SANTO DOMINGO – Green lending by multiple banks increased from RD$1.46 billion in 2017 to RD$14.24 billion in 2022, representing a cumulative increase of 876% over five years, reported the Dominican Republic's Association of Multiple Banks (ABA), noting that this trend is in line with a transformation process in the banking sector aimed at sustainability and responsibility in its business model.
The ABA noted that the green loan portfolio registered an average annual growth of 59.6%, higher than that of the total commercial loan portfolio, which was 9.2%. Consequently, the share of green loans in the total commercial loan portfolio increased from 0.3% in 2017 to 1.7% in 2022, it specified.
He also detailed that power generation plants are the main recipients of this type of financing, representing 39% of green credit; in second place are solar panels and their current conversion equipment, with 34%; followed by wind turbines, which registered 26% of the loans in this category.
He added that other equipment, for example, heat absorbers for refrigeration, electrical or thermal energy storage devices and organic cycle power generation machinery, among others, receive 1% of these credits.
Multiple banking's commitment to sustainability and the environment
The Banking Association stated that the considerable increase in financing coincides with the transformation towards green and sustainable banking, a process that had its starting point in 2017, when the ABA formalized its entry into the Sustainable Banking and Finance Network (RBFS).
In that regard, he specified that this organization operates with the support of the World Bank and its International Finance Corporation (IFC), whose objective is to promote the adoption of international best practices in sustainability by banks and other financial entities.
The ABA indicated that Dominican banks, with the support of the IFC, have been working on an agenda whose main focus is the design and implementation of a green protocol that will allow them to adopt best practices in: environmental, social and corporate governance (ESG); development of “green” instruments for financing sustainable projects; environmental risk management in loans and investments; and environmentally sustainable purchasing and contracting policies.
He pointed out that the Association has also initiated projects with other international organizations, such as the Global Green Growth Institute (GGGI), with which it is developing a pilot program of technical assistance for the issuance of thematic bonds. Along the same lines, he indicated that it is working with the United States Agency for International Development (USAID) on the green transition of the banking model, seeking to promote a more sustainable economy.
The ABA argued that the banking sector is increasingly committed to implementing sustainable and responsible practices in its business model, which is generating significant benefits for quality of life and the environment, as well as for the economy and new businesses.
“There is a growing awareness that sustainable finance and corporate social and environmental governance management can improve risk-adjusted returns, enhance reputation, mitigate portfolio risks, and improve market positions and value,” stated the entity that brings together multiple banks operating in the country.
The ABA noted that, therefore, the banking sector's support for these types of initiatives is crucial to fostering sustainable development and ensuring a more prosperous and equitable future for present and future generations.
