• GOV-1

Role of administrative, management, and supervisory bodies

The organizational structure of PZU Group entities is tailored to the scale and nature of their operations. The scope of competencies of the companies’ governing bodies is defined by legal regulations, particularly the Commercial Companies Code, corporate statutes / agreements.The parent company of the Group is Powszechny Zakład Ubezpieczeń Spółka Akcyjna. In the governance structure of PZU Group, a key role is played by PZU’s Management Board and Supervisory Board. The management and supervisory structure in the PZU Group is based on a clear division of responsibilities between the Management Board and the Supervisory Board.

The Management Board of PZU is responsible for the company’s operations, including strategy execution. The Board ensures that the company’s activities comply with legal regulations and that environmental and social goals assigned by the Supervisory Board are met.

The Supervisory Board, in accordance with legal regulations and the company’s statute, supervises PZU’s activities. In particular, it evaluates the performance of the Management Board and makes decisions regarding its composition.

The management and supervisory structure in the PZU Group is based on a clear division of responsibilities between the Management Board and the Supervisory Board.

PZU Group has implemented a standardized process for setting and evaluating targets for Management Board members across its subsidiaries. These targets include ESG-related aspects. The „Procedure for Setting and Evaluating Targets” has been developed, with implementation planned for 2025. The principles for setting and assessing objectives expand on executive compensation rules outlined in resolutions of General Meetings and Supervisory Boards of PZU Group subsidiaries.

The General Meeting of PZU has authorized the Supervisory Board to define detailed management objectives and measurable KPI indicators, which serve as the basis for assessing performance. These indicators also impact the variable compensation of senior management.

As part of ESG target cascading, the Management Board of PZU has expanded responsibility for ESG target execution to include senior management and selected subsidiaries. Supervision of these targets is carried out by the Management Board through regular meetings and reporting of results to the Supervisory Board.

The competencies of Management Board and Supervisory Board members are verified in accordance with applicable procedures, including the „Rules for the Qualification Process for Management Board Members in PZU Group Entities”. The evaluation process assesses qualifications, professional experience, compliance with legal regulations, alignment with PZU’s Diversity Policy.

At PZU, TFI PZU, and Bank Pekao, the ESG competencies of management and supervisory board members are assessed as part of the candidate selection process, based on evaluation forms aligned with regulatory requirements from the Polish Financial Supervision Authority (KNF). PZU Group updates plans to update the rules of qualification procedure for members of the Management Board in the PZU Group to include the requirement of knowledge in the area of sustainable development.

In addition, executives are included in educational activities aimed at expanding knowledge in the areas of sustainability, risk management and reporting. A series of workshops in ESG topics was conducted in 2024.

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  • GOV-3

ESG information management and addressed ESG Topics

Factor-based management and risk identification are an integral part of the organization’s internal risk management and monitoring system and, if material, are subject to reporting. In 2024, the PZU Group implemented its risk management strategy, adjusting the frequency of reviews and reporting to the specific nature of individual companies’ operations. Risks were monitored at various levels—from regular quarterly reports to more detailed monthly analyses, as well as periodic strategic reviews conducted semi-annually or annually. In the event of significant events or changes, Management Boards reacted immediately, providing key information to the relevant supervisory bodies.

In 2024, PZU Group tailored its risk monitoring frequency to align with the specific nature of each entity’s operations.

  • Quarterly risk reviews were the standard in most entities, ensuring regular reporting to Management Boards and Supervisory Boards.
  • Monthly real-time risk monitoring was implemented in entities more exposed to dynamic market changes, such as BALTA, Lietuvos Draudimas (Estonia branch), and LINK4.
  • Annual or semi-annual reviews enabled strategic assessments of policy implementation effectiveness, particularly in ESG areas (Bank Pekao, TUW PZUW, Alior Bank).
  • Ad hoc reporting enabled flexible responses to sudden changes and unforeseen risks.

Risk and opportunity analyses of the business are taken into account when overseeing strategy and making key business decisions. ESG is integrated into risk management, and strategic transactions and operations are analyzed based on their environmental and social impact.

Investment decisions are assessed in terms of sustainable development and long-term risk evaluation.

Management bodies regularly analyze key impacts and risks, including:

  • Environmental risks: impact of PZU Group’s operations on climate change, CO2e emissions, and compliance with environmental regulations,
  • Social risks: impact on local communities, human rights, and involvement in social initiatives,
  • Operational risks: supply chain stability, cybersecurity, legal risks, and regulatory compliance,

To ensure the effectiveness of implemented actions, management bodies apply the following monitoring mechanisms:

  • KPI System: Key Performance Indicators (KPIs) enable real-time tracking of strategic progress,
  • Regular performance verification processes: Internal and external audits evaluate the effectiveness of control systems and risk management processes within the Group,
  • Integration with operational processes: ESG is fully embedded in business operations, ensuring alignment of actions and effective strategy execution,
  • Supervisory and management bodies of PZU Group: oversee key impacts, risks, and opportunities, ensuring effective governance, regular reporting, and monitoring mechanisms.

Incentive systems and compensation policy in the context of sustainable development

PZU Group has rules for remunerating members of Management and Supervisory Boards. They were developed in accordance with the principles of transparency and effective organizational management. Remuneration of members of the Boards of Directors consists of a fixed part and a variable part, which depends on the achievement of management objectives, including those related to ESG.

Fixed remuneration is within the range defined by resolutions of general meetings, while variable remuneration may not exceed 50% to 100% of the previous year’s fixed remuneration, depending on the size of the entity. In entities where this is required, 40% of this value is subject to deferral and is paid in three annual installments, provided the assumed criteria are met.

Management Board of PZU and Management Boards of subsidiaries implement management objectives, among which are ESG objectives. In 2024, in terms of the ESG goal, Management Boards of PZU and PZU Życie were tasked with (1) implementing the requirements of the CSRD – including the designation of the PZU Group’s material areas of influence based on the results of the double materiality analysis, (2) developing a methodology for counting greenhouse gas emissions, and (3) developing a decarbonization strategy.

Management Boards of Polish subsidiaries (other than the Pekao and Alior Bank Groups) of the ESG objective were tasked with implementing the requirements of the CSRD in accordance with the specifics of the Company’s operations and decarbonization strategy, based on guidelines prepared by PZU. Management Boards of the Baltic subsidiaries were given the goal of implementing one product in line with the EU Taxonomy and increasing the percentage of ESG-linked investments.

Compensation policies are supervised by the Supervisory Board and the General Meeting. The General Meeting authorizes the Supervisory Board to define detailed management targets, their weighting in Key Performance Indicators (KPIs), and their direct impact on variable compensation. Supervisory Boards monitor and evaluate the achievement of management objectives.

ESG performance indicators are considered when determining variable remuneration, with annual weighting adjusted based on PZU’s strategic ESG targets. The proportion of variable compensation tied to ESG target achievement is determined individually and constitutes an integral part of management performance evaluation.

PZU’s Management Board has forwarded ESG goals for implementation by senior executives. The 2024 Strategic Objectives Catalog, which includes PZU and PZU Życie Senior Executives, includes objectives related to implementing the 2021-2024 ESG strategy “Development in Balance” and meeting taxonomy requirements, in addition to those derived from the Management Board’s objective.

  • GOV-5

Management of ESG risks and internal controls in sustainability reporting

PZU Group implements internal standards for risk management and internal control in sustainability reporting. The established processes and systems aim to identify risks, implement effective mitigation strategies, and continuously monitor performance to ensure full compliance with regulations and stakeholder expectations.

The Office of Sustainability in PZU is responsible for coordinating PZU Group’s sustainability data reporting process. It is the owner of the procedure defining the rules for preparing and provision of data, as well as defining the participants in this process and their responsibilities. In the organizational structure, it reports directly to the PZU Board member responsible for the area of sustainable development, Elżbieta Häuser-Schöneich. Cooperation with PZU Group entities in the area of ESG is defined by the provisions of agreements concluded separately with Pekao Bank and Alior Bank. With regard to non-bank subsidiaries, the basic principles of cooperation are set out in the “Agreement on Cooperation Principles in the PZU Group,” which, in terms of ESG, are detailed in the policies issued by PZU under this agreement in the area of sustainable development.

Sustainability reporting is subject to ongoing auditing to ensure compliance with applicable laws of general applicability and internally applicable laws. Internal controls are carried out by the Office of Sustainability to check the completeness of the results of the double materiality assessment, documentation related to the related to preparations for data acquisition, data sources, and the factual correctness of the data received. The Office of Planning and Controlling conducts control over the process of preparing the Sustainability Statement.

The purpose of the sustainability reporting audit is to ensure the reliability and completeness of information, compliance of sustainability reporting with applicable regulations, due diligence with regard to the data reporting and publication process, and reliable documentation for external attestation.

In terms of sustainability reporting risks, the completeness of the results of the double materiality assessment, record-keeping related to data acquisition preparations, data sources and data accuracy, among others, were considered critical. Ongoing control is aimed at mitigating these risks. If a process or substantive irregularity is detected, information in this regard is forwarded immediately for correction. If correction is not possible, measures are taken to reduce the associated risks.

In 2024, the process of controlling ESG reporting was carried out for the first time, so control mechanisms will be developed.

The sustainability statement has been attested with limited assurance in accordance with the National Standard on Attestation Services for Sustainability Reporting 3002 PL and the National Standard on Attestation Services Other than Audits and Reviews 3000 (Z), as amended by International Standard on Attestation Services 3000 (revised) “Attestation Services Other than Audits and Reviews of Historical Financial Information,” based on which the attestation was performed.

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Notes to the Sustainability Statement