Banks eyeing industry green financing, costs will reduce

Banks will increasingly provide green or sustainable financing to industry at lower cost, as competition between them increases and new technologies become tried and tested. However, this financing must be clearly defined to make sure it is in fact supporting environmentally conscious projects. So said participants at this week’s European Steel Congress in Katowice.

The steel industry is more volatile than the wider economy and therefore harder to finance, but banks do it willingly as they understand the risks, Andrzej Bialek, strategic clients department director at Bank Pekao, said during the event’s green financing panel attended by Kallanish. However, the prospect of investing into new, untested technology without some form of sponsor makes obtaining bank financing more difficult, he added.

The cost of green financing/second party opinion should reduce in future and the lending margins charged by banks will narrow, Bialek added.

Lukasz Smigasiewicz, financial director at Polish coal exporter and steel processor Weglokoks, said the benefit of procuring green financing today is just reputational, rather than cost saving. Banks are providing lending on the basis of the company’s operations rather than “some green idea”, he pointed out, “so why would you lower lending margins?”

Marcin Terebelski, industrial development programme director at Polish development bank BGK, added that green financing must be clearly defined because banks are obliged to report the funds, which are then verified.

There may be no cost benefit yet for green financing off-takers but the reputational benefit is important as “your supply chain is looking at your image”, Terebelski observed. Banks have green financing written into their strategies and will be increasingly looking to provide it, he added. However, the sector must be aware of the risk of big corporations overstating their ESG credentials in the reports they publish.

Adam Smith Poland