Business model transformation for ESG financing Qorus-Infosys Finacle Banking Innovation Awards 2024 - Winner

ESG issues are closely tied to the BNP Paribas Bank Polska identity and its business aims which is reflected in the new GObeyond strategy for the years 2022-2025 . As Poland is one of the major GHG emitters in Europe - Polish companies need to make high and long-term investments in green transformation in order to remain competitive in the market. We have created a unique operating model based on comprehensive support and promotion of green business transformation through an ecosystem of products and services and substantive engagement with both the sales network and our customers. The goal of the project is to become a first-choice partner in financing customers' green transformation and growing the Bank's green assets. The Green Transformation Financing Ecosystem introduced consists of the following:

A. Banking products dedicated to financing green transformation

In terms of banking products dedicated to the green transformation of businesses, the Bank offers products supported by public mechanisms and EU funds, which bring tangible benefits to entrepreneurs. For example, the Green Loan has been introduced into the Bank's offer, based on cooperation with the National Development Bank (BGK) under the European Funds for Modern Economy Program, 2021-2027. The product is dedicated to SMEs and MidCaps, intended for the implementation of a green investment aimed at modernizing the enterprise leading to a minimum 30% reduction in primary energy consumption. Proper implementation of the project gives the entrepreneur the opportunity to obtain an environmental bonus from BGK, earmarked for partial repayment of the loan, up to 80% of the project's eligible costs. Last year we have achieved 15% share of the program of Green loan - second place in the market.

In addition, the Bank offers products such as Ekomax giving the possibility of obtaining a guarantee of up to 80% of the value of the loan, and the possibility of receiving a subsidy in the form of a surcharge on the loan's principal paid by BGK after the implementation of the investment. Businesses interested in energy transformation can also take advantage of a dedicated Leasing offer for financing infrastructure for renewable energy sources.

The bank has expanded its offer to include further products enabling financing to be tied to progress in ESG – alongside Sustainability-Linked Loans and “green bonds,” Bank offers ESG rating-linked loans, what is supported by the establishing a partnership with the global ESG ratings firm EcoVadis. The ESG Rating-Linked Loan is a lending solution whereby a company, by improving the standards of sustainability management in its operations and therefore its ESG rating score, can obtain more favourable financial terms. The ESG rating-linked loan is based on simple rules and is available to a wide range of companies (including smaller entities which are not ready yet for SLL). Interested companies can use it as general or targeted financing. The Bank will honour both the assessment carried out by EcoVadis and other widely recognised ESG rating agencies

B. Beyond banking offer

However, banking products alone are not enough to effectively support businesses in their energy transition and transformation, so the Bank has set its sights on developing an offering of beyond banking products and services to help effectively meet the challenge of green transition .

One of the key pillars of this strategy was the establishment of a partnership with Envirly in March 2023 - we were the first Bank in the Polish market to offer a certified platform for counting carbon footprint for all 3 scopes. In cooperation with Envirly, we enable companies to use a certified tool that allows them to independently estimate the carbon footprint of their operations, in accordance with applicable standards and therefore measure the effect of their transformation. Entrepreneurs can include the results in their annual reports. More than 100 of the Bank's customers have been invited to POC of the tool, and at the end of 2023 the Bank has decided to make a capital investment in the development of Envirly.

In addition, we are collaborating with EcoVadis, a provider of a platform for calculating ESG ratings. Thanks to this cooperation, customers not only receive transparent access to the platform, but can also benefit from the substantive support of EcoVadis experts and effectively measure the effects of their transformation.

One of the Bank's differentiators is a working team of engineers who provide expertise to the Bank's clients and prospects on energy transformation investments, including those related to the change to a sustainable business model. The experts are tasked with, among other things:

• Development of analytical methods and tools to support decision-making processes for financing investments in the area of energy transition (including RES and energy efficiency)

• Preparation of a substantive opinion on planned investments at the stage of credit application analysis, evaluation of assumptions for the business plan, including verification of the assumed productivity of the RES source (excluding biogas installations), adopted energy prices, business model (including the applied operational support system - FIT/FIP tariffs, auctions), opinion on potential project contractors, technology suppliers, verification of project contracts, including service, guarantee and energy sales contracts.

We have provided our clients involved in Food&Agri sector with the Agronomist.pl platform, an innovative way to build relationships and share knowledge. It is a solution aimed at agricultural producers, processors and food manufacturers who understand the need to change their business model and want to grow with the trend of sustainable production. It provides reliable knowledge and scientifically proven tools, including the first carbon footprint calculators in the Polish language for poultry, swine and beef cattle compliant with GHG Protocol and SBTi and FLAG standards. In 2023, the platform was visited by more than 213,000 users. What's more, our customers can take advantage of the GO4fuds program, which provides them with the necessary information on relevant subsidy programs provided by consulting companies and banking experts.

C. Set-up and competences

The main prerequisite for successfully supporting our clients is building the right front office competencies. Corporate clients are served by more than 300 Regional Mangers - at the end of 2022, all client advisors were trained and certified as Sustainability Officers. In order to popularize and effectively implement green transformation products within the sales network, we have set up a team of green ambassadors to promote green financing and to be first-contact resolution for the rest of the front-office team members.

In addition, the Sustainability Area exists within the Bank's organizational structure, acting as the coordinator of ESG activities in the organization. The Executive Director of the Sustainability Area (with the rank of a Board Member), reports directly to the CEO. Since the Area creation BNP Paribas Bank Polska has made a strong progress in embedding sustainability issues in its business model and conduct of affairs. The Area includes The Energy Transition Support Department responsible for cooperating with financial institutions and organizations with the aim to support the energy transformation.

To provide top service quality in sustainable finance, we organize series of training and consulting sessions for Relation Managers serving Corporate Customers and SMEs. At these events, green and sustainable products, their applications and examples of transactions were presented. In order to show these products in the context of ESG challenges, the training aimed to expand knowledge in areas such as climate change, environmental protection, and social and regulatory

In addition, in 2023 we implemented to all sales staff the so-called Green Knowledge Zone - a dedicated website will be a collection of the necessary knowledge for effective customer service. The website is divided into 5 green zones (Green Loans, Leasing, Green Services & Tools, Support Programs & Systems, Learn More). The idea behind our design is for the advisor to have all the information in one place. That's why each zone contains product sheets, materials for the client and advisor, important links and procedures for processing enterprise energy transformation transactions.

D. Clients Engagement

The final key element of the Bank's operating model is to engage our clients by building awareness and providing substantive support to them. Every year we organize a series of meetings with entrepreneurs, to which we have invited both our clients and prospects. The events are held in a total of more than 20 locations across the country in the form of business breakfasts and each series gathers about 200-300 participants. Our experts discuss a range of important issues related to energy transition, support for Polish companies in this process, EU funds and ways to achieve energy efficiency. In addition, we regularly organize webinars for clients on current ESG challenges and dedicated solutions. The events are prepared by Bank experts generally in cooperation with external consultants and tool providers.

Within the Corporate Banking and SME area, our corporate clients are served by > 300 customer advisors, most of whom are certified as Sustainability Officers. Within the sales network, there is a team of 12 ambassadors specially trained and promoting green financing to colleagues. For SME and MidCaps clients, there is a unit that coordinates the implementation of both internal and client initiatives related to ESG financing.

In addition, the Bank has The Sustainability Area acting as a supervisor of ESG activities and working with all business lines. The area functions with a team of 7 engineers supporting companies in their energy transformation strategies. In addition, the area has teams responsible for cooperation with external partners, which is one of the pillars of the adopted operational model. The bank actively cooperates with both private companies such as Envirly, Ecovadis, Bureau Veritas and public institutions such as Bank Gospodarstwa Krajowego and the European Investment Bank.

The Bank aims be a leader in sustainable finance and is, therefore, developing products and services for all business lines. Their dynamic sale will enable an increase in the share of sustainable financing from 4.5% at the end of 2021 to 10.0% in 2025. The goal was achieved in 2023 and will be developed in the following years. The volume of sustainable financing has reached PLN 9.6 billion. Our activities are appreciated not only by the market, but also by existing clients. Customers of business segments express increasing satisfaction with cooperation with the bank - relational NPS records a y/y growth rate: for Corporate Customer +13 p. and SME +9 p. We have been also recognized with multiple market awards.