By BERNIE CAHILES-MAGKILAT
Sustainability and profitability go hand in hand for Rizal Commercial Banking Corp. (RCBC) as it vowed to continue increasing its sustainable finance portfolio from the current more than 10 percent share the bank’s total loan exposure.
Jamal Ahmad
Jamal Ahmad, RCBC Chief Risk Officer and Head of Risk Management Group, at the bank release of the bank’s Green and Sustainability Bonds Impact Report, noted that sustainability and profitability are critical factors in the bank’s decision in choosing their investments.
Ahmad said could not quantify how much weight each (sustainability and profitability) play in the decision-making process but Ahmad said, “This one reason they invested heavily in renewable energy because this sector is profitable with social dimension impact.”
“One does not take a precedence over the other and I think one personal lesson I’ve learned through this process is that is absolutely okay to be sustainable and make profit.”
The bank is funding four geothermal plans that would reduce carbon emissions by 10 million metric tons, he said.
“Sustainability is taking a longer view at investments, it is how it should be. If you take a long view of own personal life, the same thing for investments.”
He noted that sustainability is the finer refinement of the corporate social responsibility in the olden days where companies donate time and be charitable. But by taking the CSR to the next level to be sustainable, he said, it should make the venture profitable in the long term.
In fact, RCBC is the first local bank that came up with The Green and Sustainability Bonds Impact Report to disclose the impact of its first ₱39 billion worth of investments in various sustainable projects led by financing for clean energy ventures. The bank was able to raise this amount from the issuance of three sustainability bonds last year.
So far, RCBC’s sustainable finance portfolio already accounts for over 10 percent of total loan portfolio. In contrast, he said, the global estimate out of $50 trillion worth of banking investments of which a third is in emerging market less than 10 percent are investment in green assets.
In addition, RCBC’s sustainable portfolio of 10 percent of total loans continue to be ahead of its erstwhile fossil fuel energy assets,
“Our strategic objective is to grow this book and continue to make a positive impact,” he said adding they may tap the market again if needed but whether they will do that or not, their exposure in sustainability finance will continue.
He cited of encouraging demand for green bonds both from the local and foreign investors noting that the bank’s three bond issues last year were all over subscribed and attracted foreign investment houses. The first sustainability bond (₱15 billion) was three times oversubscribed, the second (₱8 billion) was likewise oversubscribed and the third ($300 million) attracted foreign investors and performed very well.
“It suggests positive demand,” Ahmad said.
The ₱39 billion raised from the three sustainability bonds were invested by RCBC to environment-related programs and social development projects to mitigate the impact of climate change and improve lives. The investment also supports the country’s commitment to United Nations (UN) Sustainable Development Goals (SDGs) and The Paris Agreement.
In its first-ever Green and Sustainability Bonds Impact Report, Ahmad stated channeled ₱29.8 billion to fund 17 eligible green projects on renewable energy, energy efficiency, clean transportation, and sustainable water management, in its effort to decrease the country’s carbon footprint.
The bank also participated in 12 renewable and energy efficiency financing deals, provided direct financial support to Southeast Asia’s largest solar power plant, and largely funded a 132.5MW solar farm in Cadiz City, Negros Occidental. The bank is also the sole lender to AC Energy, BIM Group, with a $232-million project financing for a 330MW solar power plant in Vietnam.
RCBC also allocated ₱9.2 billion to fund 9,347 eligible social loans that address access to essential services, socioeconomic advancement and empowerment, employment generation, and affordable housing.
As of end 2019, RCBC reported a total of ₱51.7-billion eligible sustainable portfolio, which is seen to positively impact the country through various indicators.
These include, on a total basis, 2,879MW of capacity to generate 11,630,323MWh of renewable energy per year, 380.9 million cubic meters of water supplied/collected/treated per year to serve 998,225 billed service connection households, 8,650 affordable houses financed, and ₱15.676 billion in loans given to underserved individuals, among other benefits in the transport, healthcare, and academic sectors.
“We map the impact of our investments and it is phenomenal,” he said noting that the four geothermal plants the bank funded would reduce carbon emissions by 10 million metric tons.
“We are taking leadership role in addressing challenges of climate change,” he said adding the company also embeds sustainability goals in all its activities, strategies, and policies not just imposing them on their clients.
RCBC has also extended P6 billion worth of loans to 679 small and medium enterprises and expect to continue supporting this sector as it is a core business of the bank.
Then RCBC bond reports the positive impact and seeks to reduce the negative impact of the activities in our operations.
“We are taking leadership role on addressing challenges of climate change through our sustainable finance,” he stressed.
There are other areas for funding in the sustainability space that will be determined by the bank leadership.
With its aggregated impact to the environment, society, and economy, RCBC’s eligible green and social assets also support the UN SDGs on good health and well-being, quality education, clean water and sanitation, affordable and clean energy, decent work and economic growth, industry, innovation and infrastructure, reduced inequalities, sustainable cities and communities, responsible consumption and production, and climate action.
“The Green and Sustainability Bonds Impact Report is an important milestone for RCBC. It is a first such initiative by a domestic bank in the country to publicly disclose the positive impact of its investments in sustainable activities,” said Ahmad.