Impact on environment

The nature of the business activities means that the direct impact of the Bank and the Bank’s Group on the natural environment is limited.

Annual Report
2021

Direct environmental impact

Scale of the direct impact on the natural environment

The Group entities have procedures and structures in place for monitoring the legal changes regarding the environment, which are significant for their operations. In 2021, none of the Group entities conducted any projects that could significantly affect the environment. [307-1] No administrative proceedings relating to a breach of the environmental regulations were conducted with respect to the Group that resulted in any financial penalties (in one subsidiary, waste collection fees were increased due to failure to meet the obligation of selective collection of municipal waste).

Direct impact on the environment depends on the manner of consumption of limited natural resources. The Group monitors the consumption of such resources and engages in activities aimed at reducing their consumption. In previous years, a number of entities of the Bank’s Group performed energy efficiency audits. On the basis of the results of such audits, the Group entities identified the areas with the highest energy saving potential and drew up action plans which are currently being successively implemented.

In 2021, in accordance with the requirements of the Act on energy efficiency the Bank conducted an energy efficiency audit. During the audit tasks were defined the implementation of which should lead to a reduction in energy consumption. These tasks are mainly focused on the optimization of the use/ modernization of the automatic control of heat sources and technical installations in properties (HVAC, heating). Investment tasks were also defined for a few properties. Some of the tasks concern properties which may be withdrawn from use in the near future, therefore the Bank is focused on carrying out only those tasks the completion of which will bring actual savings.

[303-1] For the purposes of this report, the Group tried to estimate its water consumption. In 2021, water consumption at the Bank amounted to approx. 216.9 mega litres (258.2 mega litres in 2020). The change in consumption in 2020 is the result of the greater accuracy of the adopted model for estimating and calculating consumption. Water consumption at the other entities of the Bank’s Group amounted to 41.7 mega litres.

Consumption of energy and fuels and greenhouse gas emissions

[302-1], [302-4]

Energy consumption within the organization (in MWh)

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	BANK	OTHER ENTITIES	GROUP	GROUP	BANK	OTHER ENTITIES	GROUP	BANK	OTHER ENTITIES	GROUP
	2021			y/y (%)	2020 (recalculated)			2019 (recalculated)
Fuel used in buildings	22,122	3,889	26,011	-2.3	22,765	3,871	26,636	24,122	3,095	27,216
natural gas	19,706	3,749	23,455	-4.6	20,866	3,732	24,598	20,465	2,940	23,405
heating oil	2,188	98	2,286	29.4	1,672	94	1,767	3,368	132	3,500
diesel oil	49	12	61	-7.2	56	10	66	81	17	98
LPG	0	30	30	-13.1	0	34	34	0	6	6
lignite	0	0	0		0	0	0	0	0	0
coal	179	0	179	4.6	171	0	171	208	0	208
Fuel used in vehicles	19,356	10,224	29,579	3.5	18,400	10,180	28,580	28,697	9,903	38,600
diesel oil	1,124	4,097	5,221	-1.4	815	4,479	5,295	1,211	4,093	5,304
LPG	0.2	0	0.2		0	0	0	0	0	0
gssoline	18,231	6,127	24,358	4.6	17,585	5,701	23,285	27,486	5,810	33,296
Energy purchased	143,181	19,831	163,012	-1.4	147,788	17,473	165,261	150,450	19,973	170,422
electricity	75,494	11,125	86,618	-4.6	80,829	10,004	90,832	81,675	11,034	92,709
heat	67,687	8,706	76,394	2.6	66,959	7,469	74,428	68,774	8,939	77,713
Total energy consumption	184,658	33,944	218,602	-0.9	188,953	31,524	220,477	203,268	32,971	236,239

[302-3]

		Bank’s Group
Indicator	Unit	2021	2020	y/y (%)	2019
Total energy consumption per employee	MWh / person	8.4	8.4	-0.2	8.4
Total energy consumption per PLN 1 mln assets	MWh / PLN 1 mln assets	522.9	584.9	-10.6	679.0

[305-1], [305-2], [305-3], [305-5]

Emissions by source in MgCO2e by market-based method

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	BANK	OTHER ENTITIES	GROUP	GROUP	BANK	OTHER ENTITIES	GROUP	BANK	OTHER ENTITIES	GROUP
	2021			y/y (%)	2020 (recalculated)			2019 (recalculated)
Scope 1 – direct emissions from:	10,000	3,388	13,388	-0.8	10,096	3,405	13,501	12,728	3,671	16,399
fuels used in buildings	4,681	797	5,478	-1.2	4,751	792	5,543	5,185	638	5,823
fuels used in vehicles	4,757	2,591	7,348	2.4	4,562	2,613	7,175	6,631	3,033	9,664
refrigerants	562	0	562	-28.2	783	0	783	912	0	912
Scope 2 – indirect emissions from:	28,101	9,203	37,304	-35.1	49,125	8,312	57,438	87,067	10,045	97,112
purchase of electricity	4,590	6,305	10,895	-65.6	25,864	5,836	31,700	62,482	6,949	69,431
purchase of heat	23,511	2,898	26,409	2.6	23,262	2,476	25,738	24,585	3,096	27,681
Total emissions (Scope 1 + 2)	38,101	12,591	50,692	-28.5	59,221	11,717	70,939	99,795	13,716	113,511
domestic and foreign business travel	195	–	195	-32.4	289	–	289	–	–	–
employee commuting	3,341	–	3,341		0	–	0	–	–	–
Scope 3	3,536	–	3,536	1125.0	289	–	289	–	–	–
Total emissions (Scope 1 + 2 + 3)	41,637	–	41,637	-41.5	59,510	–	71,227	–	–	–

[305-4]

GHG emissions intensity indicators in the Bank’s Group

Indicator	Unit	2021	2020	y/y(%)	2019
Scope 1+2 GHG emissions per employee	Mg CO₂e / person	2.0	2.7	-28.1	4.1
Scope 1+2 GHG emissions per customer	kg CO₂e / person	4.8	6.8	-29.1	10.9
Scope 1+2 GHG emissions (Scope 1+2) per PLN 1 million of assets	kg CO₂e / PLN 1 million assets	121.2	188.2	-35.6	326.3

[305-1], [305-2], [305-3]

Emissions by method in MgCO₂e

Scope 1	Scope 2	Scope 3
[GRI 305-1]	[GRI 305-2]	[GRI 305-3]
13,388	85,396 (location based)	3,536
	37,304 (market based)
Direct emissions of the Bank’s Capital Group as a result of fuel combustion in sources owned by it	Indirect emissions of the Bank’s Capital Group resulting from the use of purchased electricity and heat	The Bank’s indirect emissions from domestic and foreign business travel

The boundaries of the reported emissions include: (1) in the case of data concerning the Bank, this entity only (100% of the emissions); (2) in the case of data concerning the Group: the Bank and all the subsidiaries of the Bank according to operational control (100% of the emissions of each entity). The reported emissions comprise Scope 1 and Scope 2. Scope 3 emissions comprise domestic business trips of the Bank (since 2020) and business trips abroad as well as employee travel to work (for the Bank since 2021).

The Bank calculated the emissions in accordance with the Greenhouse Gas Protocol (GHG) Corporate Accounting and Reporting Standard (revised) using the market-based and location-based methods. As a result of the calculations performed, the Bank achieved a data reliability index (the percentage of data obtained from data sources in all data used in the calculations, which comprise data obtained from data sources and estimations) on a good level according to the GHG Protocol methodology.

The Bank recalculated the base year (2019) and the previous year (2020) for the following reasons:

including emissions from fugitive refrigerants;
more precise calculation of the consumption of energy estimated for properties for which actual data was not available;
changes in the emissions indicator used for electricity;
adjustments to actual data (consumption of diesel oil by power generators) for the Bank;
adjustments to actual data (consumption of system heat and diesel oil for power generators) for the Group companies in Ukraine.

Detailed information on the method used to calculate emissions and the comparison with the base year are presented in the Inventory of greenhouse gas emissions of PKO Bank Polski S.A. for 2021.

The Bank calculated GHG emissions intensity ratios for the purpose of comparison with the market. Total 1+2 Scope emissions for the Bank’s Group were used in the calculation. In this way, a full picture was obtained of the carbon footprint generated as a result of the operating activities.

In 2021, the biggest drop in the emissions was recorded by the Group in Scope 2 with respect to the emissions from purchased electricity. One of the reasons behind the big reduction in greenhouse gas emissions in this area is the fact that the Bank has purchased guarantees of origin for the electricity from water sources in a RES installation (68.9 GWh).

The emission amounts by method and type of energy are presented in the above-mentioned inventory.

[302-4] The total energy consumption in the Bank’s Group in 2021 was 0.9% lower than in 2020, with a 2.3% drop for the Bank and a 7.7% increase for the other Group entities.

The Group purchased electricity, heat and cooling; no purchases of technological steam were recorded.

Optimization of energy consumption at the Bank

[302-4] The Bank continues to work on the implementation of the Energy Management System in accordance with ISO50001 in order to optimize energy consumption at the enterprise, introduce a single energy consumption control system and intensify the measures aimed at reducing the consumption of energy carriers.

In 2021:

continuation of equipping properties with LED lighting, including emergency and evacuation lighting and elements of exterior signage (illumination only at night);
use of lighting control for certain rooms;
replacement of windows with ones in compliance with the current heat transfer coefficients;
energy efficiency certificates (the so-called White certificates) were obtained for two investment projects of 197.26 toe;
development of a model of a branch with a smaller surface area;
installation of heat recovery ventilation systems in five locations.

Waste

Non-municipal waste produced by the Bank (in tonnes)

	BANK
	2021	2020	r/r (%)	2019
Total	901	736	22	843
hazardous*	21	15	40	16
other	880	721	22	827
including:
bulky waste	303	261	16	532
electronic and electric	366	243	51	136
magnetic and optical data carriers	1	1	0	2
paper and cardboard waste (binders)	32	37	-14	4
iron and steel waste	178	179	-1	152

* electric and electornic appliances, such as air conditioners, used monitors, refrigerators

15%

Drop in paper (A4) consumption vs the previous year

65%

Drop in paper (A4) consumption in last 5 years

In 2021, the Bank had an agreement for the collection of non-municipal waste with the same service provider as previously. The service provider holds ISO 9001:2015 and 14001:2005 certificates. The waste collected from the Bank is handed over by the service provider to other waste management companies, in accordance with the decisions held and the applicable regulations.

[306-2] Hazardous electrical and electronic waste is handed over by the Bank to a specialized company, where it is processed and recycled (100%).

Paper bank documentation is collected by a specialist company and shredded.

Moreover, in 2021 the Bank and the Group conducted the selective collection of municipal waste.

The increase in the quantity of electronic waste produced in 2021 is the result of the implementation of replacement projects and emergency equipment replacement, the liquidation and relocation of branches. The increase in the quantity of bulky waste is the result of the liquidation of branches, including large branches, relocations to smaller locations, and modernization of old branches.

Mitigating the adverse effect on the environment – measures taken in 2021

Measures taken to reduce the quantity of waste produced:

Repair of electronic and electrical devices instead of handing them over for scrapping
Repair of furniture fittings
Resale of redundant assets instead of handing them over for scrapping
Elimination of paper correspondence in favour of electronic correspondence
Elimination of plastic waste (discontinuation of the use of coffee capsules, bottled water, plates, cutlery and cups).

Liquidation of the coal-fired boiler room in Wieruszów
Modernization of the central heating system, replacement of boilers with more energy efficient models
8 new PV installations which enabled the production of 18,395.2 kWh (own use: 13,918.2 kWh)
Purchase of 68,900 MWh of electricity from RES -> reduction in CO2 emissions of 49,539 t

Use of bicycles at branch offices

Space management

The Bank carried out a pilot project Flexidesk which was aimed at creating a new working environment and enabling work rotation/remote office work by adapting office space to a flexible working model and providing standard IT equipment. The implementation of the project resulted in reducing office space by 10.7% in the Bank’s tested location.

The Bank leases a property at Chmielna 89 in Warsaw for the purposes of conducting office activities. Following the completion of the necessary modernization works, the building was commissioned for use in 2021. The selection of the building was influenced by its environmental characteristics confirmed with a BREEAM certificate at the Excellent level.

Indirect environmental impact

One of the tools for managing credit risk for selected industries/sectors is lending policies. The Bank has the following policies: Renewable Energy Sources, Carbon Intensive Energy Sector, Real Estate, Trade, Construction and building materials, Chemistry-Oil-Gas, Car Dealers and CFM companies, Public Healthcare.

Apart from the aforementioned policies, the Bank (in the corporate segment) monitors changes and market trends in various industries/sectors on an ongoing basis, publishes internal materials and organizes industry meetings. These measures have a direct impact on the high quality of the loan portfolio.

Adopted and implemented in 2020 for the Bank’s Group.

Purpose: gradually increasing the share in the financing of renewable energy. Motivation: supporting the natural environment, preventing global climate change, transformation of Poland into a zero-emission economy.

The policy defines the preferred directions of development of the loan portfolio in the renewable energy segment. It is focused in particular on the financing of photovoltaic farm and wind turbine projects. However, other projects can also receive financing based on individual decisions. Project assessments performed by the Bank include an analysis of the following issues: formal documents, transaction parameters, sources of repayment (e.g. a successful renewable energy auction, PPA), as well as the investor’s capital resources and experience.

Adopted and implemented in 2019 for the Bank’s Group, updated in 2020 (introduction of more stringent criteria).

Purpose: a gradual change in the loan portfolio structure by reducing the exposure to Customers and transactions based on coal as an energy carrier (in line with the European climate policy and aiming for net zero emissions by 2050).

The policy covers, among other things, the following industries: coal and lignite mining, coal-related sectors (e.g. production of mining machinery, trading in coal and similar products), generation of electricity/heat (with the exception of renewable energy sources) and supplementary activities in the power sector (transmission, distribution, heat and power plants). The main policy assumptions:

with respect to coal and lignite mining, production of boilers, fireplaces and burners (coal-fired) – reducing the exposure (with the exception of coke as a raw material entered on the EU list of critical raw materials);
with respect to energy/heat production – not financing any new coal- or lignite-based sources and gradual reduction in the existing exposure;
reducing general purpose financing and transforming it into ESG financing, aimed at improving energy efficiency, changing the energy mix or modernization of transmission networks (coal-based projects can be financed on the condition that the funds are spent on modernization aimed at meeting the environmental requirements; in such cases, the purpose of financing must be precisely defined and the use of funds must be controlled);
with respect to coal-related industries (e.g. production of mining machinery, trading in coal and coal-based products) – gradual reduction in exposure, precise definition of the purposes of financing and control of its use; financing of entities with diversified customer or product/service portfolios (i.e. generating significant revenues from other sources not related to mining) or those transforming their operations is acceptable.

The Policy for Financing the Chemistry, Oil and Gas Sector defines, among other things, the framework for financing entities operating in the sectors of oil and natural gas extraction, production and distribution of liquid and gaseous fuels, production and trading in chemicals/chemical products, and production and sales of rubber and plastic goods. The Bank has adopted a strategy of reducing exposure to operations covered by the EU Single-Use Plastic Directive and a prudent approach to the sectors of oil and gas extraction or production of chemicals, chemical goods and rubber goods. The prudent approach is reflected in, among other things, an assessment of compliance with environmental standards and the impact on the environment and an evaluation of the business model with regard to the concept of sustainable business development. The future shape of this policy may be affected by changes in EU law, e.g. with regard to the approach to the use of natural gas during the period of energy transformation, as well as the growing requirements in the ESG area.

ESG in the lending process

Since 30 June 2021 each time the Bank assesses the impact of environmental, social and governance-related factors (the so-called ESG factors) on a Customer’s creditworthiness, in the lending process for Customers in the corporate segment and Customers in the companies and enterprises segment evaluated using rating methods.

The Bank also examines the impact of lending transactions on ESG issues and classifies them into four categories, starting from transactions with a positive effect on ESG issues through to those with a significantly negative impact. In assessing the ESG factors, the Bank takes into account, among others, the risk of climate change and the impact on a Customer’s activities, the Customer’s possible effect on climate change, factors related to human capital or those relating to health and security as well as factors related to the aspects of management (including the organization’s culture and internal supervision).

By using appropriate tools, the Bank estimates ESG risks, assesses and controls them. The identification of ESG risks allows the identification of projects which do not meet the increasingly high environmental and social requirements. By identifying these risks the Bank may support the financing of environmentally sustainable and socially responsible projects, as well as eliminate the financing of activities/projects with a negative impact on the environment.

As part of popularizing the knowledge of ESG, the Bank organizes internal meetings which are aimed at raising awareness and pointing to the role of ESG factors in today’s world. The Bank also organized such meetings at its Customers’ request.

“Green” products of the Bank’s Group

(offered jointly by the Bank with PKO Bank Hipoteczny S.A.)

The Customers may obtain a lower margin on the “Własny Kąt” mortgage loan based on the energy performance certificate for the property.

(for housing cooperatives and homeowner associations) offered by the Bank

Those who receive this loan may obtain non-refundable aid from the state budget in the form of a thermal modernization bonus or an overhaul bonus for repaying 20% of the loan amount. The performance of projects financed with the “Nasz remont” loan with a bonus provided by BGK makes it possible to reduce demand for energy.

he fund’s assets are invested in entities whose operations are environmentally friendly and which generate a positive impact on the society. First valuation: 23 October 2019, rate of return by the end of 2021: 25.51%.

(products included in the offer of PKO Leasing S.A. for enterprises)

This product is offered under a simplified procedure (there is no need to provide any financial documents) and the Customer may obtain financing for both photovoltaic panels and their installation (the financing of up to PLN 250 thousand may be provided for the entire photovoltaic installation for a period of up to six years). The company finances modules installed on roofs as well as on the ground.

(in the Bank’s offer for individuals)

The repayment period is from 2 to 120 months, the interest rate is 2.99%, and the commission for granting the loan is 0.99%. The Customer should provide an invoice documenting the purchase of photovoltaic devices for at least 85% of the loan amount within 3 months from the date of receipt of the loan. Otherwise, the interest is increased to the current maximum interest rate level. As from 2020, Ekopożyczka is also available to individuals who do not have bank accounts with the Bank.

Transactions addressed to the Bank’s corporate Customers who are obliged to redeem such rights every year in accordance with the EU ETS regulations. The Customers may trade in such transactions and hedge against changes in the prices of emission rights.

(in the Bank’s offer)

The possibility to secure loans for the so-called environmentally-friendly projects, such as a circular economy, electromobility, renewable energy sources.

(offered by PKO Leasing S.A.)

An agreement of PKO Leasing S.A. and Masterlease with Bank Ochrony Środowiska S.A. as part of the implementation of a government programme “Mój elektryk” (My Electrician). Provision of assistance to Customers in obtaining a subsidy under a programme for the purchase of an electric or hydrogen powered vehicle combined with an offer of lease services.

In 2019, PKO Bank Hipoteczny SA issued the first green mortgage covered bonds in Poland. The total value of the two issues carried out in 2019 was PLN 500 million. PKO Bank Hipoteczny is gradually building a portfolio of loans which qualify for being financed with the funds obtained from issues of green mortgage covered bonds. The value of this portfolio as at the end of 2021 was PLN 6,760 million, i.e. more than 13 times the value of the green mortgage covered bonds issued. The portfolio of loans financed with the issues of green mortgage covered bonds was verified by an external firm (Sustainalytics) which confirmed the correctness of the utilization of the funds. The portfolio of mortgage loans qualifying for being financed with proceeds from green mortgage covered bonds offers annual energy savings of 328,341 MWh and allows avoiding annual greenhouse gas emissions of 126,274 tCO2 (which is more than the combined annual greenhouse gas emissions of the entire Bank’s Group).

(PKO TFI S.A. and the Bank)

Launched at the beginning of 2021. In accordance with the investment policy, the fund acquires and sells companies whose core business activities comprise generation, sales, transmission or storage of energy from photovoltaic, wind or water installations located in Poland. As at 31 December 2021, the Bank did not have any investment certificates (no capital exposure).

An agreement on financing a wind farm of PLN 228.6 million (production of energy for an average of 36 thousand households). As part of the project, 11 wind turbines with a total capacity of 42.6 megawatts will be installed. The launch of the farm is scheduled for 2023.

Lending decisions on financing renewable energy sources (wind farms) totalling PLN 398 million.

Participation in a syndicate which granted a loan related to sustainable development totalling EUR 225 million.

PKO Bank Polski S.A. co-organized the issuance of sustainable development bonds, Climate Awareness Bonds, by the European Investment Bank (the first ever public issue of this type of bonds, dedicated in whole to Polish investors). The bonds offer an annual coupon of 1% and a rate of return for the investors of 1.028%. The amount of the issue was PLN 1.25 billion, and the maturity date was set at February 2027.

Issue of municipal bonds. The funds from the issue allow cities to finance sustainable investment projects (e.g. construction of a tram line).

Taking up green bonds of a company in a renewable energy sector of PLN 35 million.

Value of Bank’s exposure

The exposure (loans and debt securities and the balance sheet equivalent of treasury limits) to the corporate segment entities and SME as a percentage of the Bank’s total assets as at 31 December 2021

	2021	2020	2019
„Green” branches (e.g. energy production from renewable energy sources, sewage disposal, water treatment and supply, waste collection/ treatment, remediation etc.)	1.30	0.80	0.96
Loans for cooperatives and housing communities for the thermo-modernization of multi-family residential buildings	0.57	0.67	0.72
High carbon emissions energy sectors	0.37	0.51	0.70

Note: the adjustment to the shares for 2020 is the result of the adjustment to the value of the assets

In 2020, the Bank’s loan portfolio was marked in green or brown (identified as a high carbon emission industry) in an individual manner and concerned the credit exposures of Customers in the corporate segment. The analysis covered the largest credit exposures to corporate customers and exposures assigned to Customers whose core business activities were assigned to the sector of economic activities (Polish NACE codes) marked by the Bank as an industry which has a positive impact on the environment or a negative one from the perspective of high carbon emissions activities. In 2021, the Bank introduced changes consisting of the obligation to mark each credit exposure to a corporate Customer with an ESG colour, including recording this colour in the Bank’s central systems. In the process of assigning an ESG colour, factors relating to the environment, society and corporate governance are taken into consideration. In the case of SME Customers, the ESG colour of the lending transactions takes on the ESG colour assigned to the Customer’s core Polish NACE codes.

Due to the changes introduced in 2021, the presented portfolio marked with a green or brown ESG colour includes:

all credit exposures of an institutional Customers (corporate Customer + SME) at the Bank;
changes in the Bank’s loan portfolio due to the implementation of key ESG performance ratios;
principles for assigning an ESG colour, incorporated in the Bank’s lending policy.

Group in 2021 Financial notes

Environment Climate risk