Stoyan Tsvetkov: ESG is increasingly influencing bank financing
Stoyan Tsvetkov, executive director and member of the Board of Directors of Investbank, took part in the ESG - Investing in our Future forum, organized by Darik Business Review.
In the future, the cost of bank financing will increasingly depend on the factors of sustainable development. This was stated by Stoyan Tsvetkov, executive director and member of the Board of Directors of Investbank, who took part in the ESG - Investing in our Future forum, organized by Darik Business Review.
How does the topic of sustainable development affect the banking industry?
"ESG policies and regulations apply to all businesses that fall within their scope. However, banks, unlike others, have a leading role in communicating them along the supply chain through financing instruments.In this way, through them, the regulations reach more businesses, even if they are not covered by the directive, which has not yet been transposed into our legislation," explained Tsvetkov. He believes that banks will be forced to factor non-financial environmental, social and governance factors into their risk models.
"It may turn out that in the next few years this will also affect the cost of financing. Especially for organizations that are not committed to sustainability measures, do not measure their carbon footprint, do not monitor their social impact and do not apply principles of transparent management", also commented the executive director of Investbank.
According to him, this transformation is already happening, but there are also serious challenges surrounding it. One of the biggest is the lack of data - both within the banks themselves regarding their customers and from the customers themselves.
Companies using bank financing are now required to provide additional information. At the moment, however, credit institutions are still not prepared with a comprehensive base of indicators, indicators and information to assess whether a given financial product for a certain client will be sustainable or not, explained Stoyan Tsvetkov.
"Over time, however, this data will accumulate and begin to be applied by everyone," he commented.
Is digitization part of sustainable development efforts?
According to Stoyan Tsvetkov, the steps that every ESG strategy goes through include training the teams, creating specific policies and measures, as well as communicating with stakeholders (customers, employees, partners, etc.).
"Part of this topic is also the digitization of the banking sector. My personal opinion is that digital services are part of the new business at a global level. In order to be competitive, you must offer facilities for your customers. But when these facilities also contribute to achieving of the goals for sustainable development, digitization also becomes part of ESG," commented Tsvetkov. He added that in this way resources can also be saved, which directly affects the carbon footprint of companies. Many consumers already take advantage of the convenience of paying with their phones, and in the future it is very likely that physical bank cards will completely disappear.
Are the banks ready for the new regulations and for joining the Eurozone? "I am convinced that the banks will cope with the challenges of joining the Eurozone. My concern is more about the state institutions and whether they will be able to do what is necessary. Unfortunately, they did not make enough efforts, including on ESG-related topics. The necessary communication that should have started more than a year ago to make companies more prepared for what lies ahead never happened," the Investbank CEO said.
According to him, there is a danger that the Bulgarian companies that did not start working in this direction on time will drop out of the supply chains.
"More and more global businesses require their suppliers to be engaged and prepare detailed ESG reports, and a large part of managers in our country still do not even know about this," said Stoyan Tsvetkov. He also said that the state still has a lot of work to do because the directive has not yet been transposed, the ESG standards have not been specified, and it is not clear who will audit the companies' reports.