After several months of waiting, we have received from Santander Bank Poland answers to the questions we posed to its board of directors at the General Meeting of Shareholders on April 27, 2022.

Below are the questions with answers from the bank's management:

1. How are Santander Bank's Scope 3 emissions, i.e. emissions related to the loan and investment portfolio, changing? Has it been possible to estimate this volume?

At this point, Santander Bank Poland only calculates Scope 3 emissions related to employee travel. As for SCOPE 3 related to the emissions of our portfolio, we plan to publish this data in 2023. We are currently starting work on this project. Please note, however, that the biggest challenge in this task is still the poor availability of data and the need to rely on estimates.

2. Does the Bank have or plan to place restrictions on entities that do not themselves have strategies for getting to climate neutrality? Wouldn't such strategies make it easier for the Bank to manage its loan portfolio on the way to climate neutrality?

Santander Bank Poland already assesses companies' ESG strategies in its ESG risk assessment procedure, and in the case of carbon-intensive companies, it intends to introduce this element into the transaction assessment procedure as one of the points for assessing ESG risks. In addition, as part of the Environmental, Social and Climate Change Risk Management Policy, criteria have been defined to determine the bank's ability to work with clients operating in the following sectors: oil and gas, energy production and transmission, mining, metals, soft commodities. Ultimately, strategies for reaching climate neutrality will be part of the transformational risk assessment for which the bank is preparing.

3. Starting in 2030, the Bank will not provide services to entities that derive more than 10% of their revenues from coal-fired power generation. How large is the Bank's exposure to this sector?
At the moment it is 1.77% for the entire loan portfolio.

4. The Bank announced the introduction of decarbonization targets in 2022 for the oil and gas sectors, among others. Are the criteria and end dates for financing for these sectors already known?

Due to the current geopolitical situation, we have postponed the setting of decarbonization targets until 2023. However, this does not mean that we are abandoning the net-zero strategy and that we are going to abandon our plans. We still do not finance investments based on thermal coal, and we have placed restrictions on financing thermal coal imports.

5. In its "Social, Environmental and Climate Change Risk Management Policy," the Bank excludes financing projects for the construction or expansion of coal-fired power plants, and makes the aforementioned declaration not to provide services after 2030 to entities deriving more than 10% of their revenues from coal-fired power generation. At the same time, the situation in which a power company that is an existing customer of the Bank increases its installed capacity from coal is described by the Bank as requiring additional analysis. What criteria are taken into account in such a case, and what is the reason for this approach? Is it not better to withdraw from financing entities increasing installed capacity from coal?

The Bank does not finance the increase of installed capacity from coal at existing customers. In addition, pursuing the goals of the adopted strategy, we do not establish relationships with new customers whose business is based on coal.

The bank's answers are commented on by Piotr Chmielewski, a specialist at our foundation:

— Comparing Santander Bank's current climate responses and policies with the actions taken by the institution just a few years ago, one can clearly see positive changes and promises, such as a move away from carbon investment financing, responsible procedures for assessing its clients' ESG strategies and risks, and a declaration to publish a report on the carbon performance of the bank's investment portfolio in 2023.

Unfortunately, despite the bank's good efforts, ambitious declarations and specific climate targets are still lacking. The lack of clear transformational goals for the period between 2030 and 2050 in the current climate neutrality strategy calls into question the bank's ability to achieve it by 2050. In this context, there is notably a lack of declarations of a progressive shift away from financing the bank's current clients involved in the coal industry (coal mining and power generation), as well as addressing the problems associated with investments in other fossil fuels (oil, natural gas).

What also deserves special attention is the topic of estimating emissions of the bank's loan and investment portfolio. Santander points out that "the biggest challenge in this task is still the poor availability of data and the need to rely on estimates," which is hard to deny. On the one hand, one would expect to see more serious, top-down regulations forcing companies to keep and disclose relevant records and analysis to assess companies' emissions. On the other hand, it could be good practice for the bank to assume the highest possible emissions if data from the company is missing - adopting such a policy could speed up the development of the report and, at the same time, put pressure on the bank's clients to provide the missing information and take ambitious steps towards the necessary energy transition.

To sum up - Santander Bank's responses and strategies show a willingness to change and take the topic of the climate crisis seriously, but this is still not enough, as there remains significant room for improvement, which should happen as soon as possible. In particular, more clear and ambitious climate targets would be useful, including a radical reduction in exposure to the fossil fuel sector as a whole: not just coal, but also oil and gas. —