The transition to a net-zero economy presents significant social and economic challenges, particularly for industries and regions reliant on high-carbon activities, hence the need for a just transition. This paper examines exposure to just transition risks-a newly introduced category of financial risk defined as social risks driven by climate transition risks-in the Polish banking sector. Using a sector- and place-based methodology, the paper identifies financial exposures to just transition relevant sectors, classified as declining (subject to job losses) or transforming (requiring adaptation to lower-carbon processes). Leveraging granular credit data, the findings show that 17.2 percent of Polish banks' financing is exposed to just transition relevant sectors, predominantly in transforming sectors like transportation. Regional analysis reveals that 2.7 percent of total just transition relevant sector credit is concentrated in European Union Just Transition Fund-backed regions, where policy support mitigates some risks, but residual social risks may persist. Meanwhile, 9.1 percent of total credit is linked to non-Just Transition Fund regions, where exposure to just transition risks is potentially higher. Although not conclusive, these findings underscore the need for Polish banks to integrate just transition considerations into risk management frameworks-enhancing due diligence and data aggregation capabilities-and engage with affected stakeholders to mitigate legal and reputational risks while supporting a socially equitable climate transition
