ProCredit: Living Green Finance

First off, I’d like to say I’m not writing this article as any part of a paid advertisement (though I was taken to Thessaloniki early summer to hear the information live- but I wrote other fascinating articles to cover that privilege!). I’m writing this because I am truly impressed by the mind-set and working practise of ProCredit Bank, as described by their top and middle management and clients, and I would like to bring them as an example of how your business can become greener in both thought and deed.

“When you do business, do you think about the environment? Or resource management? Or the impact of climate change on your business?” asks Borislav Kostadinov, chairperson of the supervisory boards of the ProCredit banks in Albania, Bosnia and Herzegovina, Kosovo, Macedonia and Serbia and member of the Management Board of ProCredit Holding, the mother company of ProCredit Bank in Georgia.

Good questions. I can answer “yes,” but at the same time I must admit to rather too much inaction in implementing change in my own working environment. Motivation is the key factor, of course. In my office, as well as in most businesses, the desire to be more environmentally responsible, and the demand for it to be a permanent fixture, must come not only from management but also from staff and customers. ProCredit Bank is no different.

“The main impulse for doing green finance, and for “living” it the way we do, comes from our shareholders. For us and our shareholders, responsibility for the environment is an integral part of social responsibility,” said Kostadinov. “Take our key strategic shareholder, Zeitinger Invest which emerged from IPC, for example. When IPC was launched in the early 1980s, the initial focus of its consultancy work was on what was then called alternative energy. Another private sector shareholder is the DOEN Foundation, whose stated aim is ‘to contribute to the transition of a green and innovative economy where inspiring entrepreneurs contribute to a better world for the people and the planet.’”

Everyday barriers

So, your thoughts and ideas are starting to have green tinges? But everyday issues still seem to make those ideas hard to realize, right? So what exactly are we up against? Kostadinov suggests “short-termism,” incomplete knowledge, misunderstandings, and lack of confidence in economic recovery.

“Short-termism is often the single most powerful force swaying the hand of the decision-makers in banking,” he says. “But if you’re short-sighted, the stealthy and creeping nature of environmental risk will escape your attention. Its complexity, interconnectivity, its randomness; the sudden and disproportionate impact it could have on your operating context. It is intuitively clear that if you operate in a country or in an industry with high energy intake, high resource consumption and high pollution, you will likely be at a disadvantage compared to your competitors operating in an environmentally-sound setting.”

Set to make a difference, in 2011 the ProCredit Group decided to institutionalize its approach to “green-ness,” aiming to develop and implement a comprehensive Environmental Management System aimed at reducing the environmental impact of the ProCredit banks. IPC was given a mandate to advise the Group how to institutionalize the green concept and together they built up new structures and defined new processes. “We established Environmental Management Units at both the Group and Bank level. We created committees, wrote procedures – and our competitors probably thought we were crazy, because this was the peak of the crisis for Eastern Europe,” Kostadinov says.

Making it standard

In order to reduce its impact, ProCredit has done something any company can do- implemented in-house energy and resource efficiency measures which apply to both technology and behaviour, making green activities part of its internal standards and procedures. By educating staff on the importance of green thinking and by investing in infrastructure and efficient equipment, the process of change is made easier.

Over to Kostadinov: “The most significant resources used by us are paper, electricity, and fuel for transportation. Printing optimization projects started at most of our banks some years ago, with significant results, and improvements are still ongoing, as our ultimate aim is to have paperless banking operations. Technical upgrades, multifunctional printing equipment, streamlining and automation of processes, and a series of internal awareness-raising campaigns for staff have led to further decreases in paper consumption. In 2015, the ProCredit banks consumed 29 percent less paper than in 2014. Energy is another main resource we consume. In 2015, the total energy used by the ProCredit banks decreased by 15 percent compared to the previous year.

This was achieved by installing new or renovated heating and ventilation systems, efficient inverter air conditioners, LED lighting etc., and by making improvements to the building envelope. I would like to emphasize that, in addition to reducing our overall greenhouse gas emissions, the measures we have taken also result in substantial cost savings.”

So my little office is looking a little better: energy-saving light bulbs switched off when not in use (check), new PVC windows ensuring minimal heat loss and used in good balance with the air-conditioning (check), two clearly marked exits (check),… but the bin is still full of waste paper (even though we do print on both sides) and there are magazines piled up around the office. Hmm. ProCredit would have a few words to say…

“We are seeking to work with forward looking entrepreneurs and require that our borrowers comply with the relevant rules and regulations regarding environmental protection as well as health and safety standards. We are very well aware that social and environmental factors have material relevance for our own risk management at an institutional level,” says Kostadinov.

Practise what you preach & Green Loans

Many banks, when addressing “green-ness,” often focus on environmental and social issues at the transactional level in order to mitigate credit risk or reputational risk. ProCredit, however, takes their environmental responsibility one step further and will actually reject loan applications if the activity seeking funding is harmful to the environment or if the applicant fails to manage the environmental risks correctly. Yet for those facing a “rejected” stamp from ProCredit, there is still hope:

“Our approach implies engaging in dialogue with our clients and incentivising them to reduce the environmental impact of their activities,” Kostadinov says. “We do our best to share our observations.”

And it’s working. “Over the last few years we have been steadily building up our green portfolio. So far we have disbursed green loans totalling almost half a billion Euro,” he says. By the end of June 2016, the Group’s green portfolio amounted to EUR 296 million, with around 10,000 outstanding credit exposures. The lion’s share of these loans – 71% of the total amount– was granted to finance investments in energy-saving measures.

Frequent investments by ProCredit include energy efficient space heating, ventilation systems, heating and cooling processes, lighting systems and transport; and renewable energy technologies, primarily in solar water heating technologies, photovoltaic installations, mini hydropower plants, wind power turbines and biogas and biomass applications.

One example of a client that has invested in energy efficiency is the Georgian company Bedegi, a ProCredit client since 2003 and a manufacturer of high quality building materials.

“ProCredit Bank Georgia disbursed a Green Loan to finance Bedegi, a project that was environmentally friendly in a dual sense: the installation of energy efficient machinery to produce insulation blocks, which themselves help to improve energy performance and minimize the cost of heating and cooling the buildings constructed with them,” Kostadinov says.

Looking back to my office, I again see that for any business the success of an environmental management system ultimately depends on the staff and their attitude towards the environment. That means continuous staff training, internal awareness-raising and in-house expertise- aspects which are central components of the ProCredit business philosophy. Maybe it should be central to yours, too.

Katie Ruth Davies