Case study: How Banco de Machala works with its clients and customers to encourage sustainable practices
Banco de Machala S.A. is a versatile banking institution located in El Oro province, Ecuador, yet it operates with a nationwide strategy and reach, allowing for the enhancement of its value proposition. The bank prioritizes delivering high-quality products and services, supported by efficient processes and state-of-the-art technology, all facilitated by a cohesive, empowered team that operates with a sense of urgency. Banco de Machala is a signatory of the Principles for Responsible Banking (PRB) and is, accordingly, working with its clients and customers to encourage sustainable practices and enable sustainable economic activities. Tweet This!
This case study is based on the 2022 Sustainability Report by Banco de Machala, prepared in relation to its implementation of the PRB, that can be found at this link. Through all case studies we aim to demonstrate what ESG/ sustainability reporting done responsibly means. Essentially, it means: a) identifying a company’s most important impacts on the environment, economy and society, and b) measuring, managing and changing.
Which Principles for Responsible Banking have been addressed?
The Principles for Responsible Banking addressed in this case are:
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- Principle 3: Clients and Customers
- Principle 4: Stakeholders
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- How Banco de Machala proceeded with stakeholder identification and consultation, and
- How Banco de Machala worked with its clients and customers to encourage sustainable practices and enable sustainable economic activities
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Stakeholder identification and consultation
Please describe which stakeholders (or groups/ types of stakeholders) you have identified, consulted, engaged, collaborated or partnered with for the purpose of implementing the Principles and improving your bank’s impacts. This should include a high-level overview of how your bank has identified relevant stakeholders, what issues were addressed/results achieved and how they fed into the action planning process.
The growth of Banco de Machala and the achievement of its goals over the years can be attributed to the trust its stakeholders have in Banco de Machala’s operations, products, and services. Banco de Machala consistently maintains open communication and emphasizes transparency in all its daily activities and outcomes. The bank defines its stakeholders as those who are significantly impacted by its operations or play a key role in helping Banco de Machala meet its business objectives.
Banco de Machala’s aim with each of these stakeholders is to build lasting relationships that provide mutual benefits. Banco de Machala interacts with them while upholding its values, principles, and the Machala Code of Ethics.
Stakeholder involvement was essential in defining Banco de Machala’s materiality analysis. Banco de Machala conducted interviews, surveys, and open discussions to gather their insights.
How did Banco de Machala work with its clients and customers to encourage sustainable practices and enable sustainable economic activities?
In its 2022 Sustainability Report Banco de Machala reports that it works with its clients and customers to encourage sustainable practices and enable sustainable economic activities as follows:
One of Banco de Machala’s key strengths lies in the way the bank supports its customers, allowing Banco de Machala to effectively address their needs. Banco de Machala has established a Code of Ethics and Conduct, a social and environmental assessment program for commercial loans (SARAS), and a targeted risk policy.
Banco de Machala implements strong processes for identifying, measuring, monitoring, controlling, and reporting on risk management across significant banking activities. This approach enables the bank to capitalize on new business opportunities, mitigate potential losses from risks, and safeguard the bank’s assets and solvency.
The assessment of environmental and social risk levels in economic activities is informed by the “World Bank Guide to Determine Environmental and Social Risk Classification,” utilizing the World Bank’s Environmental and Social Framework (2017) as a reference point.
Banco de Machala carries out its assessments and management of environmental and social risks and impacts based on the specific Environmental and Social Standards established by the World Bank. These standards are intended to prevent, minimize, reduce, or mitigate adverse impacts and risks.
Banco de Machala’s environmental and social risk policy is formulated in accordance with these international frameworks, outlining the procedures to follow and identifying a list of activities deemed ineligible for financing due to their negative implications.
Banco de Machala’s evaluation methodology consists of five steps, detailed as follows:
a) Identification: Potential social and environmental impacts are identified through a review of credit specifics.
b) Classification: Banco de Machala determines risk levels, priorities, and appropriate responses to identified risks.
c) Assessment: Projects and/or companies are evaluated for compliance with legal frameworks and environmental and social (A&S) guidelines in the financial sector.
d) Monitoring: Banco de Machala ensures ongoing tracking of environmental and social commitments.
e) Continuous Improvement: Banco de Machala regularly reviews policies, procedures, and protective measures.
Some of the objectives of Banco de Machala’s Environmental Management System include:
✔ Encouraging sound environmental and social management practices, along with adherence to national regulations, in the sub-loans financed by the IFPs using project resources.
✔ Promoting effective environmental and human resource management practices within the institution.
UN Principles for Responsible Banking: Accelerating a positive global transition for people and the planet
With over 300 signatory banks representing almost half of the global banking industry, the Principles for Responsible Banking are the world’s foremost sustainable banking framework. Through these Principles, the banking community takes action to align core strategies, decision-making, lending and investment with the UN Sustainable Development Goals and international agreements such as the Paris Climate Agreement.
FBRH Principles for Responsible Banking (PRB) Assurance:
First class PRB assurance services: The result of solid, hands-on ESG/ Sustainability experience
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- FBRH is a GRI Certified Training Partner (Global), ISEP Training Centre and a member of CPD.
- FBRH builds trust. Over 200 reviews from top professionals from around the world demonstrate our ability to build strong, trusting business relationships.
- FBRH possesses a unique skill set that combines ESG/sustainability certified training, experience in advisory services and report preparation, and ESG/sustainability report assurance.
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The combination of all the above empowers FBRH to provide first class Principles for Responsible Banking (PRB) assurance services.
References:
This case study is based on published information by Banco de Machala, located at the link below. For the sake of readability, we did not use brackets or ellipses. However, we made sure that the extra or missing words did not change the report’s meaning. If you would like to quote these written sources from the original please revert to the following link:
https://www.bancomachala.com/media/56072/sustainability-report-2022.pdf
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