Mario Maciel Castro
Director General
CIBanco
/
Insight

Green Banking as a Strong Financial Strategy

Wed, 02/19/2014 - 12:25

“Sustainability is not at odds with profit,” says Mario Maciel Castro, Director General of CIBanco. As the cost of energy and other natural resources rise, companies that use these resources more effectively will gain a significant edge. Maciel Castro sees three main approaches toward gaining that edge. The first is adopting a long-term perspective that initially involves investing in more expensive methods of sustainable operation, which will eventually translate in lower costs. The second is a more gradual process that starts with small changes to internal processes that can generate substantial savings, which can then in turn be reinvested into more efficient technologies. The third approach is to spread sustainable practices among customers. CIBanco, Mexico’s first self-proclaimed green bank, chose the latter approach. “This does not mean that we only service green customers because it is not feasible for a bank to do that. What we do is provide added value to our green customers; we offer better conditions if they adopt our green products,” adds Maciel Castro.

CIBanco was born 30 years ago as a currency exchange bureau. In 1999 it was bought by its current shareholders, who decided to make it the pillar upon which a new bank would be created. In 2008, the financial authorities approved the creation of new banking products. The first deposit products were released in October 2008 and the first loan was provided a year later. “In 2012, CIBanco became the first green bank of Mexico by adopting sustainability as a business guideline, embracing the Equator Principles, and joining the UNEP- Finance Initiative, the global partnership between the United Nations Environment Programme and the financial sector,” said Maciel Castro. This allowed the fledgling bank to nevertheless contribute to the implementation of internationally agreed sustainable development goals and commitments. ”We are betting on future generations who will seek for the green option in banking,” emphasizes Maciel Castro.

Making sustainability practices trickle down to clients is no easy task with the main challenge being to educating the client. Maciel Castro observes that many customers still do through the internet. “Many people still prefer to receive their account statement in hard copy because they are not convinced they can see it online. It is a matter of a cultural switch and education,” he notes. However, it has been easier to sell the CI Green Auto Loan – a loan for cars that emit up to 180g of CO2/km with a preferential rate – as clients immediately notice they are getting better conditions on their loan interest rate. Maciel Castro explains that when buying a regular car, the client will receive a 12.9% interest rate, but when buying a green car, CIBanco provides them with a 9.9% interest rate, translating to savings of around 26%. “People that buy a green car are making a rational purchase rather than an aspirational one; they do not buy a car as a matter of status but because it is cheaper, environmentally friendly, and has lower fuel consumption. A person who thinks in those terms is more focused on sustainability and is more responsible,” he adds.

Given the complexity of sustainability and the cross-sectorial approach it requires within the bank, CIBanco designated José Gómez Santamaría as its Chief Sustainability Officer to implement the bank’s sustainability agenda. Gómez Santamaría acknowledges that sustainability doubles up as a great marketing strategy because it sets CIBanco apart from other banks. He explains the three generations of Mexican banks. First generation banks are those that were nationalized in 1982 and reprivatized 10 years after. Second generation banks are those that were approved in the mid-1990s, while third generation banks are the ones that have been authorized during the last two presidential administrations, such as CIBanco. “The main challenge we face is linked to being a third generation bank. We are competing with institutions that have been in the market for more than 100 years and that are worldwide brands,” says Maciel Castro.

However, convincing the market that the green bank concept was viable but that customers should sign up for such programs was not as difficult as once thought. CIBanco had the advantage of having previously operated as Consultoría Internacional Casa de Cambio, which provided it with an existing concentrated customer base. “We did not start from nothing,” stresses Maciel Castro. “We created the bank on top of a previous business, which was easier for us as we did not have to suffer through the learning curve. It was more a matter of selling our employees internally and convincing them to act like bankers.”

CI Banco’s green strategy has two major components. The first one is corporate sustainability and the reduction and efficiency of the bank’s use of natural resources. In the past year the bank has managed to reduce its own carbon footprint by 34%, which has led to operative cost reductions. “We started with the PV system installation in some of our corporate buildings and signed an agreement to purchase 60% of our branches’ energy consumption from a solar park. This will mean that we will be saving around 35% on our electricity bill each year,” underlines Maciel Castro. The second component of the green strategy is increasing the proportion of profits generated from green business. “The CI Green Auto Loan has grown 250% in this past year,” he adds. While the bank is also exploring opportunities in new sectors such as eco-friendly transportation (GNV) and more efficient industrial machines, it will mostly be focused on renewable energy projects in the coming years. “The Energy Reform encourages the use of renewable energy by eliminating regulatory hurdles for new projects and by building more transmission lines. In addition, the financial sector will provide access to preferential green credits, although we are still waiting for the secondary laws to come through to finalize this,” Maciel Castro adds.