The future of banking: Premier Bank's path to sustainability

In today's rapidly evolving financial landscape, sustainability has emerged as a crucial focus for progressive institutions. By embedding sustainability into its core operations, Premier Bank not only aims to deliver responsible financial services but also to enhance productivity, streamline team coordination and expand its range of offerings.

In a recent conversation with TBS, Mohammad Abu Jafar, the managing director and CEO of Premier Bank, shares insights into how the bank is paving the way for a greener future. Through targeted workforce training and strategic partnerships, Premier Bank is setting new standards in sustainable financing. 

Can you share your bank's overall vision and commitment to sustainability?

Our bank is committed to sustainability, driving us to provide financial services that are both responsible and forward-looking. To achieve this, we focus on effective cost management, improving productivity through seamless coordination between our business and support teams, and expanding our banking services to ensure consistent performance.

In preparing our workforce for the future, we have placed special emphasis on building skills in key areas such as credit, foreign exchange, business development, customer relationship management, product marketing, investment monitoring, risk management, and technology-based banking. We have also focused on branch management, compliance with legal and policy requirements, and preventive vigilance.

To support this, we have established a training centre that offers virtual programs, allowing our employees to access training from anywhere, which is particularly important for maintaining social distance during these challenging times. Additionally, we regularly invite our staff to seminars, workshops, and training sessions organized by the Bangladesh Institute of Bank Management (BIBM) and other reputable institutions.

What motivated your institution to focus on green or sustainable financing?

Our motivation to focus on green or sustainable financing stems from our desire to make our planet more livable by fostering a congenial environment.

What specific green financial products or services does your bank offer (e.g., green bonds, sustainable loans)?

Our bank offers a range of green financial products and services, including the Green Transformation Fund (GTF), the Sreeup Fund, a Refinance Scheme for Green Products, Initiatives, and Projects, as well as a Technology Development and Upgradation Fund.

How do you ensure these products align with global sustainability standards?

Today's weather patterns are increasingly erratic, with heavy rainfall, high temperatures, and frequent flooding driven by rising greenhouse gas emissions. These emissions are largely due to investments in non-green, traditional businesses. To help reduce greenhouse gases and lower global temperatures, institutions around the world are turning to green financing, guided by ESG (Environmental, Social, and Governance) principles. Our bank ensures that all its investments are aligned with global sustainability standards.

What criteria does your bank use to evaluate the sustainability of projects or companies before offering financing?

Before offering financing, our bank evaluates the sustainability of projects or companies by considering several key criteria. We examine future business forecasts to ensure the project's long-term viability, assess environmental and social risks to avoid projects with significant negative impacts, and review projected cash flow statements to confirm that the project can meet its repayment obligations.

How do you balance risk and return with sustainability considerations when making lending or investment decisions?

Customers with a strong business track record are charged lower interest rates and commissions because they present lower risk. Conversely, customers with riskier businesses face higher interest rates and commissions. Therefore, our investment decisions are based on risk assessment, as risk and return are closely correlated.

Does your bank partner with any organizations, governments, or NGOs to enhance your sustainable financing efforts?

Yes, we provide financing through 33 NGOs to enhance our sustainable financing efforts.

Can you provide examples of successful collaborations that have advanced your green financing agenda?

Yes, Bangladesh Bank offers several refinance schemes that allow commercial banks to lend against investments in green products and projects at an annual interest rate of 5%, which is borne by the customer. Through these schemes, we at The Premier Bank PLC have invested approximately Tk100 crore.

How does your bank measure the environmental and social impact of its sustainable financing activities? Can you share any specific metrics or success stories that demonstrate the positive impact of your sustainable financing initiatives?

Our bank actively measures the environmental and social impact of its sustainable financing activities using standard sustainability accounting metrics. While these metrics can vary across industries, the most common ones, based on SASB standards and tools, include Greenhouse Gas (GHG) emissions, energy use, resource consumption, social impact, supply chain efficiency, financial performance, biodiversity preservation, and social responsibility. A certified energy audit report has shown that Green/LEED-certified industries save 42% more energy and see a 25% increase in productivity compared to traditional garment industries using non-energy-efficient machinery. To date, we have financed 23 LEED-certified customers.

What challenges has your bank faced in adopting green financing, and how have you addressed them?

One challenge we face is that many customers lack clear knowledge about green finance, which affects their interest in availing green financing from the bank. To address this, we are working to increase green finance literacy among our customers and are considering providing incentives for investing in green finance projects.