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AGM of mBank - how the board answered to shareholders' questions

On March 31, 2022 was held mBank's Annual General Meeting of Shareholders.

As in previous years, members of the bank's board of directors answered questions from minority shareholders on climate policy and ESG (environmental, social, and corporate governance) strategies.

While board members responded directly (and affirmatively) to questions about linking ESG metrics to the salaries of executives, answers to questions about mBank's specific reduction targets and possible restrictions on financing companies without a GHG reduction strategy were not satisfactory.

mBank is yet to develop data on greenhouse gas emissions generated by the companies the bank finances, as well as detailed targets for their reduction in the 2050 timeframe. This is the so-called scope 3 of emissions, representing the largest source of emissions to which financial institutions contribute, many times larger than scope 1 and 2, i.e. emissions related to the bank's operations and electricity consumed. Executive Vice President for Risk Management, Mr. Marek Lusztyn asked for patience, pointing out the difficulty of obtaining data and that the bank plans to engage an external organization for this task.

As for introducing the restriction for financing entities that do not themselves have specific strategies for reducing greenhouse gas emissions, mBank's Board of Directors did not explicitly address this issue.

The contents of the questions and answers are presented below.

Below are the questions of our foundation's representative, Jan Chudzynski, a minority shareholder attorney:

  1. You said that this year you will determine pathways or specific quantitative reduction targets. I would like to ask you if you have any estimates of how scope 3 emissions have changed in recent years (I know there is no reporting requirement at this point, but some banks already provide this type of information). This is important because, after all, scope 3 is the largest source of emissions to which the financial sector contributes.
  2. Are there criteria within the new credit policy that set limits for companies within the loan portfolio that have not yet determined their own path to Net-Zero? This applies equally to the coal, oil and gas sectors.
  3. I would like to ask about the "S" in ESG and refer to the dismissal of the union chairman in November 2021 and the consequences of this decision. How are you managing this reputational risk, especially in the context of customer demographics?


Here is the response of the Vice President, Marek Lusztyn:

Referring to ESG - in our strategy we committed to achieving climate neutrality by 2021 in scope 3 [slip of the tongue], in terms of direct and indirect emissions (in scope 1 and 2) by 2030, and we also said that we will design a decarbonization pathway in 2022, in which we will define both intermediate targets and ways to achieve them. Here, as you noted - different institutions give different parameters on the carbon performance of their portfolio. In the non-financial report we have already written a bit about this as well. However, our ambition this year, based on Science Based Targets, is to show stakeholders exactly what the total carbon footprint of the mBank group is. And because we are a bank, we realize that scope 3 emissions are especially important for us, i.e., those indirect emissions resulting from the bank's financing of its lending activities.

Measuring the carbon footprint of Scope 3 at this stage is not trivial, given the range of available data, including non-public data available from customers. Also, given that the range of data disclosed by different institutions is, at this point, quite incomparable, we want to do this with an external organization that certifies the process of calculating carbon footprint. Therefore, we kindly ask stakeholders to arm themselves with patience. I think by this time next year we will be able to tell you exactly where we are and where we are going.

What is certainly worth highlighting is that environmental care at the institution's DNA level is quite clearly visible. We were one of the first institutions to declare non-financing of fossil fuels. Looking at the industry activity profiles of our clients, we see that our loan portfolio is clearly overweighted toward activities that are more forward-looking and less energy-intensive in this regard. Thus, we note that despite the fact that we are not able to give you data down to the last comma, for the reasons I mentioned earlier, mBank's starting point from both a scope 1 and scope 2 perspective (as can be seen, for example, by the very modern building here or in Lodz, or reduced number of offices) is something that makes us stand out from our competitors in terms of issuance.

Also in scope 3, i.e. in terms of the loan portfolio profile, we are much better positioned than the average loan portfolio of the Polish banking sector. Here, of course, one cannot fail to mention that the situation related to the war in Ukraine does not facilitate the energy and issuance situation. On the other hand, this is something that we will also have to deal with, as an institution, and at this stage it absolutely does not change our ambitions, which we communicated to you last autumn.

Cezary Stypułkowski, Chairman of the Board of Directors, also spoke in reference to the questions:

As you remember, these issues have been flagged for several years at our General Shareholders' Meetings. Here I would like to emphasize that it seems to me that the bank has indeed entered the broader climate trend relatively quickly. The portfolio is indeed uniquely clean by Polish standards. In response to your third question, I want to make it clear that, to the best of my knowledge, this is not a matter of social activity, but simply an abuse of employee duties - this is how it is interpreted in the bank. We, in any case, would not want and do not restrict the activities of our employees. I can say that it even seems to me that we are a role model. The union has formed with regard to the functioning of the labor council. We don't have the slightest intention of restricting anyone's activities. The engagement score at the bank is very high, the highest in the banking sector, so we don't particularly have anything to reproach ourselves with here. On the other hand, situations of this kind do happen, and they must be brought to an end. That's what we have to say on the matter. From the side of this type of risks - how 7,000 employees work, such risks simply have a right to happen. Certainly, take this as an assurance on our part that the main motive of our activity is that our employees feel comfortable in this institution. And this is served by many of the measures that are and will be systematically taken in the bank.

Here are the questions from Artur Wieczorek, a socially engaged shareholder:

  1. Do you have, in your policies and strategies, ways to check that mBank is not financing companies that invest in fossil fuel extraction and fossil fuel-based energy?
  2. Do you have policies that take into account the link between ESG indicators and salaries, either of management or employees? And if not, do you plan to introduce them (so that achieving these ESG targets is linked to various types of benefits)?
  3. Code for service providers - a very valuable initiative, while the provisions of this code are quite soft. Do you have plans to introduce specific indicators or educational initiatives for service providers that would popularize ESG among the companies you work with?

Below is the response from Marek Lusztyn, Vice President of Risk Management:

Thank you very much for these questions and for your appreciation of our efforts on ESG-related topics. First, it's worth emphasizing that when it comes to ESG, "the way is the goal," so today's solutions are certainly not the target solutions, because as the awareness of both customers and our partners grows, both the bar and the expectations of what is being implemented raise. We plan at the level of both credit policy and investments to review individual exposures that carry ESG risks. In particular, in terms of credit policy in 2021, we have built internal tools that allow us to assess the scale of ESG risks. In the strategy, we have clearly stated our aspirations for decarbonization in terms of Scope 1, 2 and 3. Our ambition this year is to give you a more precise pathway to these medium- and long-term goals based on Science Based Targets. Nevertheless, this is something that is already taken into account at the stage of any credit decision.

Regarding the second question related to the inclusion of ESG targets in the individual employee scorecards: yes, as we already emphasized when we communicated the medium-term strategy last fall - already this year, ESG targets are part of the evaluation matrix of each of the 100 key managers at mBank, including, of course, the board. As for the code for service providers, our starting point was to introduce it. We accept the assessment that these provisions could be tougher. As I said, this is an evolutionary process, and we will raise the bar on our partners over time.

A rebroadcast of the entire meeting can be viewed on the bank's website:


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