Source: Trade Finance Global

Following the EBRD 2023 Annual Meeting and Business Forum in Samarkand, Uzbekistan, TFG’s Brian Canup (BC) spoke with Nino Masurashvili (NM), Deputy CEO, Chief Risk Officer, TBC Bank Georgia, who was recognised with the EBRD Sustainability Silver Award. Read interview to learn more about TBC Bank Georgia, why they were awarded the EBRD Sustainability Silver Award, and their plan for continuing to support Georgian sustainability.

BC: What specific sustainability initiatives have TBC Bank Georgia implemented in recent years to promote environmental and social responsibility, and what spurred this movement? 

NM: Our aspiration to contribute to sustainable development comes from our role as a leading financial institution in Georgia’s development. We are aware that we have an impact on the country’s economy, business development, employment and societal progress as a whole. With the international expansion of our operations, sustainable development approaches are incorporated into our subsidiaries, as well.

In 2021, we took further steps to enhance the Group’s ESG framework through the development of an ESG strategy, which reaffirms our commitment to make a long-term, sustainable contribution to the country and the region. The strategy defines several key areas for the coming years: a strong ESG governance structure at the board and executive level; a focus on sustainable financing, services, and products; employee diversity, equality, and inclusion (DEI); green and sustainable funding; and a system and approach for impact measurement and reporting.

To list key achievements in 2022:

• GEL 750 million sustainable loan portfolio target for 2022 met. Furthermore, the total volume of the sustainable portfolio reached GEL 782 million, which constitutes a growth of 15.6% in comparison with the end of 2021 (GEL 676 million).
• Climate-related framework in line with the Task force on Climate-related Financial Disclosure (TCFD) requirements established and the second TCFD report published.
• Comprehensive ESG training framework covering all employees and different responsibility levels established.
• DEI  Policy, targets and action plan defined.
• ESG strategies in all significant subsidiaries developed.

Since the environmental and climate change issues are accelerated worldwide, we are committed to managing our direct and indirect environmental and social impacts stemming from our operation by developing the continuous enhancement of TBC’s Environmental Management System (EMS).

In 2020, we further strengthened our EMS and obtained ISO 14001:2015 certificate and successfully passed the third-year surveillance audit of the EMS in 2022. This certificate serves as a testament to our EMS’s full compliance with international standards.

As part of our EMS, TBC Bank implemented different initiatives to reduce its direct environmental footprint.

To list some of them:

• Since 2019, TBC Bank operates a green car fleet, which is comprised of electric and hybrid vehicles.
• Since 2015, TBC Bank has contracted a company for paper recycling. TBC delivered more than 250 tons of paper for further processing.
• In 2023, TBC Bank started collecting plastic waste and transferring it to a partner company “Polyvim” for further recycling. The goal is to reduce plastic waste, create value-added products, and promote the development of a circular economy in Georgia. As a result of several stages of plastic processing, a high-quality fibre fabric is obtained, which can be used in other industries.

BC: Can you provide some details on what led to TBC Bank Georgia being awarded the EBRD Sustainability Silver Award?

NM: One of the features that the Silver Award considers is transactions with our customers. One of the transactions was the replacement of street lighting in Batumi City, the second-largest city in Georgia. The transaction was structured under a letter of credit product, where TBC Bank acted as an issuing bank facilitating the import of energy-efficient LED lighting from Ukraine.

TBC Bank client, ADJARGANATEBA, imported energy-efficient LED lighting from its supplier, SCHREDER TOV, a lighting equipment supplier based in Ukraine.

TBC Bank issued a letter of credit with a post-import finance solution, and it was confirmed by a bank in Germany. This structure allowed the importer to re-pay for the purchased equipment within 3 years while allowing the exporter to receive funds at sight, upon installation of the lights.

Due to the ongoing conflict in Ukraine, the exporter had an urgent need for prompt payment, making smooth transactions crucial. Waiting until the end of the payment period was simply not feasible. Meanwhile, the importer had to prioritise the installation of LED lights and relied on receiving payments from the municipality on a quarterly basis.

TBC Bank matched this payment structure for both the importer and exporter, and satisfied both companies’ requirements. The transaction was also structured under EBRD Trade Facilitation Program.

The goal and the most important focus of the project was energy efficiency. By implementing the project in Batumi:

• 14,555 outdated lights are being replaced with new energy-efficient LED lights of better quality,
• The smart lighting system will improve night visibility, and safe movement on foot, bicycle, and car,
• Switching to energy-efficient LED lighting will reduce electricity consumption by approximately 50%.

BC: How have TBC Bank Georgia’s sustainability efforts contributed to the overall development and well-being of local communities?

NM: TBC runs its multi-year initiatives that aim to sustainably empower different groups of society. TBC, as an institution with a major social and economic impact, contributes to the development of areas defined as crucial by the countries’ public sector and cooperates with the National Bank of Georgia and other government institutions in key areas like financial education, job creation, investment attraction, etc.

Apart from information gathered from external sources, TBC assesses its own strengths and competencies and chooses areas of involvement accordingly. We have several principles that guide the choice of initiatives to be implemented. Each project must:

• Increase its positive impact on society and the country in the long term and have growth potential,
• Be a part of TBC knowledge and expertise: Before getting involved in a certain area, TBC builds expertise in it by increasing its knowledge internally and collaborating with external stakeholders that can contribute to the process with their experience,
• Aim at co-participation not just funding: TBC works with partners, supporting them not only by funding specific projects, but also by sharing expertise in communication project management and more.

Some of our priority areas are:

• Accessibility and affordability of financial and non-financial services: via our platforms www.tbcbusiness.ge and www.startuperi.ge, we support MSMEs, as well as promote a startup culture.
• Women’s economic empowerment: among other initiatives, the empowerment of women in information and communication technologies (ICT) is a focus area.
• Educational programmes for youth: scholarships, courses in ICT area, and STEM.

BC: In what ways does TBC Bank integrate sustainable finance principles into its operations and decision-making processes?

NM: The incorporation of our sustainable finance principles started many years ago. First of all, with the introduction of the Exclusion List of activities, we avoid ethically questionable and harmful activities. The list of activities excluded from financing by TBC Bank is based on the Exclusion Lists of the EBRD, IFC, DEG and ADB.

We reject financing activities that violate local legislative requirements, international conventions and declarations of human and labour rights.

Furthermore, all our commercial lending to SME and corporate customers are screened for environmental and social risks in line with the EBRD Performance standards.

TBC strives to increase its positive impact on society and the economy by introducing new financial products and services that are designed to deliver a specific social or environmental benefit.

Green Lending Development – TBC is a leading partner in Georgia in local renewable energy financing with a core segment in hydropower stations. To make our contribution to the development of sustainable financing countrywide, we conducted local market research to determine how to adapt TBC’s green criteria to the Georgian reality and developed Green Lending procedure, in cooperation with the Green for Growth Fund (GGF) Technical Assistance Facility, represented by Finance in Motion GmbH and financed by the European Union under the EU4Energy Initiative.

This procedure helps the Bank to identify green and environmentally friendly initiatives and encourages private companies to move to sustainable investments in their businesses. Furthermore, since 2023, we implemented the Green Taxonomy of the National Bank of Georgia, developed in line with the best international taxonomies and sustainability frameworks.

International Fund Raising – Providing solutions that contribute to the sustainable development of local businesses has been an important target for TBC’s sustainability agenda. To achieve its ESG objectives, the Bank has continued to mobilise financial resources, focusing on the country’s inclusive economic growth and sustainable development. In 2022, the Bank mobilised the wholesale portfolio of $485 million in total, from its International Financial Institutions (IFIs) partners. Attracted facilities are a testament to TBC’s strong commitment to supporting the sustainable economic growth of local businesses, thereby contributing to job creation and bringing long-lasting benefits to the country.

Green mind-set and green financing: Overcoming sustainability challenges

Following the EBRD 2023 Annual Meeting and Business Forum in Samarkand, Uzbekistan, TFG’s Brian Canup (BC) spoke with Nino Masurashvili (NM), Deputy CEO, Chief Risk Officer, TBC Bank Georgia, who was recognised with the EBRD Sustainability Silver Award.

BC: Have there been any struggles in the implementation of green initiatives into your bank, and overall community?

NM: Customer awareness and expertise are challenging since awareness of businesses and society about climate-related risks and opportunities is very low. This influences the readiness to engage actively in the transformation process to a low-carbon economy. Additionally, as a developing economy, short-term objectives often are more prioritised. We need to create a good base for research, and cross-sectoral analysis, including finance specialists, scientists and government institutions.

Data: Challenges currently exist concerning the availability of granular and comparable data and the development of metrics that adequately translate climate outcomes into financial impacts. To some extent, these challenges reflect a lack of underlying data, for instance on the exposures of different sectors to climate risks.

Affordable funding to finance mitigation and adaptation measures for different (vulnerable or relevant) sectors in Georgia are needed for the agriculture, transport, buildings, construction, energy sector.

BC: What measurable impacts or outcomes have resulted from TBC Bank Georgia’s sustainability initiatives, and how do you track and report on the progress?

NM: In 2021, we published our first TCFD report and committed to making visible progress every year. In 2022, we advanced on climate stress scenarios and conducted the first climate stress testing exercise in Georgia. We have a dedicated team who is responsible for fostering the process, creating knowledge and engaging with partner organisations on additional technical and educational support.

We incorporated climate-related initiatives and aspirations in our ESG Strategy which follows a strategic road map, reflecting milestones of our sustainability journey for the following years up to 2030.

In 2022, the Group aligned loan portfolio growth planning with risks and opportunities in different sectors and defined relevant products on a sectoral level, thus supporting sustainable portfolio growth and the transition to a lower-emission economy in Georgia. In order to identify products relevant for various economic sectors, separate meetings and analyses were conducted with representatives of the various business lines and the potential for greening a sector was assessed.

As of the end of 2022, the sustainable loan portfolio of TBC Bank (GEL 782 mln) includes exposures with different purposes, such as, energy-efficiency loans, electric car loans, renewable energy financing for solar panels and hydropower plants.

In this process, we closely cooperate with our partner IFIs, e.g. EBRD. Recently, TBC committed to developing a comprehensive transition plan in the near future. TBC is the first bank in the region with this commitment.

However, there are a number of challenges. TBC’s objectives are to act responsibly and manage the climate-related, environmental and social risks associated with our operations, increase the resilience of customers, employees, businesses and society towards climate change risks, and support them in pursuing climate-related opportunities.

In 2019, we started to respond to stakeholders’ demand for more information and published a GRI-referenced sustainability report. Our GRI-reference sustainability report is a full-scale report covering the areas where TBC has an impact: good governance, employee diversity and equal opportunities, environmental footprint, climate change etc.

First of all, the disclosure is proof of our commitment. It shows the company’s efforts to pursue its aspirations and goals. Furthermore, it creates trust in interested parties. And finally, the disclosure is a symbol of the responsibility towards all stakeholders: customers, employees, investors, partners, environment and society as a whole.

BC: Looking ahead, what future plans or goals does TBC Bank Georgia have in terms of sustainability and how do you want to build off the momentum that led to receiving the EBRD Sustainability Silver Award?

NM: This year, we are going to accomplish some challenging tasks. Two examples are: to measure the Group’s direct performance in relation to the Paris Agreement targets for GHG emissions reductions and to calculate our financed emissions.

For companies in the European Union, UK and other developed countries, this has already been done. However, for Georgia, this will be a new challenge. We need to develop and validate a methodology, data, and approach, and can consider using internationally established frameworks, such as the Partnership for Carbon Accounting Financials (PCAF).

Various initiatives and programmes to support the targets set by the ESG Strategy:

• Sustainable financing I Sustainable loan portfolio growth KPIs – In 2021, ESG KPIs were linked to senior management remuneration over the medium term to reflect our mid-term strategy. In 2022, we continued to incorporate ESG-related KPIs for bank-level positions and established sustainable loan portfolio growth targets for business segments – retail, MSME and corporate: the target for green and social loans for 2023 has been set at a total volume of GEL 1 billion.
• ESG awareness I ESG Academy – Our expertise is essential in driving the transition, providing relevant solutions to the economic actors and increasing knowledge about climate-related and ESG matters. In 2023, we are taking a more structured approach and launching an ESG Academy with an extended scope for both our employees and customers. The academy will cover various topics, including green and social financing, financial inclusion, regulatory requirements, diversity and affirmative approaches, and sustainable business models and practices.

The first training programme, ‘Green mind-set and green financing’ will include extensive training over two days for 900 employees and a one-day training for 300 retail, MSME and corporate customers. The programme will be supported by partner IFIs – the Green for Growth Fund (GGF) and the European Fund for Southeast Europe (EFSE) and will run for 22 months.

• Paris alignment I Science-based targets – In 2022, we built internal capacity on relevant GHG emissions calculation methodologies and approaches. This was achieved via training and the use of external consultancies. As the next step, we are committed to measuring our performance in line with internationally-established standards and aligning with science-based targets.
• ESG awareness among employees and customers – In 2022, 98% of TBC Bank employees participated in ESG-related training. In 2023, we aim to develop a framework for measuring ESG awareness among employees in order to track the results regularly and identify areas for further improvement. Furthermore, we will establish an approach for customer engagement on ESG topics.
• Talent programmes for Information and Communication Technologies (ICT) – As technology is key to TBC, ICT is a priority area. In 2023, we will commence a new ICT programme, consisting of eight new training courses in programming, information security and other technologies. Our diversity targets focus on the empowerment of women, girls, and talented young people from the regions and rural areas as well as on age-diverse recruitment. Under the industry-led skills programme co-funded by USAID, around 750 people from a diverse range of backgrounds, ages and genders are expected to participate in the programme over the next 24 months. A number of the graduates will be employed by TBC and TBC’s partner companies.
• ESG Strategies in significant subsidiaries – In 2023, we will have several priorities: establishment of ESG-related governance structures, implementation of ESG-related policies and training framework, development of regular reporting, as well as internal capacity building in our subsidiaries.

TBC Group’s ambition is to be the leading supporter of ESG principles in Georgia and the wider region. We aspire to make our direct environmental impact net zero by 2025 and develop a plan to drive our indirect impact through financing to net zero.

Our ESG Strategy is guided by a strategic road map that outlines the key milestones for our sustainability journey through 2030. Our commitment lies in reaching an advanced level of compliance with TCFD requirements and integrating the local Green and Social Taxonomies set by the National Bank of Georgia.

And last, but not least, it is important to be transparent about work done, challenges in the process, limitations of approaches and future action plans. It is important to show that this is a consistent journey and not a completed project.