How to get out of the crisis?
Article courtesy of Center-invest Bank – Natalya Malakhova
On 3rd July in St. Petersburg opened XXVIII international financial Congress (IFC-2019), which brought together several thousand participants from around the world. The plenary session will discuss the situation on the global financial market and the main directions of its development for 2019 – 2021. We talked with one of the participants of the forum, Chairman of the Board of Directors of Center-invest Bank, Professor, Doctor of Economics Vasily Vysokov about what is happening today in the transformational economy in the conditions of continuous crisis, and about the prospects for the development of banking business.
Vasily, what areas of banking do you consider promising?
Vasily Vysokov: The desire to overcome the crisis has become an Integral part of modern economic thinking. But competent statement of a question: not from where, and where it is necessary to leave it? There are few alternatives for banking: state, speculative, Islamic and sustainable banking. Among the global trends, it is important to note the expansion of the model of sustainable banking, which, in addition to protecting the interests of existing and future generations, covers the principles of ethical, socially responsible, affordable, “green” and transformational banking. Behind this direction the term ESG (Environmental, Social, and Governance) was embedded.
It is a business with its own characteristics and competitive advantages. It is not just “buying and selling risks” (increased risks – raise rates), and the real management of them, with the real cost of resources to reduce them, the availability of loans, the growth of profitability by reducing default.
What is ESG-banking?
Vasily Vysokov: First of all, it is an environmental responsibility. Here we are talking not only about reducing energy consumption and harmful emissions, but also about improving the efficiency of all production and consumption processes. The increase in efficiency should not be 2 – 3 percent, but 2 – 3 times. To do this, we need to introduce innovative solutions. Projects implemented with the help of loans from the Center-invest Bank, reduced CO2 emissions by 196 thousand tons per year, as much as clean 7.8 million trees.
It is also a social responsibility. I can say with confidence that the best way to save money for the repair of apartment buildings is to get a loan, repair entrances, roofs and basements, and then happily live in a renovated house and repay the loan through mandatory savings contributions to the Capital Repair Fund. Center-invest Bank issued 129 loans to housing associations for repair of multifamily buildings for a total amount of 213 million rubles.
Finally, it is a managerial responsibility. In 2018, various kinds of inspectors checked the Bank for 3850 days. Transparent operating system and transparent accounting allowed not only to preserve the Bank’s efficiency, but also to optimize information flows.
Experts consider non-financial services to be one of the mandatory elements of ESG-banking. How does this trend develop in Center-invest?
Vasily Vysokov: From the point of view of speculative bankers, non-financial services for the Bank are costs, charity or marketing. But in ESG banking, non-financial services are part of risk management.
Cenrter-invest Bank has been working with small businesses in the South of Russia for more than 20 years. Over the years, has formed a system of training and education of entrepreneurs on the basis of the Internet portal “Enterprise for All” (school.centrinvest.ru), competitions of students “Smart scholarship” the Endowment Fund “Education and Science of South Federal District” (education.southofrussia.ru), strategic projects (strategy2030.ru), consulting services and mentorship for women, youth and social entrepreneurship as part of the Center-invest Bank accelerator (acc.centrinvest.ru/en/), financial literacy centers established jointly with the universities of South Russia (знаниясила.рф). In total, about half a million residents of the South of Russia took part in non-financial projects of Center-invest Bank.
Strategy 2019-2021 “ESG-digitalization of the Center-invest Bank ecosystem” is aimed at using information technologies for business development based on the principles of ESG-banking. Digitalization is not only a global trend and the goal of the national project, but also ensuring the availability of financial and information services, the development of the Bank’s own operating system on the basis of information technologies, electronic interaction with the regulator and government, digitalization of customer interaction channels.
There are many new information technologies in the world today, but some of them are gaining market share. Based on the ESG-principles, Center-invest Bank doesn’t assume the risks and costs of pioneers, but actively cooperates with developers and operators of proven projects for the development of operating systems, the introduction of cards of the national payment system “Mir”, the “Marketplace” system of the Bank of Russia, participates in the integration of biometric identification services, interdepartmental electronic interaction system, including “Public services” and “Multifunctional center (MFC) of state and municipal services”.
The Bank monitors the emergence of new technological solutions for customer service, reducing costs and risks in obtaining information about the client and promptly providing information to customers.
Which banks are interested in the ESG-principles?
Vasily Vysokov: These principles have already gained powerful authority in global markets: ESG funds manage 30 trillion US dollars. To be globally competitive, the Russian financial market must implement ESG principles at an accelerated pace.
Center-invest Bank uses the principles of integrated reporting to provide detailed information about their activities to investors, shareholders, customers, partners and employees (https://www.centrinvest.ru/en/). This made it possible to concretize the specifics of the Bank’s work on the basis of ESG-principles: today, almost 90 percent of the Bank’s income is generated by working with the real sector of the economy, the main beneficiary of the Bank is the population receiving almost 35 percent of the Bank’s income, employees account for 20 percent, partners – about 17, shareholders – 29, of which more than 20 percent goes to the development of the Bank.
How does the Bank’s development strategy relate to the regional strategy and national projects?
Vasily Vysokov: In its strategy, Center-invest has combined National Projects and Global Sustainable Development Goals. The closest intertwining of national and global goals in the Bank’s work is related to the availability of credit to the population, support for education and science, development of small business, promotion of innovation, new financial technologies, digital economy, promotion of international trade and partnership for sustainable development.
Center-invest Bank also presented the relationship of its products and services with the strategic documents of the Bank of Russia on the development of the financial market, financial technologies and availability of financial services. This relationship increases competitiveness and allows you to position yourself in the market of banking services as a benchmark, case study and success story.
In developing the Bank’s strategy, a table of relationships between products and services and sustainable development goals was built. Behind each item in the table is a description of specific activities to achieve one of the 17 Sustainable Development Goals and 12 National Projects through banking products and services. For the population these are loans, deposits, cards, payments and services. For business – loans and services, including modern electronic services, lending of repairs of multifamily housing buildings and new requirements for housing construction. For corporate and social responsibility is the development of the operating system, the introduction of modern banking technologies, information security, risk management, corporate culture, personnel training and social projects.
The presentation of the strategy aroused great interest among investors. Center-invest Bank has received recognition in the ESG investment market: the Swiss-based fund responsAbility Investments AG became a shareholder of the Bank, an agreement on ESG loans with the Symbiotics Fund was signed, and loan agreements for SME financing with the Eurasian Development Bank and the Black Sea Trade and Development Bank were concluded.
Center-invest Bank became a member of The Global Alliance for Banking on Values – an international Association of banks operating on the basis of the ESG-principles, and also took the 17th position out of 76 European banks in the ESG-ranking by Vigeo Eiris.
By the way
At the initiative and with the financial support Center-invest Bank, Rostovstat (Rostov Statistic authority) prepared a statistical compendium “Rostov region – the movement for sustainable development goals”. This is the first comprehensive analysis at the regional level of indicators of 17 Sustainable Development Goals approved by 193 UN
The results of this work once again confirmed the idea of global competitive advantages of the Don region as a region of sustainable development. Entrepreneurs of the Rostov region can now assess their local business from the perspective of global development and present it to foreign colleagues and partners in more familiar and understandable for them modern terms. Students of Don universities had the opportunity to see the assessment of their knowledge and their projects not only in the records, but also their participation in the development of the world economy.
About half a million residents of the South of Russia took part in non-financial projects of the Center-invest Bank.