Emerging Markets


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Somak Ghosh,President - Corporate Finance - Yes Bank Ltd. - India

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Emerging Markets

  1. 1. Fostering Metanoia through Responsible Banking 3 rd November 2005
  2. 2. What is Responsible Banking? <ul><li>Adopting a social and economic value generation model and supporting businesses that do so </li></ul><ul><li>Responsibility to the Bank’s various stakeholders </li></ul><ul><li>Including “social risks” in the Bank’s risk and client rating model </li></ul><ul><li>Recognising the importance of change and managing change through Metanoia </li></ul><ul><li>Operating in a “Sustainability Zone” to develop bankable projects and provide innovative financial services </li></ul>
  3. 3. Sustainability Zone <ul><li>Sustainability Zone </li></ul>Pure profit Economic principles “ Sustainability Zone” i.e. combined economic, environmental, social benefit Social investments Pure philanthropy
  4. 4. The need for Responsible Banking <ul><li>Long term sustainability of banks depends on identifying sustainable businesses – or “future winners” </li></ul><ul><li>Tomorrow’s winners will be those businesses that recognise new market realities and incorporate a sustainable development approach to their business practices </li></ul><ul><li>New market realities include </li></ul><ul><ul><li>Profits being “sustainable” in every sense </li></ul></ul><ul><ul><li>Markets demanding greater accountability, transparency and CSR </li></ul></ul><ul><ul><li>Increasing influence of international financial institutions (e.g. IFC) and markets to adopt sustainable best practice (e.g. Equator Principles) </li></ul></ul><ul><ul><li>Genuine partnerships with stakeholders </li></ul></ul><ul><ul><li>Contribution to local, regional and national development </li></ul></ul>
  5. 5. Examples of “Profitable Sustainability” <ul><li>Building sustainability into business has been the key to growth and profitability </li></ul><ul><ul><li>BP – promoting “sustainable oil use” through measures such as increasing energy efficiency to reduce greenhouse gases </li></ul></ul><ul><ul><li>Interface (world’s largest carpet maker) – concerted approach to “sustainable design” - recycles floor coverings, waste reduction has saved co. $231mn since 1995, energy use in fabric production down by 31%, water use per sq. meter of carpet fallen by 78% since 1996 </li></ul></ul><ul><ul><li>Starbucks – ensuring coffee comes from environmentally friendly farms and paying farm workers a fair wage </li></ul></ul>
  6. 6. Examples of “ Commercial UnSustainability” <ul><li>Ignoring sustainable issues leads to long term value erosion </li></ul><ul><ul><li>Asbestos poisoning has pushed Dow Corning (and 11 other smaller companies) into bankruptcy </li></ul></ul><ul><ul><li>There are pending litigations of over USD 200 bn related to this </li></ul></ul><ul><ul><li>Environmental claims have affected Alstom </li></ul></ul><ul><ul><li>Tobacco litigation – may seem a distant spectre – but is a time bomb in the making </li></ul></ul>
  7. 7. New Generation Sustainability <ul><li>New Generation Sustainability A new approach to manage challenges and capture business opportunities </li></ul><ul><li>New Generation Sustainability embraces global, long-term environmental, social, economic, and geopolitical issues and how they interact with business, government, society and finance in terms of sustainable development </li></ul><ul><li>Examples of issues/challenges are: climate change, increasing transparency, access to drugs, food safety, cultural heritage, poverty, energy security, corporate governance </li></ul><ul><li>It is about understanding the impacts, managing them as part of normal business operations and capturing the business opportunities from developing long-term sustainable solutions. </li></ul><ul><li>The objective is to generate solutions and services that allow to increase competitive advantage and shareholder value . </li></ul><ul><li>New Generation Sustainability is fully integrated in all strategic and management processes , impacts services and goes far beyond risk-management or PR </li></ul><ul><li>In investing, NGS is financially material information defining an “ information advantage ” beyond common information used in the information process </li></ul>
  8. 8. Building net surpluses <ul><li>Sustainable business model needs to generate net surplus in sustainable markets. </li></ul><ul><li>  </li></ul><ul><li>Technology & Innovations </li></ul><ul><li>Use financial services as a win-win proposition </li></ul><ul><li>CSR initiatives of big corporate   </li></ul><ul><li>Clean Development Mechanism </li></ul>
  9. 9. The LIVELIHOOD TRIAD Institutional Development Services Business Development Services Livelihood Financial Services <ul><li>LFS- Savings, Credit, Insurance, Fund Transfers, Commodity derivatives </li></ul><ul><li>BDS – Productivity Enhancement, risk mitigation (non isnurance), local value addition eg cultural heritage based, alternate market linkages </li></ul><ul><li>IDS –SHGs, Co-operatives, MIS, IT, Capacity building, Entrepreneurship development,policy analysis and sector work </li></ul>
  10. 10. Thank you