How to finance the green transformation of economies and companies?
In the coming decades, we are facing a huge change in terms of reforming entire economies to be more 'green’. The European Union is moving towards zero-emissions, and to this end a new Community strategy known as the European Green Deal, has been proposed. It assumes the implementation of measures related to environmental protection and the fight against climate change, so that in 2050 Europe will be a climate-neutral continent.
The European Green Deal assumes, among others, an energy transformation – reduction of CO2 emissions and a transition from „dirty” energy to renewable energy sources. Other important points of the strategy include sustainable transport, based on alternative fuels, energy-efficient construction and closed-cycle waste management. For some EU countries, the proposed measures will be an evolution and will accelerate changes that have already been underway for a long time. However, for many EU countries, including Poland, the strategy and its ambitious goals will bring about revolutionary changes. Adapting to them will be particularly challenging for our energy sector, which in Poland is based on more than 75% coal.
Energy companies operating in Poland are already taking measures to reduce CO2 and switch to RES. Many of them see that there is no turning back from this trend and being more 'green’ is a necessity. Currently, the photovoltaic segment is developing particularly dynamically, and its installed capacity in Poland has almost tripled over the past year, reaching 3.7 GW. The next step will be offshore wind farms. Santander Bank Polska is involved in this process, offering, as the first financial institution in the country, financial solutions based on ESG (Environmental, Social, Governance) or SDG (Sustainable Development Goals) principles. These include green bonds, ESG-linked loans or interest rate volatility hedging transactions based on sustainable development principles, i.e. green IRS. We are also involved in financing the largest wind and solar farms in the country.
International investors’ interest in obtaining detailed and reliable information on environmental, social and corporate governance issues is growing rapidly, according to S&P Global Ratings experts. Now more than ever, they appreciate the value of considering ESG factors in their investment decisions, both to mitigate potential risks and to uncover new business opportunities. At the same time, adequate communication and transparency is crucial for further development of the market for financial instruments based on ESG criteria – investors increasingly want to know whether instruments offered to them as „green” or „socially responsible” are in fact so, therefore, full transparency in this area is essential.
A tool that supports the dynamic development of the market is the ESG Assessment created by S&P Global Ratings. It aims to increase transparency by providing a detailed analysis of companies in terms of evaluating environmental, social and governance risks. ESG is used both by investors to determine their risk tolerance and by companies to enhance their reputation and credibility among key stakeholders.
Energy is not the only branch of the economy that is changing dynamically and in which environmental aspects are becoming a key topic. Also in the manufacturing industry, transport, trade or services, the principles of sustainable development and reduction of negative impact on the environment are being treated more and more seriously. The changes that are being implemented relate to making savings by improving energy efficiency, using more energy from renewable sources, reducing waste and better recycling, changing packaging to more eco-friendly solutions, or replacing car fleets with alternative drive vehicles. The participants of the expert debate „Green transformation through the eyes of entrepreneurs and investors” were convinced that the green transformation is not a temporary trend, but a permanent change. According to representatives of the financial sector, who took part in the discussion, it can already be said that large investments that do not meet ESG criteria are difficult to finance, because many financial institutions require that companies meet „green” criteria.
When financing projects of companies from various industries, we see that an increasingly important aspect is the desire to minimise environmental impact. Most large companies are already planning to implement ambitious environmental projects, which are spread over years, and are obtaining financing for them. Leaders of change in this area have completely changed their way of thinking and do not treat such actions as a cost but rather as an investment that in the future will give measurable financial savings and profit in the form of environmental protection. Being environmentally unfriendly will become increasingly expensive in the coming years, so regardless of the industry, it’s worth thinking now about how to reduce environmental impact.
The Green Deal aims to reduce coal consumption by 60-80 per cent by 2030, and to eliminate it completely from the European energy market by 2050. Over the past three decades, greenhouse gas emissions in Poland have decreased from 447 megatons of carbon dioxide equivalent to 380 in 2017. For our economy to become zero-carbon by 2050, emissions reductions would have to accelerate fourfold. According to McKinsey analysts, decarbonising the Polish economy over 30 years will cost EUR 380 billion. It will also bring a decrease in operating costs, development of new industries and 300 000 new jobs*.
*McKinsey report „Carbon Neutral Poland 2050”, June 2020
