| Subtopic | Type of IRO | Description and location of IRO | Area of the Group’s strategy |
|---|---|---|---|
| Climate change mitigation | Impacts | Negative environmental impact due to financing borrowers unable to adapt their business models to a low-carbon economy. | Total Responsibility:
Incorporating environmental risks into the business model and transforming the investment portfolio towards lowemission assets. Development of products supporting the green transition of clients and society. |
| Increase in greenhouse gas emissions related to portfolio activities (retail banking loans). | |||
| Increase in greenhouse gas emissions related to portfolio activities (institutional banking loans). | |||
| Opportunities | Increase in revenues due to (1) growth in the volume of financing granted for real estate that meets the criteria of our Sustainable Finance and Investment Classification System, (2) financing and advisory services for the expansion of electric vehicle charging infrastructure, (3) financing and advisory services for the transition to electric vehicles, and (4) financing for water, waste, and soil treatment, improved energy efficiency, and lower emissions. | Total Responsibility:
Development of advisory services for clients on green transition |
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| Increased customer trust by offering loans and advisory services to help identify opportunities for property modernization | |||
| Market leadership through (1) funding of technologies to support low-carbon mobility and (2) funding and advice on emission reduction technologies in agriculture | |||
| Differentiation in the market through (1) encouraging and supporting clients across the entire value chain in adopting more sustainable business practices and (2) providing financing and advisory services for early-stage companies focused on solutions enabling the energy transition. | |||
| Growth in green bonds, green loans, and sustainability-linked financial instruments | |||
| Increased revenue by financing the development of new technologies, such as hydrogen, carbon capture, utilization and storage (CCUS), biofuels, and energy storage in a broader sense | |||
| Risks | Reputational risk stemming from perceptions by customers, investors, and other stakeholders that banks are not doing enough to achieve low-carbon goals or are acting contrary to their policies. | Total Responsibility:
Proactive management of regulatory initiatives and transparent communication of ESG activities. |
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| Reputational risk due to failure to achieve climate and environmental goals, including those related to the bank’s own operations and those of its clients, which may result in financial losses. | |||
| Risks arising from activities in various sectors that hinder climate mitigation. | |||
| Energy | Impacts | Contributing to environmental protection through increased use of renewable energy and other lowcarbon technologies. | Total Responsibility:
Supporting the energy transition by promoting the use of renewable energy sources and low-emission technologies, both in operational activities and in client offerings. |
Material impacts, risks and opportunities and their interaction with strategy and business model (SBM‑3)
- ESRS:
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Material impacts, risks and opportunities and their interaction with strategy and business modelSBM-3Material impacts, risks and opportunities and their interaction with strategy and business model
The strategy of the Group forms the foundation for the preparation of business and financial plans by individual units, whose implementation leads to the achievement of strategic objectives. The Management Board of the Bank is responsible for the overall strategic planning processes, while the Finance Management Division is the owner of the Strategic Planning Policy. The integral stages of strategic planning include: quarterly and annual reviews of the current strategy’s implementation; preparation of strategic analyses and insights (market, business model, financial and business plans, as well as resource and competency analyses); development and approval of the strategy; implementation of the strategy; and monitoring the degree of its delivery.
Although the Group’s strategy for 2024-2026 was developed prior to the 2024 double materiality assessment, the material impacts, risks, and opportunities identified in the medium-term horizon are closely linked to the strategy and serve as the foundation for its further development and the adaptation of activities to the evolving socio-economic and regulatory environment.
The double materiality analysis provided valuable insights, enabling a better understanding of the impacts of the Group’s activities on the environment and society, as well as an assessment of how these factors translate into development opportunities and potential financial risks. Currently, the Group, is in the process of analysing the identified impacts, risks, and opportunities across business units to better align our policies, objectives, and activities.
The table below presents the key material impacts, risks, and opportunities and how they are linked to our strategy. The resources allocated to manage significant impacts, risks and opportunities are described in dedicated sections of the statement.
As a Group, we currently do not identify any financial effects of material risks or opportunities on our balance sheet, financial result, or cash flows that are not already reflected in our financial statements and could result in a significant adjustment to the previously reported figures in the following year.
In order to take full advantage of sustainability opportunities and efficiently manage potential risks, as a Group we take actions, both strategic and operational, which are described in dedicated environmental, social and governance sections of the disclosure. These actions lead to capital and operating expenditures, which are now embedded in the Group’s overall operating mechanism. We measure the progress of our sustainability strategy and actions through strategic objectives and operational metrics – these are reviewed periodically by the Management Board, but are not validated by an external entity other than the assurance provider. The setting of strategic targets and their revision are done taking into account the expectations of stakeholders such as the Banco Santander Group and regulators.
Assessment of the resilience of the Group's strategy and business model in relation to material impacts and risks and in relation to its ability to take advantage of significant opportunities
As indicated in the SBM-1 disclosure, the Group’s business model is based on a wide range of complementary products and services for specific customer segments, a network of branches and franchise outlets throughout Poland, banking technologies and remote distribution channels under development. The Group’s business model consists in offering financial services to a diverse range of institutional and individual customers located mainly in Poland. The Group’s services can be and are continuously adapted to the evolving market environment, taking into account customer preferences and regulatory and technological changes.
The Group’s business model is characterised by flexibility in the design and implementation of customised services and is not dependent on fossil fuels or on locations significantly exposed to physical climate risks – consequently, it is reasonable to conclude that the Group’s business model is resilient to significant climate change impacts and risks (see the next section for detailed analysis of the resilience of the strategy and business model to climate risks).
In addition, given its operations in the European Union and the extensive regulation and supervision to which the banking sector is subject, it is reasonable to conclude that the Group’s business model is resilient to material impacts and risks related to employee resources, consumer and end-user relationships and corporate governance.
The Group’s periodically updated strategy, in which strategic directions are set and revised by qualified and experienced management, reflects the Group’s willingness to recognise and pursue significant sustainability opportunities. At the same time, through its strategy and existing internal regulations (described in the next section), the Group limits or excludes financing or fossil fuel sectors and industries or locations with higher physical climate-related risks. The directions of the Group’s Strategy 2024-2026, described in the SBM-1 disclosure, illustrate that the strategy seeks to set targets for the implementation of activities that reflect positive material sustainability impacts, and identifies and supports the realisation of material sustainability opportunities. Consequently, in the Group’s assessment, it is reasonable to conclude that our strategy is resilient to significant sustainability impacts and risks and enables the realisation of significant sustainability opportunities.
Qualitative and quantitative analysis of the resilience of the strategy and business model to climate risks to support a combined assessment of the resilience of the Group's strategy and business model
The resilience of our strategy was verified through a sensitivity analysis of the Bank’s portfolio to climate risks – details of this analysis are available below). We excluded the other elements of the value chain from the analysis as climate risks were not identified as material for them as a result of the double materiality test. Risks identified in other areas are assessed as part of the ongoing process of monitoring strategy implementation.
The Bank has a methodology for assessing the level of climate risks – physical and transition for individual climate sectors and real estate, which introduces a taxonomy of climate sectors to the Bank. It has enabled a portfolio analysis of the materiality of climate risks for the loan portfolio. These reports are already presented at selected committees and this information is used in the credit risk assessment of clients and transactions.
In the Group (excluding Santander Consumer Bank companies due to the specificity of their operations), ”the Social, Environmental and Climate Change Risk Management Policy” applies, as approved by the Bank’s Management Board. It defines the criteria conditioning the Bank’s ability to cooperate with customers operating in selected sensitive sectors. The document defines areas of activity into two categories: prohibited activities and activities subject to additional analysis. In connection with the adaptation of credit processes to the provisions of the Policy, certain exposures characterised by excessive and unmanaged transition risk are not accepted.
Limits of concentration have been defined:
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for sectors contributing most to climate change while being most exposed to transition risk, -
for business and mortgage-backed exposures in locations assessed as highly exposed to physical risks.
and measures of acceptable risk levels relating to the Bank’s declarations included in the Social, Environmental and Climate Change Risk Management Policy. Issues related to the aforementioned asset groups exposed to climate risk are incorporated into the Bank’s strategic objectives aimed at increasing the volume of environmentally sustainable exposures. This approach helps mitigate the risk associated with the concentration of exposures vulnerable to climate risks (see disclosures on objectives in subsection E1-4).
Depending on the level of assessment of climate risks for each sector, elements affecting the estimation of credit risk levels are added to the credit process. For selected customers in the business segments, an individual ESCC (Environmental, Social & Climate Change) risk analysis is performed for customers or transactions, operating in the sectors defined in the Bank’s policies. The conducted ESCC risk analysis and recommendation is included in the customer’s credit application and, if it affects the assessment of credit risk parameters, is taken into account in the customer’s rating.
In 2024, the requirements for mortgage collateral valuation were strengthened to incorporate ESG factors. From this change onward, valuations must consider both transition risks related to the energy efficiency of properties and physical risks associated with their location. Conducted analyses have shown that, in the case of transition risk approximated by the energy efficiency level of buildings, valuation differences based on this risk level are already observable within the existing collateral portfolio.
In 2024, the Bank revised its sensitivity analysis of the portfolio to climate risks, taking into account the assessment of the sensitivity of the most exposed sectors. In order to capture the nature of climate risk, the analysis was performed over three long-term time horizons – i.e. for the years 2030, 2040 and 2050. For the purpose of this analysis, it was decided to use climate scenarios defined by the Network for Greening the Financial System (NGFS). We considered the following three scenarios*:
- Below 2°C Scenario assumes that, through the gradual tightening of climate policies (with a 67% probability), the rise in average temperature will be limited to below 2°C. This scenario falls under the category of Orderly Transition scenarios.
- Delayed Transition Scenario assumes no reduction in emission levels until 2030 and a limited scope of negative emissions. Restricting the temperature increase to below 2°C in this scenario will require very firm climate policy actions. This scenario belongs to the category of Disorderly Transition scenarios.
- Current Policies Scenario assumes that currently implemented actions will be continued, but goals that remain at the level of declarations will not be achieved. The implementation of this scenario will involve a high level of physical risks and belongs to the category of Hot House World scenarios.
* Defined by the NGFS as part of Phase III in September 2022.
In addition, for physical risks, an analysis was carried out based on external data defining the level of physical risks for more than 15 climate phenomena (acute and chronic) at the municipality level using RCP (representative concentration pathways) scenarios. These are four scenarios for changes in carbon dioxide concentrations that were accepted by the Intergovernmental Panel on Climate Change in the Global Climate Model Comparison Project.
We analysed the evolution of physical and transition risks in 11 sectors most sensitive to climate risks, in which Banco Santander Group’s clients operate. Nine of these 11 sectors are materially represented in the Bank’s portfolio. The table below presents the results of this analysis, along with the materiality of each sector in the Bank’s portfolio, including information on their share of the Group’s loan portfolio as of 31 December 2024. The remaining sectors were either excluded from the analysis as accounting for an insignificant part of the portfolio or their exposure to climate risks was assessed as minimal.
The gross value of the Group’s loan portfolio (gross loans and advances to customers) amounted to PLN 180,345,564 thousand as of 31 December 2024, including: loans and advances to enterprises: PLN 73,876,598 thousand, loans and advances to individuals: PLN 88,814,191 thousand (including PLN 55,931,181 thousand related to mortgage loans), other receivables: PLN 17,654,775 thousand. Further details are available in the ”Consolidated Financial Statements of Santander Bank Polska Group for 2024”.
The sensitivity analysis performed is an analysis that identifies concentrations of credit exposures in sectors or locations for which publicly available and recognised climate scenarios assume increased climate change risks. Consequently, the analysis is subject to uncertainties mainly due to the long-term nature of the climate risks, the characteristics of the scenario analyses and the qualitative approach to the development of a heatmap illustrating the potential sensitivity of the portfolio to these risks over the assumed time horizons.
The impact of climate change on the Bank’s operations has been defined at a high level, but we plan to expand this analysis with a deeper quantification of the impact of risks:
 Very low (1) |
 Low (2) |
 Average (3) |
 High (4) |
 Very high (5)
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RF – Physical risks
RT – Transition risks
| Sectors sensitive to climate risks | Quality assessment* | Transition risks (RT) | Physical risks (RF) | Current sector share in the segment** | |||||||||||||||||||||
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| RT | RF | Orderly | Disorderly | Hot House World | Orderly | Disorderly | Hot House World | BCB | CIB | SME | Individual clients | Overall | |||||||||||||
| 2030 | 2040 | 2050 | 2030 | 2040 | 2050 | 2030 | 2040 | 2050 | 2030 | 2040 | 2050 | 2030 | 2040 | 2050 | 2030 | 2040 | 2050 | ||||||||
| Fossil Fuel |  |
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0.2% | 4.6% | 0.0% | 0.0% | 1.0% | |
| Mining and Metallurgy | |
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7.4% | 4.5% | 4.0% | 0.0% | 3.6% | |
| Energy Sector – Conventional Energy Generation | |
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0.5% | 11.6% | 0.3% | 0.0% | 2.6% | |
| Renewable Energy Generation (RES) |  |
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0.0% | 8.6% | 0.0% | 0.0% | 1.0% | |
| Transport | |
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6.7% | 1.7% | 10.0% | 0.0% | 3.6% | |
| Consumer car loans and leasing*** | |
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| Agriculture | |
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1.2% | 0.2% | 17.5% | 0.0% | 1.9% | |
| Industrial processing | |
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20.1% | 6.6% | 8.4% | 0.0% | 8.5% | |
| Water Supply*** | |
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1.1% | 0.0% | 0.6% | 0.0% | 0.4% | |
| Construction | |
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9.6% | 4.4% | 10.8% | 0.0% | 4.9% | |
| Real Estate and Mortgage Sector | |
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10.9% | 2.6% | 1.8% | 70.9% | 31.6% | |
| Retail sector unsecured | 0.0% | 0.0% | 0.0% | 29.1% | 11.3% | ||||||||||||||||||||
| Non-climate sectors | 42.3% | 58.8% | 46.6% | 0.0% | 29.8% | ||||||||||||||||||||
| Total | 100% | 100% | 100% | 100% | 100% | ||||||||||||||||||||
* For the purpose of a rapid assessment of the portfolio structure, a simplified materiality matrix at the aggregate macro-sector level may also be used.
** Portfolio structure at the end of 2024.
*** The Consumer Car Loans and Leasing and Water Supply sectors are locally immaterial to the bank’s portfolio.
BCB – Business & Corporate Banking
CIB – Corporate & Investment Banking
SME – Small and Medium-sized Enterprises
Regarding physical risks, in most scenarios, the portfolio is predominantly composed of sectors assessed as being exposed to ”low risk”. A slightly higher risk assessment (”medium risk”) applies to the energy and renewable energy (RES) sectors, as well as agriculture and water supply. This explains the higher share of this category and exposure to risk in the Corporate and Investment Banking (CIB) and SME segments.
This applies to the entire analysis period, as significant materialisation of physical risks, according to the adopted NGFS scenarios, is projected to occur only after 2050. The exposure would look slightly different under the Current Policies scenario, where higher risk assessments would also apply to the fossil fuel sector and several other sectors by 2050, as physical risks may materialise somewhat earlier in this scenario.
Regarding transition risks, in the scenario of limiting the average temperature increase to below 2°C (Below 2°C), the portfolio’s exposure to these risks is slightly higher in the period to 2030, due to the very high risk assessment for the fuel sector as well as the metallurgical and mining sectors. In the medium and long term, the risk ratings for these two sectors are slightly lower, resulting in lower portfolio exposure to climate risks across all segments. The highest exposure is observed in the Corporate and Investment Banking (CIB) segment due to the relatively large share of the energy sector and the mining and metallurgy sector in the portfolio. In other segments, exposure results from the share of the transport sector, while in the Business and Corporate Banking (BCB) segment, exposure is additionally driven by the significant presence of the metallurgy sector.
In the Delayed Transition scenario, exposure to climate risks is highest in the medium term – over 20% of the Corporate and Investment Banking (CIB) portfolio will fall into the very high-risk category (13% for the Business and Corporate Banking (BCB) segment). For comparison, this category does not appear within this time horizon if the transition is orderly. In the period by 2050), the share of the very high-risk category will decrease significantly (none in the portfolios of the Business and Corporate Banking (BCB) and SME segments).
The last scenario considered, Current Policies, does not assume rapid or ambitious actions within climate policy, resulting in significantly lower transition risk ratings compared to the other scenarios. Portfolio exposure to climate risks in this scenario will decrease slightly in the period by 2040. However, for the Corporate and Investment Banking (CIB) portfolio, exposure will increase in the 2050 horizon due to the energy sector’s share.
Climate stress tests in 2024
In 2024, in Santander Bank Polska stress tests were carried out on the credit risk parameters of the credit portfolios, taking into account transition risk, and the result was taken into account in the process of assessing the adequacy of allocated internal capital. The results obtained do not indicate a significant dependence of the portfolio parameters over the time horizon analysed in the stress tests. In the following year, it is planned to extend the analyses performed as part of the stress tests carried out, including the consideration of the impact of physical risks on the scenario considered.
The stress tests were performed based on climate scenarios provided by the Network for Greening the Financial System (NGFS). In the transition scenario, the main macroeconomic policy factor is the carbon price, designed to alter relative prices and accelerate the transition. The scale of the carbon price increase in the scenario reflects, in a simplified manner, the strength of climate policies modelled in each scenario.
As part of the Internal Capital Adequacy Assessment Process (ICAAP) exercise, we focused on the scenario of short-term disorderly transition risks. To do this we use the Phase III NGFS Disorderly (Delayed) Transition scenario. In the NGFS Delayed Transition scenario, policy actions aimed at reducing carbon emissions are delayed. For governments to still meet the goals of the Paris Agreement, a sharp and unexpected increase in the carbon price is necessary. However, while in the long-term disorderly transition scenario the sharp increase in the carbon price occurs from 2030 onwards, the ICAAP scenario assumes that the economic effects appear as early as 2024.
Stress tests results:
- The simulated shock in this scenario has a negative impact on the global economy.
- The scenario is not as severe as a typical stress test scenario in terms of the aggregate decline in GDP, but it has significant effects on some particularly vulnerable sectors.
- The impact on property prices is negative but moderate, consistent with the effects on GDP and inflation.
- In the medium term, the scenario generates inflationary pressure, and overall, inflation at the end of the scenario exceeds the baseline level. However, in the short term, the negative effect of the shock on economic activity leads to a slightly negative impact on inflation.
- Accordingly, central bank interest rates are initially lower than in the baseline scenario but exceed them by the end of the scenario.
- Overall, the disruptions and reallocation of resources caused by the sudden increase in the carbon price are leading to a decline in asset values.
- The abrupt policy response triggers volatility in financial markets, an initial loss of confidence, and a correction in financial market valuations, such as stock prices.
The results of the stress tests are subject to uncertainties mainly due to the long-term nature of the climate risks, the characteristics of the scenario analyses and the features associated with each modelling exercise of certain parameters – the stress tests represent a certain model of the consequences of occurrence arising from assumptions made in the scenario analyses.
