects aimed at mitigating climate change, reducing environmental pollution and projects supporting sustainable social development. In view of the above, the Bank supports a gradual and orderly transition to a low-carbon economy, by reducing the financing of coal mining and fossil fuel energy production, in order to increase the financing of energy from renewable sources. The Bank considers infrastructure investments that are characterized by low CO2 emissions and resistant to climate change and disasters to be desirable.

The Bank, together with the assessment of creditworthiness and credit risk in the strict sense, carefully assesses the specific risk of transactions, in particular legal, reputation, political, environmental risks, the risk of customer’s failure to comply with the principles of corporate social responsibility, money laundering and terrorist financing (e.g. conflict of interest, transparency, companies operating in tax havens).

In the ESG risk assessment, the Bank takes into account climate, environmental and social risks. It takes particular care of the risks arising, i.a., from the transition to an economy that is low-carbon and “resilient” to climate change, and threats arising from the so-called risks of physical climate change.

In its day-to-day operations, Bank Pekao has a special commitment to environmental protection issues. The assessment of the ESG risks is one of the integral elements of the assessment of credit transactions made with business entities. Its aim is to promote informed credit decision-making and appropriate relationship management with customers who operate in areas that significantly affect the environment in which we live. Wherever possible, negative environmental, social and climate impacts should be avoided. If avoidance is not possible, negative impacts should be reduced, mitigated or compensated accordingly.

Should environmental hazards connected with the type of business activities carried out by borrowers occur, the Bank cooperates with customers in order to mitigate potential consequences of environmental risks. The purpose of such cooperation is to identify, assess and mitigate environmental, social, and climate risk and takes place during the assessment of credit risk and is based on methodologies and relevant trade guidelines of the European Bank for Reconstruction and Development and the European Banking Authority (hereinafter: EBA).

If the customer is found incapable of mitigating the ESG risks, the Bank defines conditions for particular environmental actions during the transaction and may activate environmental clauses in the credit facility agreement, among other possible solutions.

As regards environmental issues, the Bank does not finance some types of activities, inter alia:

  • new coal and lignite mining projects, and new energy projects based on coal and lignite, excluding projects supporting the transformation of the Polish energy sector
  • activities generating a material threat to the natural environment, i.e.:
    • activities declared illegal, phased out, or prohibited (e.g. production or trade of products containing polychlorinated biphenyls (PCBs), hazardous chemicals, psychoactive substances, ozone-depleting substances, persistent organic pollutants, wildlife and products thereof),
    • cross-border shipments of waste,
    • keeping animals for the primary purpose of fur production or any fur production activity,
    • the manufacture, placing on the market, and use of asbestos fibers, articles and mixtures containing these fibers intentionally added,
    • export of mercury and mercury compounds and the production, export, and import of a wide range of products containing mercury,
    • activities prohibited by the legislation of the host country or international conventions on the conservation of biological diversity resources or cultural heritage,
    • sea drift fishing with the use of nets exceeding 2.5 km in length,
    • forced evictions.

The Bank is in the process of analyzing options for supporting the nuclear energy transition.

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