Bank Pekao S.A. Supports Processes of Importance to Poland and Europe

Bank Pekao's Eurobond was subscribed in November 2023 with investors reporting demand of more than EUR 1.5 billion. The debt securities went to 110 entities, and the reduction rate reached 66.77 per cent. The notes were issued under EMTN's EUR 5 billion medium-term Eurobond programme.

Bank Pekao has been active in the sustainable finance market for years, both organising green and sustainable debt issues for clients and acting as an investor in such bonds. Now it has also entered this market as an issuer of green bonds, and the interest that has accompanied this issue proves how important financing the transformation in our country is in the eyes of Polish entities.

Good Strategy, Good Execution

The success of the green Eurobond issue and other successes confirm the validity and good implementation of Bank Pekao's ESG Strategy announced in 2021. It is based on three pillars: Environment, Engagement and Governance.

The first pillar provides for the financing of sustainable projects, an orderly and gradual transition to a low-carbon economy, carbon footprint reduction and the achievement of climate neutrality. The second covers social activities, including education, support for the development of Polish companies, as well as digital and innovative solutions. The third pillar, meanwhile, covers high corporate governance standards and an ethical approach to business, the integration of ESG in all key processes, and attention to development, diversity and employee equality.

“More companies, including banks, are changing their strategies related to the new approach to sustainability. Our bank, in its strategy for 2021-2024, has adopted ESG targets in its overall strategy, but has otherwise adopted an ESG strategy that is completely separate. A great many entities are doing the same”, says Jerzy Kwieciński, Vice-President of Bank Pekao S.A., who oversees the Corporate Banking, Markets and Investment Banking Division.

Why is this so important and, for some, unavoidable?

“People and institutions with huge amounts of money are saying yes: we will give you money for your investments, but on condition that they are green investments. At the moment, financial institutions are pledging funds in excess of annual global GDP. That is, more than USD 100 trillion”, comments Jerzy Kwieciński.

Among Bank Pekao's key intentions for 2024 is precisely to organise the financing of new sustainable projects. This is a strategic objective. In its strategy, the bank will arrange financing for new sustainable projects of at least PLN 30 billion between 2021 and 2024 (that's approximately EUR 7 billion at the current exchange rate). This amount will consist of at least PLN 8 billion of new financing for sustainable projects including green, social projects and support for the issuance of ESG bonds of the bank's clients amounting to at least PLN 22 billion.

COVID and the subsequent economic crisis in 2020 significantly accelerated digitisation and digitalisation, especially in the economy. What happened next, namely the whole energy crisis resulting from the aggressive policy pursued by Russia for years, as well as the very fact of Russia's aggression against Ukraine, led to the acceleration of ESG processes in Europe. This led to the importance of achieving economic and energy independence in the region being recognised.

“Looking at Poland, we can safely say that the world is changing and our country is keeping up with these changes. We have become independent of energy raw materials that were imported from Russia”, emphasises Jerzy Kwieciński.

There has also been a revolution in renewable energy sources. Twenty years ago, this energy and its production had to be subsidised. Today, the production of electricity, whether from the wind in the form of wind farms or from the sun through photovoltaics, is cost-effective.

Bank Pekao will support customers in their energy transition and adaptation to climate change, as well as finance the development of RES and new technologies. It intends to be an active participant in government and EU climate reconstruction and transformation programmes.

“We have operationalised a new approach in our bank and changed all business areas. Including those that serve businesses, companies, the public sector and individual customers. In this way, we are comprehensively switching our products to the principles of sustainable financing”, says Jerzy Kwieciński.

The regulatory environment is important. EU regulations will require reporting next year on how certain institutions, including banks such as Bank Pekao, meet ESG standards, and the ESG situation of their customers.

Bank Pekao's ESG strategy assumes that the share of green financing, which includes projects such as wind farms, photovoltaic installations, low-carbon transport or green building, will exceed 4 per cent of Pekao's balance sheet portfolio.

“The world's leading financiers of this type of venture have investments in their portfolios at the level of around 5 per cent. This shows how Pekao is strongly committed to these investments”, points out Jerzy Kwieciński.

This, he adds, is in line with the expectations of customers, the public and business partners.

Bank Pekao is financing Poland's largest onshore wind farm, located on the border between Pomorskie and Zachodniopomorskie Voivodships. At the same time, together with the Polish Development Fund, it is taking part in the pilot financing of projects to build photovoltaic and wind farms with a total capacity of up to 500 MW. The bank also co-organised the first green bond issue by a local government in Poland. In the commercial real estate sector, however, it has consistently focused on financing projects with top-quality environmental certification.

In line with the ESG Strategy, Bank Pekao also plans to achieve its own climate neutrality by 2030. The share of financing that covers the mining sector and electricity or heat generation using coal and lignite will fall below 1 per cent.

And at the beginning of November 2023, the bank published the Sustainable Finance Framework, a document outlining which categories of projects the funds from green or sustainable bonds issued by the bank will go to. Among the objectives are: stimulating change, enhancing positive environmental and social impacts and funding projects that support the UN Sustainable Development Goals and take into account elements of the EU Taxonomy, with defined categories including renewable energy, green building, energy efficiency, and access to basic services.

The Sustainable Finance Framework has been prepared in accordance with the applicable international standards published by ICMA and the LMA. The framework has also received an independent opinion (SOP) from Sustainalytics, which confirms its credibility and positive impact.

Important Awards

The achievements of Bank Pekao are also confirmed by numerous awards. The bank was awarded the prestigious title of leader in sustainable infrastructure financing in the CEE region and was recognised as the best bank in Poland in terms of sustainable financing. The ‘Outstanding Leadership in Sustainable Infrastructure Finance’ and ‘Best Bank for Sustainable Finance’ awards are presented by the renowned Global Finance magazine. Pekao was recognised for its contribution to financing initiatives and bond issuance programmes that aim to contribute to the country's energy transition, mitigate the negative effects of climate change and support local communities. This commitment enabled the bank to win the prestigious title of Best Bank in Poland in the sustainable financing category.

“We started from the premise that energy transition and environmentally friendly projects are not about spending a lot, but spending wisely and efficiently. I think this is what prompted Global Finance experts to honour Pekao with the award”, says Jerzy Kwieciński. “We are the leader in corporate banking in Poland and now also the leader in sustainable development in Poland. This is not only a reason for satisfaction, but also a motivation to develop further in these directions”, concludes Jerzy Kwieciński.

It is worth adding that in mid-December, Bank Pekao S.A. was honoured with the prestigious title ‘Bank of The Year in Poland’ awarded by one of the most important magazines in the financial industry, The Banker, part of The Financial Times group.

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