GREENPACT Recap: Green finance as investing in the future

During the debate, experts discussed key aspects of the green transition and the financial challenges associated with the process. The discussion covered the role of financial institutions, ESG reporting and the broad socio-economic context of environmental change. The moderator of the discussion was Anna Grygiel-Tomaszewska, PhD of the Warsaw School of Economics.

The financial challenges of the green transition

Arkadiusz Drzał, Chief Operating Officer of the Corporate Banking Division and Director of the Corporate Banking Strategy and Development Department of Bank Pekao S.A., highlighted the enormous scale of the financial challenges facing Poland: - We now need 65-70 billion PLN a year for the energy transition than we did a dozen years ago. The expert also pointed out the key role of markets and financial institutions in this process, and the need to involve companies, regulators and individuals in taking care of the competitiveness of the Polish market.

Drzał also ephasized the importance of audited reporting as a tool to combat greenwashing, allowing decisions to be made for green growth: - It enables banks to finance credible, high-value projects. Drzal also added that Bank Pekao has created a subsidy finder to search for financial instruments that support green development: - Banks are creating a green product offering aimed at small and large businesses. If a company invests in RES, thermal upgrades and other such activities, it receives preferential financial terms.

The role of financial institutions

Krzysztof Kaminski, Member of the Management Board of Millenium TFI S.A., meanwhile, noted the problem of lack of EU support in the ESG transformation process: - The EU has shifted the burden of transformation to financial institutions. Companies are unable to finance it on their own without the help of these institutions. The EU's 'clever' plan, therefore, is for these institutions to redirect the flow of capital toward responsible businesses. This is a better relationship between investment and the degree of risk.

By the same token, however, Kaminski emphasized how crucial reporting should be: - Regulatory reporting, reporting that has become mandatory for companies, is crucial for financial institutions to assess the risk and reliability of allocating funds. These data map the costs they take off the public, so to speak, giving a strong signal to the market, which is not insignificant for individuals. Financial institutions must have the data to make accurate and low-risk decisions. (...) Changing the mindsets of management and supervisory boards of companies that do not have to report is extremely important. It forces us to clarify our transformation strategy at the outset, and before that to analyze materiality, what affects our business and how we affect our environment.

A global perspective on green transformation

During the debate, there was also an exchange of views on the global dimension of the transformation challenges, pointing out that their scale is $3-6 trillion annually. Yuval Laster, Head of Division, Finance, Investment and Global Relations at The Organization for Economic Co-Operation and Development (OECD) highlighted the importance of focusing on progress: - The financial market plays a key role in supporting companies and initiatives. They not only provide capital, but also provide important direction for global transformation. Changes and signals for the market should therefore be organized at the government level and not change with a particular administration. (...) In 2023, the 55 countries with green transformation reporting regulations have quadrupled in a short period of time. Such measures help financial institutions and insurance companies better assess risks. This will enable them to move forward and meet challenges in the future. (...) ESG will definitely stay with us for the long term. We realize that we are focusing on climate change risks, social risks. In large companies, green transformation is already on the agenda.

Public funds and sustainable development

In turn, Katarzyna Duber-Stachurska, President of the Polish Agency for Enterprise Development, drew attention to the problem of the lack of a coherent policy and strategy for the distribution of public funds: - Public funding for sustainable development is a market consensus - it is and will continue to become increasingly diverse. Since regulators and policymakers require transformational processes, there is an expectation of support in this endeavor. At this point we do not have a coherent policy and strategy, resources are disposed of in an unregulated manner.

Thus, the speaker referred to the role of PARP in this process, which has several instruments focused on the circular economy and opportunities to support the acquisition of competencies and support businesses. This may be due to the fact that: - All public funds include a requirement that they not be used for activities that are not part of sustainable development. If an activity is a burden on the environment and society, it will not meet the requirement for public funding. The PARP president also pointed out the role of SMEs in the ESG reporting process: - Small entrepreneurs need to be taught certain actions, diagnoses, prepare for certain processes. By offering them subsidies and financial instruments, we are forcing them and teaching them such actions and preparing them for reporting, which is currently not mandatory for them.