The Malta Independent 17 July 2024, Wednesday
View E-Paper

Green financing – the way forward to sustainable development

Wednesday, 10 July 2024, 14:02 Last update: about 6 days ago

Mark Scicluna Bartoli is head of Product Development at Bank of Valletta

One of the latest innovative trends within the local business community is the implementation of "green" projects, with a particular emphasis on green financing as a way for businesses to achieve their sustainability goals. This is a relatively recent concept that sees public, and private entities increasing their level of financial inflows from the banking sector, channelling these to their sustainable development priorities.

While the term ESG (Environment, Social, Governance) is more focused on corporate sustainability practices and governance structures, green financing is more directly concerned with providing financial support towards investment in sustainable projects and technologies. Yet both are directly interlinked, with investment in "green" projects contributing to the ultimate objectives that ESG principles set out to achieve.

 

Supporting customers in the transition to 'green'

During the past year, Bank of Valletta has been increasing its focus on ESG and taking a leading role in helping the industry push the green agenda forward. One of the strategies adopted by the bank in this regard is the refocus of its balance sheet towards greener investments, particularly in the sectors related to transport, renewable energy and the circular economy.

Through strong collaboration with the European Investment Bank (EIB), the bank has already been able to offer attractive and affordable solutions to the market, especially within the context of energy financing. BOV enhanced its credit pricing model by introducing new incentives aimed at supporting customers in their transition to more environmentally-friendly practices. During the first quarter of 2024, €58m of green loans, equivalent to nearly 9% of total sanctioned facilities, have originated from local businesses, further strengthening this positioning statement, and confirming the effort being done by the bank within the various local business sectors.

Moving forward, from the perspective of green loans, the bank will continue to advance this agenda, focusing on developments in several key areas. The bank is establishing a clear definition for green loans to provide the market with a precise understanding of what constitutes green lending. This will prevent any perception of greenwashing in both corporate banking and consumer financing. In so doing, the bank ensures that its efforts genuinely contribute to a positive environmental impact.

In addition, the bank is expanding its financing sustainability lending to include larger business corporate initiatives, thereby targeting a substantial sector of the economy where the environmental impact can be significant.

This year, the bank will initiate a pilot programme for green home loan financing utilising Energy Performance Certificates (EPC). These industry-wide standards provide a level of assurance that construction projects adhere to specific parameters, ensuring consideration of environmental impact.

 

Reducing CO2 emissions

While green loans focus on funding projects that positively impact the environment, the bank is also exploring ways to assist businesses in pollutive sectors. The goal is to help these businesses develop credible plans for transitioning to greener operational models. The bank regularly engages with organisations that have high emissions, offering strategic insights on how to reduce their CO2 emissions and monitoring their progress in alignment with Corporate Sustainability Reporting Directive (CSRD) requirements.

The integration of Climate and Environment criteria into the bank's credit underwriting process enables a comprehensive assessment of large exposures, evaluating their climate and environmental risks from both physical and transition risk perspectives.

 

Looking forward

Bank of Valletta has a clear vision when it comes to ESG principles. The bank is committed to ESG principles and is embedding them into its core operations. By offering green financing solutions and supporting companies in their transition plans, BOV aims to lead the way and drive innovation in reducing the country's carbon footprint. 


  • don't miss