PKO Bank Polski is a leading financing bank in Poland, providing a full suite of green financings to the corporates, financial institutions and sovereign issuers

Green financings are becoming more popular, with the market growing at EU level on average 50% annually in the period 2015 – 2020. While the forecasts predict even further growth in the years to come, we strongly believe that the market can accelerate even further. The headwinds that the Polish debtors and investors are facing are similar to the ones in the other EU markets: various rating standards for green projects and green bonds being adopted, still limited, although growing, number of viable projects to be financed and various and often complex review standards for the green debt instruments, increasing a risk of greenwashing.

At the same point of time the market welcomes efforts made by the EU to introduce green financings standards (e.g. green bond standard), allowing both issuers and investors to benefit from the more clearer and transparent evaluation criteria, aligned with the EU taxonomy, with the ultimate result being increasing market confidence.

We would expect this development, together with growing ESG awareness of the issuers and investors,  to be facilitating factors in helping issuances of green instruments across the EU community, including Poland.

We also note another important milestone for the green financing development being adopted by the EU early in 2023 – entry into force of the Corporate Sustainability Reporting Directive. Once implemented on the national level in the EU countries, would require a large companies as well as listed small and medium companies to report on the social and environmental risks they face, and on how their activities impact people and the environment. Needless to say, it would facilitate for the investors the process of assessing climate change risks and how they impact the performance of the businesses.

In our view, also any incentives on a demand side might be positively welcomed and would certainly be beneficiary for the market of green instruments. The number of ESG funds is still lagging in relation to the western Europe. There is a wide range of possible initiatives like for example applying  lower capital requirements to  green assets portfolios or tax relieves on the green assets returns. Last but not least,  I believe that factor just as raising ESG awareness in our society plays a significant role and would finally contribute positively to our position (by for example putting higher and higher pressure on bonds issuers).

The local market witnessed product innovation incl. green loans, green bonds and sustainability linked financings.

The local market has already witnessed a variety of the green products, including green bonds and loans, covered bonds, sustainability linked loans and bonds. While the financial institutions and corporates are more and more frequently using the green debt instruments, the local municipalities have only recently tested the market, with the first issue originated in 2021. A barrier for the municipalities to engage more frequently in green products are, again as for the other issuer, various evaluation standards for the green products as well as the costs associated with the green certification.

Transition features are important development towards ESG goals, yet still evolving in the local market. We note an increasing interest of e.g. Polish power utilities in transition loans, which purpose is to finance investment projects aiming to reduce a carbon footprint in a power generation process.

We also believe that Social Bonds with its objectives including, but are not limited to affordable housing, affordable basic infrastructure, employment generation or sustainable food systems, are the instruments worth developing. These kind of bonds are popular in countries such as France of Netherlands, but actually has not make any footprint on our market yet. This might considered as an alternative for funds raising especially in the context  housing undersupply in our country.

The ESG screening is important process implemented by PKO Bank Polski to determine green financing eligibility.

At PKO BP, we believe that ESG screening will be crucial to managing bond and loans portfolios over time. The bank has already adopted in the credit process an ESG categorization, based on both, individual interviews and assessment of the ESG eligibility of our clients and review of the independent ESG rating assigned for the clients or projects, if available. An intensified attention to ESG standards is evident in the market and while the companies are facing an increasing demands from both the regulators and the stakeholders, we are pleased to note a proper understanding among the clients of the bank how to achieve a goals enabling a shift towards a low carbon economy.

However, it is worth to underline, that due to the ESG complexity, the bank is eager to constantly develop our ESG screening politics. PKO Bank Polski attaches significant importance to this process, taking into consideration our role on the financial market in Poland.