Sustainable Finance: Combining Business with a Good Cause

Markus Ecker, Head of Sustainable Finance at RBI, explains why everyone is “completely crazy” about sustainable finance and why RBI is ahead of the game on this topic.

Markus, you said during the preliminary discussion of this interview that everyone is “completely crazy” about sustainable finance at the moment. Why is that?

Because it combines the business aspects with a good cause. Basically, it is very attractive for each of us in the bank, but also for all our customers and investors, if you can achieve a positive effect for the environment or society through the business. Part of the definition of Sustainable Finance is to set up financing for a sustainable purpose. The construction of a wind farm, for example, or a particularly energy[1]efficient building. Another part of our product range is products that influence a customer’s sustainability behavior, for example by linking the size of the margin to the customer achieving a certain sustainability target.

In other words, the bank is quasi educational and presents solutions on how the customer can become better in the area of sustainability?

Yes, exactly, that is an essential part of our consulting, to first explain to the customer what best practice is, where he may have deficits in comparison and what he can or must do to be compliant with market expectations. The banks do this for several motives. First, because it’s good for business. Not only in the sense of closing deals, but also regarding the long-term customer relationship. We believe that a customer who is concerned with the environment and with social aspects, with sustainability, is also economically sustainable and therefore a better risk for the bank. The second aspect is the role that politics has given us at the European level. The European Commission has invested a lot of energy in defining what a sustainable transaction is. This is the so-called EU taxonomy. And at the same time, metrics have been defined in relation to the proportion of sustainable assets in a bank’s portfolio. So we’re not doing this purely for our own benefit, we’re helping to achieve Europe wide targets and meeting the regulator’s requirements.

In other words, a win-win-win situation in which all banks (have to) participate. What particular advantage in terms of advice and products can RBI offer its customers?

That’s right, they all do it. Our advantage is that we are able to advise the customer better than others, especially in Eastern Europe or the non[1]EU countries. We have a unique selling point here because we know the local
environment and market conditions better than others. And probably also because we raise the issue proactively. We met with a client in Romania, a recycling company, whose CEO has been on every panel discussion in the country on sustainability because he is personally interested in the topic. And we were the first bank to seriously talk with him about sustainability. There’s no question that this did our position good....

Are our customers generally more saddle set on the topic of sustainability or still at the beginning of their journey?

Both, although the focus is increasingly on customers who want to go into detail. That is also fundamentally our strength; we have to impart basic knowledge only to very few customers. Two or three years ago, this was still an issue sometimes, but today the discussions with our experts are already very much focused on the specific and defined needs of the respective company.

And what makes a loan “sustainable”?

If the loan is used for climate-friendly or social projects, or if the bank links the size of the loan margin to the customer’s sustainability behavior, for example, or to an improvement in its sustainability rating. In other words, the margin is reduced if the predefined key performance indicators (KPI) are exceeded. The challenge with this product is that you always have to define the KPI fitting the customer’s specifics. That’s part of our advisory, and there may be disagreements, but we can usually work them out. We try to agree on realistic KPI with verifiable starting and end points. At the end of the day, what matters to the customer is not a few basis points plus or minus – that doesn’t really make the difference – but that he moves in the desired direction.

You mentioned our expertise in the CEE region at the beginning. What are you doing to maintain or expand this expertise and our position in the region?

As part of the ESG Competence Center, we established a network of ESG Ambassadors in the network banks very early on. Today, there are people working in every country who are passionate about the topic and promote it both internally and externally. And we train more than 1,000 colleagues across the group every year. Ultimately, we are also increasing our expertise by stipulating that all network banks should issue their own Green Bonds wherever possible. The fact that the issue of Green Bonds has such a strong presence in the CEE region is certainly due to our network banks. As a group, we are the largest Green Bond issuer in the region. And one must not forget that a green investment in CEE has far greater leverage than in Western Europe
because, for example, the energy mix is much poorer.

Aside from the business potential and the positive impact on the environment, what drives you, what is the beauty of Sustainable Finance?

I particularly like the impact on people, my colleagues. They don’t just earn money for the bank, which is their actual job, but they are in the nice position of knowing that what they do, the products they structure, the knowledge they pass on is making a positive contribution that is sustainable in the long term and in the truest sense of the word. It gives meaning to what they do professionally, and people who work in this field really appreciate that. That applies to me, too, of course.