ESG from strategy to practice

Our Board Member Deyan Ivanov explores how ESG is becoming an integral part of banking, covering the evolving regulatory landscape, ESG risk management, sustainable finance, and the future of responsible banking.

Three years have passed since our ESG Summit, which laid the groundwork for a stronger focus on ESG across the organization. Looking back, how have ESG principles become integrated into the bank’s strategy, decision-making, and day-to-day operations?

Indeed, three years ago, ESG was still something we in RBKO were building awareness about; today, it is much closer to the way we actually manage the bank. It is now part of our strategy, risk discussions, business development, and management accountability. A clear indication of this is that ESG has become part of the Management Board's priorities over the past three years, with measurable objectives guiding our work. These were not broad commitments, but concrete goals covering areas such ESG asset growth, CO₂ reduction targets until 2030 aligned with the RBI Group transition plan, better ESG data, engagement with high emitting clients, taxonomy and ESG assessment tools, staff training, risk governance, data transformation, portfolio steering, and stress testing.

These goals are also cascaded to our teams, which is important because ESG only becomes real when it enters daily work. I would say the biggest change is that ESG has become less of a separate project and more of a normal management topic – still developing, of course, but now clearly present in the way we set priorities and make decisions.

How has awareness and understanding of ESG evolved among our clients and business partners in recent years?

We see that awareness is increasing, but I would still describe it as relatively low in the broader market. Nevertheless, ESG is more present in discussions today, especially with larger corporate clients and with clients looking at energy efficiency, renewable energy, or green financing. But for many businesses in Kosovo, ESG is still not seen as an immediate business priority. The reason is quite practical: there are still not enough concrete incentives, or disincentives, to make ESG adoption a clear commercial necessity. Many companies do not yet face meaningful costs for higher emissions, clear tax benefits for sustainable investments, strong public procurement advantages, or strong market pressure that rewards ESG-aligned behavior.

Through client conversations, the work of our relationship managers, and ESG-focused funding lines with our financing partners, more clients are starting to see that sustainability can affect access to finance, operating costs, regulatory readiness, reputation, and asset values.Topics such as energy efficiency, renewable energy, emissions data, and Energy Performance Certificates are becoming more relevant.

Still, many clients remain focused on immediate costs, which is understandable. Our role is to make the topic practical: explain where ESG can bring value, where it can reduce future risk, and which investments make sense for the client today.

How is the growing focus on sustainability influencing the bank’s engagement with clients and its lending and financing decisions?

First of all, I have to admit that I don’t have direct impressions from the customers as I am not part of the interactions with them, but what I hear from our relationship managers is that the conversations with the clients are changing – maybe not overnight, but the topic of sustainability more often takes place, especially for the larger businesses, but also for ESG-conscious smaller businesses where a supranational institution is involved as a funding partner.

Sustainability is making our client engagement more forward-looking. We still look first at the borrower’s financial position, but we also need to understand the resilience of the business model. For higher-emitting or more exposed sectors, this means discussing transition plans, exposure to regulation, energy costs, physical climate risks, and the use of financing proceeds.

At the same time, sustainability is also an opportunity for clients. This is where dedicated funding lines and risk-sharing schemes are very useful. For example, the EBRD SME Go Green program supports SMEs investing in renewable energy, energy efficiency, sustainable technologies, agribusiness value chains, and women-led busnesses, including incentive grants for eligible investments. GEFF and GEFF II support green investments in households and buildings, such as energy-efficiency improvements and renewable-energy solutions. Funding and guarantee lines from partners such as EBRD, GGF, EFSE, and OPEC also help us support SME and green lending, diversify funding, and improve access to finance. These programs require eligibility checks, proper ESG flagging, use-of-proceeds monitoring, and transparent reporting, which also strengthens our ESG data discipline. In practice, this changes the nature of the client discussion.

We are not only asking whether a client can repay today; we are also trying to understand how the business will remain competitive tomorrow. When there is a credible transition path, our role is to support it. Where there is no willingness or ability to adjust, financing may need to become more selective.

How is the bank identifying, assessing, and managing ESG-related risks - such as climate risk, regulatory risk, and reputational risk to ensure long-term resilience and compliance?

We treat ESG-related risks as real financial risks, not as a separate reputational topic. Our focus is to translate the RBI internal ESG framework into daily credit and risk processes. In corporate lending, this starts with the ESG Process Flow. Customers and transactions are screened against exclusion criteria, sectoral strategies, and ESG-critical triggers. Where needed, ESG expert opinions are obtained and documented, so decision-makers can clearly see the relevant environmental, social, governance, reputational, and regulatory risks. ESG in Corporate Underwriting then brings this assessment into the credit process by combining the customer’s ESG profile with the industry E-risk view. This helps ensure that higher-risk cases receive the right level of attention and are reflected in the risk statement.

The ESG Industry Base Score gives us a consistent starting point for assessing industry and country level exposure, while financed greenhouse gas emission calculations help us understand the emissions linked to our portfolio. Science-based target setting and RBI Sectoral Strategies then support portfolio steering, client engagement, transition financing, and, where needed, restrictions or exit strategies. In practice, ESG is becoming part of client assessment, credit approval, monitoring, product development, and client dialogue.

The important point for me is discipline: the process should help us identify material risks early and document them properly, without turning ESG into a mechanical checklist.

ESG is often associated with environmental topics, but it also includes social and governance aspects. Which of these areas are currently the biggest priorities for our bank, and why?

It is natural that people first think about the environmental side of ESG, but for a bank the picture is broader. Indeed climate change, financed emissions targets, and the transition to a low-carbon economy are becoming more directly linked to banking risk. That is why we are integrating environmental considerations into lending, sustainable finance, financed emissions management, and we diligently work on reducing our own operational footprint.

At the same time, I would not put the “Social” pillar in second place. In the Kosovo market, financial inclusion matters a lot. Support for SMEs, women entrepreneurs, young entrepreneurs, and businesses in less developed areas is important for sustainable economic growth and social stability. Access to finance can create real opportunity, and this is where banks can have a very practical social impact.

Governance is the foundation. Without strong governance, environmental and social commitments remain good intentions. The “Governance” pillar gives us accountability, transparent decision-making, sound risk management, ethical conduct, regulatory compliance, and reliable sustainability reporting. The emphasis may change depending on the topic, but they have to work together.

Are there specific ESG trends or regulations that the bank is preparing for in the years ahead?

Yes. ESG is clearly becoming a more formal part of banking regulation and supervision.

Locally, the most important development is the CBK Advisory Letter on climate- and environment related risks. It expects banks to identify, measure, manage, monitor, and disclose climate related risks. It also expects self-assessments, action plans, stronger governance, internal expertise, better data and reporting, and the integration of climate risk into scenario analysis and stress testing. In other words, climate risk is becoming part of the supervisory dialogue, not just a strategic or reputational topic.

At European level, the EBA Guidelines on the management of ESG risks are also very relevant. They expect banks to embed ESG risk drivers into business strategy, risk appetite, internal governance, credit policies, risk classification, pricing, portfolio monitoring, capital planning, and transition planning. A key message is that banks need to look beyond short-term performance and assess ESG risks over short, medium, and long-term horizons, using forward-looking methods. For Kosovo, much will also depend on the development of the local regulatory and data environment.

This includes secondary legislation under the Law on Climate Change, energy-efficiency and renewable-energy rules, electricity market liberalization, Energy Performance Certificates, emissions reporting, physical-risk data, and eventually clearer local taxonomy or classification rules. Some of this will take time, but the direction is already visible: more data, clearer expectations, and more connection between ESG, risk management, and supervisory review

Looking ahead, what do you hope will be the most significant ESG achievement for our bank over the next few years?

For me, the real test will be to see how our ESG work has made a practical difference for our clients and we helped Kosovo on its transition path to a sustainable economy. I hope to see businesses become more resilient, accelerate the green transition, expand financial inclusion, and make sustainability part of the wider economy. For the bank, this would mean growing green and social financing, reducing financed emissions over time, improving ESG data quality, supporting clients in their transition, and integrating climate risk into everyday risk management.

I would like clients, regulators, employees, and society to see us as a bank that treats ESG not as communication, but as a serious part of responsible banking. If in a few years these topics feel less exceptional and more like a normal part of how we finance, advise, and manage risk, I would consider that a real achievement

This interview was originally published in July 2026 as part of the 6th edition of our newsletter, RaiMagazine.