Indirect impact

Indirect impact is associated with possible consequences of the PZU Group’s decisions on client behaviors and the bearing they may have on the natural environment. This applies to both insurance services and banking and investment activity.

In respect of large clients, such as industrial plants, engineering underwriting is performed to enable the insurer to calculate the premiums. A detailed outcome of the underwriting exercise along with full risk assessment and scenarios are presented to the client. The underwriting covers business risks, which are often combined with environmental risks and occupational safety and health risks in the client’s enterprise. For this reason, the actions taken by the client to eliminate or reduce certain elements of its risks, even if induced solely by an attempt to suppress insurance costs, contribute to diminishing the risks to the environment or humans arising from the client’s business operations. Moreover, the use of PZU’s preventive funds in the enterprise may translate into a permanent curtailment of its risks. 

A good example of a product offered by PZU in the environmental area is general third party liability insurance the structure of which enables the insured to apply the insurance cover also to losses arising in connection with the release of hazardous substances into the air, water or soil and the costs associated with the removal, treatment and disposal of such pollutants (TPL arising in connection with the release of hazardous substances into the air, water or soil).

Another example of a product which indirectly influences the actual behaviors of commercial undertakings served by PZU is the environmental guarantee the structure of which is similar to that of the financial guarantee. What it does is it requires PZU to pay a certain amount of money if the company to which the guarantee has been granted fails to remove adverse environmental consequences of its business operations or, despite having been delivered a demand for payment, fails to pay all or part of the costs of repair of the damage to the environment within the specified period. From the client’s perspective, this product provides security cover against claims arising from adverse consequences to the environment, as governed by the Environmental Protection Law, among other statutes. The beneficiary of this guarantee is the environmental protection authority issuing the relevant administrative instrument permitting the use of natural resources, for instance the marshal, provincial governor (voivod) or county governor (starost).

Included among the products offered by TUW PZUW is third party liability insurance against damage to the environment. Also as part of the process of underwriting and formulating insurance programs, efforts are made to reduce the risk of damage to the environment.

An example of relatively simple actions that intertwine insurance sales with an environmentally friendly approach is the practice of socially engaged marketing, as applied by Lietuvos Draudimas. The company has organized a campaign associated with sales of residential insurance products: Lietuvos Draudimas committed itself in 2016 to plant a tree for every new residential policy sold. The campaign was run over a period of 3 months and in April 2017 the company planted 64,100 trees.

In TFI PZU and PTE PZU, environmental aspects are currently not a key criterion for making capital expenditures. The PZU Group keeps watching market trends and does not rule out the possibility that along with the development of what is called ‘ethical investments’ it will supplement its offering with products based on ESG (environmental, social, governance) considerations.

TFI PZU’s offering includes the mutual sub-fund called PZU Energia Medycyna Ekologia [Energy, Medicine, Ecology]. It invests chiefly in equities of companies doing business in the following sectors: power (producers and distributors of electricity, companies dealing with the construction of power plants and energy infrastructure), healthcare (pharmaceutical and biotechnology companies, including manufacturers and distributors of innovative, generic and OTC drugs, manufacturers of medical equipment, diagnostic and medical equipment companies, medical service providers, companies providing funding to the healthcare sector) and environmental protection (companies generating energy from renewable sources, companies involved in recycling).

In the Pekao Group, the strongest indirect impact on the environment is exerted by the bank which has adopted an environmentally friendly policy based on the United Nations Environment Programme and the United Nations Environment Programme Finance Initiative. In line with this policy, the bank takes environmental issues into consideration in the process of credit risk assessment applied to potential transactions and in the process of their subsequent monitoring. On account of environmental considerations, the bank chooses not to provide financing to a number of lines of business. Some of them are enumerated in the so-called “List of environmental exclusions”, based on international standards, such as the Convention on International Trade in Endangered Species (CITES). Nor does the Bank provide financing for the pursuit of activities related to trade in goods posing a hazard to the environment or projects breaching legal regulations on public health or safety.

Moreover, the bank’s credit risk policy requires the bank to refrain from involvement in transactions related to financing the manufacture of military equipment, nuclear power plants or activities causing a serious threat to the natural environment. Any deviations from this policy must be approved by the Bank Pekao Management Board and require an opinion from the Supervisory Board.

In accordance with the Alior Bank Group’s internal regulations, loan financing may be provided only to execute responsible investments. For clients whose total exposure (the sum of current and requested exposure) is greater than PLN 1 million, the bank’s employees perform an in-depth assessment of environmental risk, including social risk. To enable precise assessment of the environmental risks related to transactions financed by Alior Bank, the Environmental Risk Assessment Charter has been created. All statements and documents submitted by clients are carefully scrutinized and verified. In special cases, the bank also commissions independent experts to provide their opinions on the level of environmental and social risks of specific projects.

Moreover, Alior Bank has regulations in place that specify the types of entities that are barred from obtaining financing.

These restrictions apply, without limitation, to companies involved in the following activities:

• production or trade in arms and armament,
• gambling,
• generation of nuclear energy or production of nuclear fuels,
• growing of tobacco, manufacture of tobacco products,
• distilling, rectifying or mixing of alcohols.

Furthermore, Alior Bank does not provide financing to any activities of religious organizations, political parties, sports clubs or ventures involving harmful or exploitative forms of forced labor, child labor, direct discrimination or practices preventing employees from exercising their lawful rights to association or collective bargaining.