Poland needs clear government strategy and incentives on ESG

Help is needed with capital expenditure required to decarbonise assets.

Investors are taking environmental, social and governance (ESG) factors seriously in Poland, but a clear government strategy and more incentives for companies are needed to bring about real change, experts agreed at Real Asset Media’s recent Focus on CEE briefing in Warsaw.

“There’s a big focus on ESG but not enough understanding of the issues,” said Izabela Makowska-Kwiecińska, associate director of Colliers Poland. “Legislation doesn’t help in Poland, as it’s still very piecemeal and there’s no coherent strategy.”

Here, only 30% of the energy mix comes from renewable sources. The country still relies heavily on coal, so it lags behind in that sense. On the positive side, the recent building boom means many new assets are state of the art, but the energy mix works against their sustainability credentials.

The climate also works against efforts to decarbonise, said Joost Leendertse, founder and chief executive of VerusSol. “Location is key, because weather conditions make it easier and cheaper to do renewables in Spain or Italy than in Poland, so my advice would be to keep it simple and establish a partnership between tenant and landlord to make the building sustainable. This would also tick the governance box.”

Energy audits

The subject is always raised by investors, especially in the office and logistics sector, where energy efficiency is a crucial topic. More companies are asking for energy audits to start their path to decarbonisation.

“The retail sector is also starting to invest in ESG measures because it can see the value they bring,” Makowska-Kwiecińska said. “The problem is there are no incentives to reposition assets and decarbonise them, so there’s a lot that still needs to be done.”

The same criticism can be addressed to the European Union. Many argue that it has focused more on the stick than the carrot. It should adopt more tax changes and come up with incentives to help pay for the changes that are needed and to force the implementation of solutions.

“I represent the [non-governmental organisation (NGO)] sector and we are pro-decarbonisation, but Europe is not going about it the right way,” said Agnieszka Sznyk, president of the board at Innowo.

“Companies are focusing more on preparing reports than on their modus operandi. There are too many regulations and the real issues are lost. We need less talk and more action, but I am not very optimistic,” she added.

Cheapest price is a mistake

A lot of money is going to companies that are just assembling solar panels from components made in Asia, she said, and that is one problem that should be tackled.

“It is the case that 90% of products come from China, which is a pity, because we can do just as well here in Europe,” said Leendertse. “It is a mistake to just opt for the cheapest price. The right strategy is going for quality and having a tailor-made solution for your building,” he said.

Adopting the best solutions and upgrading buildings require capex, and there are technical obstacles as well as financial barriers to overcome. Companies need help in choosing the right solutions and making them economically viable.

“It is not easy, because there are no financial incentives at present,” said Sznyk. “Circularity is a great idea, but we still operate in a linear economy.”

There are some positive moves in Poland and some regulatory changes to incentivise decarbonisation are on the horizon, such as Energy Performance Certificates (EPCs).

“New legislation on EPCs is expected in June and finally we’ll be able to assess the situation in Poland and compare it to other countries,” said Makowska-Kwiecińska.

“There will be other legislative changes and we’ll need to chart the best way forward, because there’s only one path ahead and there’s no way back.”