IPDC’s vision for sustainability is transforming financial practices

With a vision and unwavering commitment to sustainability, IPDC is not only redefining its role as a non-bank financial institution (NBFI) but is also making significant strides in embedding sustainability into its core operations. 

In this interview with The Business Standard, the managing director of IPDC, Rizwan Dawood Shams sheds light on how IPDC is pioneering green financing, navigating the balance between risk and return, and leveraging partnerships to amplify its impact, positioning itself at the forefront of sustainable finance in Bangladesh. 

He also talks about how the organisation's focus on empowering youth, women, and underserved communities integrates seamlessly with its environmental, social, and governance (ESG) principles. 

Can you share your NBFI's overall vision and commitment to sustainability? 

Our vision specifically centres around empowering youth, women, and underserved communities, and sustainability is naturally an integral part of this focus for the future. We are deeply committed to strengthening our environmental, social, and governance (ESG) principles, which are at the heart of our business strategy.

For us, sustainability isn't just a secondary concern but it's a core part of how we operate. We aim to integrate sustainable practices across all areas of our business, ensuring that we not only support economic growth but also address key environmental challenges. This includes bolstering the sustainability of our operations, expanding our sustainable finance portfolio, enriching our in-house green practices, and promoting women's empowerment. Additionally, IPDC has distinguished itself through its CSR activities– dedicating itself to a wide array of important causes. 

Our achievement amongst the top positions in the 'Sustainability Rating 2023' by Bangladesh Bank highlights our ongoing commitment to weaving sustainable practices into every aspect of our activities.

What motivated your institution to focus on green or sustainable financing? 

Focus on sustainable financing has been an integral part of IPDC. We've always believed that for long-term economic growth to be meaningful, it must be accompanied by environmental responsibility and strong governance.

From the inception of its journey, IPDC has participated in promoting the sustainable development of the nation, such as by financing the first international standard private hospital, and the first institutional investment in private sector education – just to name a few. By financing sustainable projects involving renewable energy, energy-efficient technologies, waste management, sustainable agriculture, sustainable MSMEs and more, we aim to support both economic development and environmental responsibility. Sustainable finance is quintessential for the future, which aligns with our broader vision. 

What specific green financial products or services does IPDC offer? 

We offer a wide range of green financial products designed to support environmental sustainability in various sectors. Whether it's financing renewable energy projects, improving energy efficiency, enhancing factory safety, or encouraging eco-friendly business practices, we're committed to making a positive impact. Through our 'Joyee' product, we also support women entrepreneurs by offering loans at competitive, below-market rates.

We're actively financing energy-efficient technologies, green transportation, green building, affordable housing, and green construction projects. Going forward, by leveraging digital innovations, we aim to further offer sustainable solutions to underserved markets. In addition to our financial products, we also offer training sessions on sustainability to raise awareness among our clients and employees. With a robust green portfolio, we encourage green practices while supporting the financial health of our clients.

How do you ensure these products align with global sustainability standards? 

We ensure alignment by following global sustainability standards, including the UN's Sustainable Development Goals (SDGs). We also adhere to the Sustainable Finance products as set out in the Sustainable Finance Policy of Bangladesh Bank, which takes into account various national and international standards. 

What criteria does your organisation use to evaluate the sustainability of projects or companies before offering financing? 

IPDC employs a comprehensive evaluation framework. Before financing any project, we evaluate its sustainability from multiple angles such as the company's governance, creditworthiness, and how the project might impact the environment and society. We also conduct environmental and social due diligence and check the market reputation of the company.

When it comes to sustainable financing, we take an extra step. We ensure that the project not only meets creditworthiness and environmental standards but also aligns with the sustainable finance policy of the regulator in addition to the environmental impact.

How do you balance risk and return with sustainability considerations when making lending or investment decisions? 

Balancing risk and return are a key part of how we approach sustainable finance at IPDC. When we think about sustainable projects, they often come with higher capital expenditure. Take green buildings, for example. Imagine a company deciding to build a green building. It looks like a more expensive option, compared to a conventional one. But here's where the story changes: that same building is designed to cut utility costs in the years to come. So, while the initial investment might seem like a bigger risk, the long-term savings make it a smart decision, both financially and environmentally.

At IPDC, we make sure every project we finance under sustainable criteria goes through a rigorous process, where we evaluate not only the financial risks but also those tied to the environment, society, and governance. This way, we're able to account for immediate risks with the long-term returns that come from investing in sustainability.

Does your NBFI partner with any organisations, governments, or NGOs to enhance your sustainable financing efforts? 

Yes, our major shareholder, BRAC, is the world's largest NGO, and we're proud to lead by example in the financial sector when it comes to sustainability. We actively work with a variety of partners to make a positive impact.

We have a strong partnership with Bangladesh Bank, where we participate in their pre-financing and refinancing schemes. This collaboration helps support businesses, especially SMEs, and promotes green financing at special rates. We also work with the SME Foundation to offer financing options at rates lower than usual.

Our commitment extends to projects like the Climate Resilient Rainwater Harvesting initiative, which has provided clean water to 55 homes and benefited over 600 people in areas vulnerable to climate change. In addition, we regularly team up with NGOs to fund projects that build capacity, reduce poverty, and boost agriculture, among other important causes.

On a global scale, we partner with an international impact investment company to support gender-focused enterprises and expand green financing efforts. Even within our company, we promote sustainability by engaging our employees in creative projects using recycled materials. These partnerships and initiatives are crucial to driving meaningful change for both the environment and the communities we serve.

How does your organisation measure the environmental and social impact of its sustainable financing activities? Can you share any specific metrics or success stories? 

We use various metrics to track the impact of our sustainable financing. For environmental projects, we look for certifications like LEED for green buildings and conduct post-financing inspections to ensure funds are used as planned. When necessary, independent energy auditors also inspect to measure the success of energy-efficient projects.

On the social side, a great example is our Child Marriage Prevention Loan. We have offered interest-free loans to underprivileged families, on the condition that their daughters stay in school and unmarried until the age of 18. It has had a real impact on both education and reducing child marriages.

Additionally, IPDC has financed two reputed apparel and knitting companies, which were recognized by the Bangladesh Bank for their outstanding work in sustainability.

What challenges have you faced in adopting green financing, and how have you addressed them? 

One of the biggest challenges we've faced with green financing is raising awareness among clients about the long-term benefits. Many businesses are still unfamiliar with how green projects can be profitable. To address this, we've focused on boosting financial literacy as well as raising awareness regarding sustainable financing. Another challenge that many of our clients face is the initial high capital expenditure. Many clients are hesitant due to the upfront costs, so we work to help them understand that the long-term returns are worth it.

We've also found that simplifying the approval process of refinance and pre-finance schemes would help accelerate progress, attract more investment, and create opportunities for partnerships to scale our green financing efforts.