The climate risk management process is defined by the Bank in detail in the Principles of ESG Risk Management at BNP Paribas Bank Polska S.A. The Principles constitute a synthesis of actions undertaken by the Bank in the area of ESG management, in the context of impact on credit risk and internal capital of the Bank. By determining the risk appetite, the Bank limits exposures to customers with high ESG risk. The designated risk appetite aims to determine the level of risk that the Bank is prepared to accept in pursuit of its strategic objectives and financial plans. Additionally, as part of the ESG assessment, the Bank verifies whether the Borrowers have implemented/are planning to implement solutions to protect their business from the negative effects of climate change.
As set out in the Risk Management Strategy, ESG risk means the risk of loss arising from the current or future adverse impact of environmental, social or governance factors on the Bank’s counterparties or invested assets, which includes, but is not limited to, environmental risk – the risk arising from the institution’s exposures to counterparties potentially adversely affected by environmental factors, including factors arising from climate change and factors related to environmental degradation.
In order to manage climate change-related risk, the Bank has incorporated into its loan origination and monitoring process an assessment of the impact of long-term climate change and extreme weather events on the activities carried out by Borrowers, in accordance with a systematisation that introduces a division into:
- long-term climate changes:
(a) impact of higher temperatures (air, fresh water, sea water),
(b) impact of thermal shocks,
(c) impact of changing wind patterns
(d) impact of changing precipitation patterns and types (rain, hail, snow),
(e) impact of sea level rise,
(f) impact of water stress (limited access to fresh water),
(g) impact of soil and coastal erosion
(h) impact of soil degradation.
- extreme weather conditions:
(a) impact of heat waves,
(b) impact of cold waves,
(c) impact of fires,
(d) impact of storms, tornadoes, etc,
(e) impact of drought
(f) impact of heavy precipitation (rain, hail, snow/ice),
(g) impact of floods,
(h) impact of landslides.
The breakdown of the above risk types was implemented on 30 June 2021, with the entry into force of the EBA/GL/2020/06 Guideline of 29 May 2020 on loan origination and monitoring. In determining the risk types, the Bank followed the guidelines set out in the EBA Report on the Management and Supervision of ESG Risks for Credit Institutions and Investment Firms (EBA/REP/2021/18), as well as the risk types indicated in the Draft Implementing Standards on prudential disclosures on ESG risks in accordance with Article 449a of CRR (EBA/CP/2021/06 Draft Implementing Standards on prudential disclosures on ESG risks in accordance with Article 449a of CRR).
In addition, the Bank pays particular attention to the financing of sectors considered sensitive in terms of ESG risks (including climate-related risks) and limits its participation in industries widely considered to be particularly damaging and incompatible with sustainability.
The Bank, in line with the BNP Paribas Group Policies, distinguishes nine sectors that are particularly sensitive in terms of ESG risks: coal power, mining, defence and security, forestry (wood pulp, palm oil), nuclear, agri-food, fuel for unconventional oil and gas resources and tobacco.
In each of these sectors, the Bank implements CSR Policies and principles towards the Customers operating in them. All current and potential Customers of the Bank operating in these sectors are informed about the CSR Policies. To become a client of the Bank or obtain financing, an entity must fulfil a number of requirements regulated in the Policy for a given sector. With regard to sectors that are particularly harmful from the point of view of sustainable development, the Bank makes strategic decisions to withdraw from serving clients belonging to these sectors.
CSR sector policies are described in detail in the Business Perspective chapter.
For more information, please refer to Management foundations chapter, in the section concerning ESG risk management and subsection Risk management process.