Republic Financial Holdings - The Power to Change the World

In just a few decades, sustainable development evolved from a mere concept to what has now become the biggest global influencer, permeating all aspects of Governance, Finance, Business and Society. The financial services sector is not only at the epicenter of the change but is positioned to be the biggest enabler, because for change to occur and be sustained, it must be financed.”

These were the words of Nigel Baptiste, Group President and Chief Executive Officer, Republic Financial Holdings Limited (RFHL) in his opening remarks at the Caribbean ESG and Climate Financing Summit (November 2022.)

Environmental, Social and Governance (ESG) integration and mainstreaming as an overarching global finance strategy has emerged as the most effective tool in business sustainability to date. Through the data-driven and sciencebased foundations of ESG, organizations can optimally achieve key business priorities such as risk management, opportunity maximization, reputational value and the creation of a strong moral compass.

ESG as a value creator is now entrenched in the entire global financial system. The European Union is leading the way in this with the following ESG specific legislation/regulation:

1 Climate Benchmarks Regulation (EU 2019/2089 – to enhance the transparency and comparability of benchmark methodologies relating to ESG metrics aimed at providing investors with clarity on the sustainability focused aspects of their investments.

2 Sustainable Finance Disclosure Regulation (EU 2019/2088) – to reorient capital flows towards sustainable investments by increasing transparency by financial market participants and advisers on sustainability risks, whilst ensuring a more uniform protection of end investors.

3 Taxonomy Regulation (EU 2020/852) –to establish a harmonized taxonomy to classify financial products as sustainable at EU Level, further promoting investments in sustainable activities while addressing “greenwashing” concerns.

4 Others on the way: Corporate Sustainability Reporting Directive (CSRD), EU Green Bonds Regulation (EUGBR), Corporate Sustainability Due Diligence Directive (CSDDD).

Perhaps the most critical for Caribbean exporters is the EU Carbon Tax, which will be phased over the next four years and will require importers to report emissions embedded in imported goods and those emissions would be taxed by 2026. Additionally, countries around the world are following suit, with the USA and Canada expected to put forward tougher ESG legislation in 2023 and most stock exchanges already asking for varying degrees of ESG disclosure for listed and newly listed companies.

The way human activity is affecting the planet is real. More responsible accounting for resources and impacts is therefore, necessary. The recent devastating flooding in Trinidad and Tobago left many communities isolated with many losses. Tisha Marajh, recently hired Group Sustainability Officer at Republic Bank, said “Trinidad and Tobago saw these losses during an abnormally intense wet season, however, the disasters which follow will be unfortunately common, unless there is access to capital to build climate resilience in the country. Banks have a unique role to play in not only providing capital but also as influencers and lobbyists for change.”

RFHL understands that every company and industry will be impacted and stands to be transformed by ESG and the race to Net Zero. The Group has set its sights on leading in the sustainability space to serve the 14

unique countries within its sphere of influence. ESG and sustainability are fundamental to financial security for our bank, region, and planet. Although these countries are not significant contributors to greenhouse gas emissions, they are among the most susceptible to climate change, and therefore financing for climate adaptation strategies is of utmost importance.

Principles for Responsible Banking

At the same time, the company is cognizant, flexible and progressive regarding Diversity, Equity and Inclusion among staff and stakeholders and continues to strive to attain the highest standards of governance, accountability and transparency at Board and Executive Levels.

In 2020, RFHL became the region’s first and only (to date) indigenous bank to sign the United Nations Environment Programme Finance Initiative’s Principles for Responsible Banking along with 300 other global banks, comprising more than half of the global banking system. The Principles for Responsible Banking (PRB) are a framework for ensuring that signatory banks' strategy and practice align with the vision society has set out for its future as expressed in the Sustainable Development Goals (SDGs) and the Paris Climate Agreement. To this end, UNEPFI approved RFHL’s first compulsory selfassessment - which can be found on our website.

Defining the PRBs

Only a few months later, another bold step led to RFHL becoming one of the founding signatories to UNEPFI’s NetZero Banking Alliance (NZBA). The NZBA brings together a global group of banks - currently representing about 40% of global banking assets - committed to aligning lending and investment portfolios with netzero emissions by 2050. Combining near-term action with accountability, this ambitious commitment sees signatory banks setting intermediate targets for 2030 or sooner using robust, science-based guidelines.

RFHL has set its very first NZBA science-based target for the Commercial Real Estate Sector. The intention is to work with clients to achieve a reduction of 26.4% of the current estimated emissions by 2030. Targets are being set for other critical sectors.

Sustainable Development Goals

To become and remain world leaders on the sustainability stage, sustainable financing options must be created internally. Ambitious financing targets support and encourage projects aimed at Sustainable Development Goal alignment. RFHL has allocated USD 200 million to the Climate Financing Target focused on SDG 13 – Climate Action. USD 100 million have also been committed towards strengthening the region’s food security and sustainable agriculture prospects. This targets SDG 2 – Zero Hunger.

RFHL recently formalized a unit to focus on capacity building among current and future Small and Medium Enterprises. The Group has set a financing target of TTD $100 million for SMEs in alignment with SDG 9 – Industry, Innovation and Infrastructure. Operations in the different countries within the Republic Group have selected specific SDGs to prioritize. However, in order to mainstream sustainability, not only within the Group, but as a region, through stakeholder coordination and collaboration, RFHL has adopted SDG 17 – Partnerships for the Goals as the Group’s overarching target.

Each territory within the Group is working on specific contributions. Republic Bank Grenada is seeking Green Climate Fund accreditation. Republic Bank East Caribbean (specifically St. Lucia) is actively forming partnerships with regional and international development organizations. Barbados is actively lending in renewables to meet our Climate Financing Goal and Ghana is working towards integrating national ESG regulations into the Bank’s operations.

On the corporate social responsibility side, the Power to Make a Difference Programme is aligning a significant proportion of social investment initiatives to the Sustainable Development Goals. For example, Republic Bank in Trinidad and Tobago entered a new partnership with Blue Waters Products Limited, Coca-Cola Caribbean Bottlers (Trinidad and Tobago), and Container Recycling Services Limited to increase plastic recycling rates nationally.

Internally, Republic Wealth Management is developing a methodology using International Best Practice for assessment of ESG compliance. A Sustainability Unit tasked with mainstreaming ESG is a strategic imperative working throughout the entire Group to achieve everything mentioned above. The intent is to begin public ESG disclosures in 2024 in accordance with the International Sustainability Standards Board which was a mandate of COP 26 and further refined at the recently held COP 27.

Going Forward

Next steps should include financing additional projects which focus on Renewables, Energy Efficiency, Water Infrastructure, Food Security, Climate Resiliency, Socioeconomic advancement, Regenerative Businesses and others which speak to the commitment of Responsible Bankers. RFHL intends to work with Sovereign Governments, utility providers, other financial institutions, business sector clients and SMEs to contribute to the financial stability and sustainable development of the Caribbean region. Possibilities in the Blue, Green and Outcome based bond markets will be explored. We expect to be a part of the Green Climate Fund financing; as well as open to opportunities for Blended Financing and in support of Carbon Markets.

It is an exciting time for the world. While there seems to be so much chaos and uncertainty, there is also tremendous opportunity. A Bloomberg analysis shows that ESG assets are on track to reach $53 trillion by 2025. They jumped to $30.6 trillion in 2018 from $22.8 trillion in 2016.

The challenge is creating the enabling environment for the Caribbean region to be part of those opportunities. According to Nigel Baptiste, “The vision I have is for Republic to become a leader, strategist and facilitator in the sustainable journey of our member countries and the region as a whole.”