We are a Georgia focused investment platform, aiming to deliver on 4x20 strategy

Social Matters

 

The Group considers the interests of its main stakeholders (which include customers, shareholders, employees, lenders and wider society) when developing the strategy and the processes to improve its operations. We continually strive to positively contribute to society through the entire scope of our business activities by developing socially-oriented products and services, implementing responsible approaches to our business operations, carrying out sponsorship and charitable activities.

SOCIALLY ORIENTED PRODUCTS AND SERVICES
CORPORATE BANKING
In order to efficiently manage its indirect environmental and social impact, the Bank prioritises the integration of sustainable finance principles into its credit risk management procedures. In 2013, the Bank updated its Environmental and Social Risk Management (ESRM) Procedures in order to ensure the proper application of appropriate, risk-based and sector-specific environmental and social risk assessment practices to its commercial lending activities and in 2014, the Bank actively started to put the procedures into practice. The Bank defined priority targets and promotes environmental and social risk management activities accordingly. Since then the Bank ensures it has a consistent approach to evaluating and managing environmental, human health and safety risks of financed projects.

These procedures are now being integrated into the Bank’s credit risk management process and soon will be routinely applied to all commercial transactions. In all that the Bank does, it strives to find sustainable solutions that make business sense to the clients and minimise its impacts on the social and natural environment.

The main objective of the Environmental and Social Policy is to increase the environmental and social benefits for our clients. Through the ESRM Procedure, the Bank enhances our clients’ opportunities to be in compliance with national environmental and social regulations and adopt international best practices in this area. The Environmental and Social Policy and Risk Management Procedures comprise the core components of the Bank’s Environmental and Social Risk Management System (ESMS). Under this concept, the Bank endeavours to become an environmentally friendly financial institution. In 2014 Bank of Georgia won the “Green Service” award at the “Georgian Green Business Awards” ceremony organised by the Ministry of Environmental and Natural Resources Protection of Georgia.

Furthermore, to ensure a more effective operation and maintenance of the ESRM Policy, the Social and Environmental Risk Unit was created in September 2016. Until then, the Environmental and Social Risk Coordinator was responsible for the implementation of the Policy. In 2017, we aim to appoint a Social and Environmental Risk Specialist to oversee day-to-day implementation of the Bank’s ESRM Policy.

We implement the following procedures to ensure the operation and maintenance of the ESMS:
  • We refrain from financing environmentally or socially sensitive business activities mentioned in the exclusion lists of Development Finance Institutions such as EBRD, IFC, DEG, FMO and ADB among others 
  • We aim to assess the relative level of environmental and social risk associated with clients’ businesses. We require certain customers to implement specific environmental or social action plans to avoid or mitigate their environmental and social impact and adhere to specific monitoring and reporting requirements that we set in order to minimise environmental and social risk. These requirements are included as covenants in agreements between certain of our customers and the Bank 
  • We aim to regularly monitor environmental and social risks associated with the Bank’s activities, and assessing clients’ compliance with the terms of respective agreements 
Through ensuring comprehensive environmental and social assessment and action plans, as a part of the stable due diligence, the Bank encourages its customers to fulfil their environmental and social obligations and established a framework for them to achieve good environmental and social standards. In many cases, the Bank’s proper and timely management of the customers’ environmental and social risks has helped them to avoid financial and legal sanctions during inspections conducted by state enforcement agencies.

Environmental and social issues are tracked at the project site in cooperation with facility staff, providing ongoing advice and guidance on good practice and standards and monitoring compliance with the requirements. For environmental and social due diligence of certain high risk projects, the Bank contracts independent external experts. As a part of monitoring, the Bank requires each of the high risk clients to provide the Bank with the annual report on their environmental and social performance and the implementation of applicable Environmental and Social Action Plans or each client is visited by the Bank staff on a regular basis. During 2016, the Bank held extensive Environmental and Social Due Diligence (ESDD), monitored relevant clients and developed action plans for non-compliant clients. Due to the Bank’s efforts, a few clients conducted environmental audits and obtained the necessary environmental impact permits to continue their business operations legally. Those clients started to identify, avoid, mitigate and manage environmental and social risks and impacts on the natural and social environment. In addition, as a result of ESDD some clients took out loans to enhance their companies’ power and ability to reduce negative impacts on the environment and positively benefit their communities.

In the Association Agreement between the European Union and Georgia, Georgia has committed to progressively approximate its legislation in the relevant sectors with that of the EU and to implement it effectively. Through this approximation process, Georgia is actively developing and amending its national legislation in the relevant sectors. As a result, the Bank regularly checks legal developments and updates with regard to environmental, health and safety and labour issues and places great emphasis on the improvement of ESDD opportunities. The Bank’s staff are very focused on introducing clients to information about relevant (existing and new) regulations and laws during ESDD with the aim of strengthening the clients’ knowledge and capacity in the area of environmental and social protection.

Training activities are also an important element for enhancing capacity for policy implementation. In 2016, the Bank provided opportunities for the development and enhancement of the capacity of Head of Corporate & SME Credit Risk Department and the staff involved in environmental and social management process. Head of Corporate & SME Credit Risk Department participated in the tenth Annual Performance Standards Community of Learning organised by IFC. The Community of Learning is a knowledge-sharing forum aimed at strengthening the implementation of environmental and social standards by financial institutions in emerging markets. The event provided a chance to exchange experience, learn from investment case studies and engage in dialogue among environmental and social risk management specialists from all over the globe. As mentioned above, Social and Environmental Risk Management training was held for the staff with a strong focus on strengthening of social and environmental due diligence and risk management. More generally, the Bank has delivered several training sessions in this area and consequently more than 100 employees were trained during the last three years. Leading experts and state inspectors were invited as trainers. We intend to continue these types of training activities.

Other highlights of the year included the development and adoption of a Procedure for Addressing External Queries and Concerns. The Procedure is intended to provide a means for the public to submit queries or concerns related to the Bank’s Environmental & Social Policy, and have these inquiries responded to by the Bank in a timely manner. This process of receiving, reviewing and responding to communications from external stakeholders is managed by the relevant departments of the Bank.

The Bank is committed to respecting the principles of sustainable development, protecting the environment and is willing to improve the level of public health safety and protection of human health as an essential element for sustainable development and economic growth.

The Bank continues to make progress toward its objective and to ensure efficient implementation of the Environmental and Social Management System. The Bank will continue to conduct business with due consideration to environmental and social protection and contribute to the creation of a sustainable society. The Bank will further help increase clients benefits through proper and diligent implementation of the Environmental and Social Policy.

The Bank also continues to support Georgia’s emerging economy by financing industries that are strategically important for the development of the country.

Tourism still remains one of the most rapidly developing sectors of the Georgian economy. The Bank actively provides financing for hotel constructions throughout the country. Alongside financing the construction of hotels in Tbilisi, the Bank has financed the acquisition and a renovation of a 34-room hotel in Batumi.

The hotel is scheduled for launch in 2017 and will be operated by local management. It is located in the very centre of old Batumi, which due to its exclusive location is one of the most popular tourist destinations in the city. The hotel also provides a variety of international and local cuisines, operated by the client.

In 2016, the Bank financed the upgrade of a data centre, specialising in Bitcoin mining, via the Georgia Bitcoin Mining Data Centre (BFDC). A free industrial zone in Tbilisi hosts the data centre and provides a tax-free zone for the entities working in the information technology industry. The data centre was founded by Bitfury, a world leader in Bitcoin mining. The total financing required for the upgrade was US$ 15.0 million, of which Bank of Georgia financed US$ 5.0 million.

In addition, the Bank endeavours to finance projects that provide millions of people with access to safe drinking water, well-maintained urban roads and other projects that provide important sustainable development benefits to households and enterprises across Georgia.

RETAIL BANKING
Bank of Georgia continues to innovate and generate a wide range of socially oriented financial products and services that provide additional value to individuals and small and medium-sized enterprises (SMEs) and meet their respective needs.

Express Banking. The Georgian banking sector still experiences difficulties in overcoming economic and geographical barriers in expanding its financial services in remote regions and among low-income parts of the population.

Our Express Banking service plays an important role in addressing this issue:
  • As at 31 December 2016, a network of 128 Express branches and 2,729 Express Pay terminals are located all over the country, including in remote mountain regions 
  • Express financial products such as Express card, Express deposit and Express loan are uncomplicated, easily accessible and affordable to a segment of the population that would not have access to banking products and services otherwise. By 31 December 2016, the Bank had attracted 471,967 clients, of which 46,617 became clients of the Bank in 2016 alone
As a part of the Express Banking service, we prioritise the development of self-service skills of our clients. We plan to expand services in Express Pay terminals, develop web-based application processing tools and implement a new instalment credit product. All of these changes will provide a more accessible banking service to our clients.

In 2016 we replaced the Student Card with the Express Student Card which has all debit card functions, as well as special discounts on public transportation and free distance banking services among other benefits. Students are automatically involved in the Express Bonus Points Loyalty Scheme. Students who collect a minimum of 600 Express Points on a monthly basis are awarded with additional 3,000 bonus points that can be converted into mobile phone top-ups and used to pay public transportation and utility bills. This award programme encourages the student population to use financial services and supports them financially during their studies.

Youth support. We have developed a wide range of financial products to support young people in Georgia. For example, via the special conditions of the Child Deposit we provide parents with the opportunity to secure their children’s future. Starting from a minimal amount of GEL 10, a deposit can be opened for at least two years at any time from a child’s birth until the age of 18. The annual interest rate (10.5% for Georgian Lari and 1.5-4.0% for foreign currency) is added to the initial deposit. In 2016, we opened approximately 5,930 Child Deposit accounts.

The Bank also offers special products that allow young people to receive higher education. Examples of such products are student loans with favourable terms that do not require any financial guarantees and collateral. Total portfolio of student loans stood at GEL 430,449 by the end of 2016, while GEL 301,081 was issued in 2016 alone.

Another example of the Bank’s products aimed at supporting young people is a social-educational project “sCool Card” – a multifunctional card for school children. The main objective of the project is to teach the children about financial culture and build their knowledge around financial services at an early stage. sCool Card is available at no cost and all of the transactions and services are also free of charge. sCool Card provides special benefits for children in Georgian public and private schools. The benefits include free public transportation in Tbilisi (metro, buses), discounts for entertaining centres popular among children, bookstores, websites of book publishers, school subject competitions as well as the accumulation of bonuses (sCoola) per each transaction.

In a further effort to help children better understand banking products, the Bank opened a sCool Card Business School, where experienced staff provide free training about topics such as: “What is money”, “Banking products”, “Bank professions” and “Time management”.

SME support. We continue to provide financing to SMEs, a backbone of the Georgian economy that helps to ensure the sustainable development of Georgia. Apart from our own micro-financing and SME loan programmes, we also participate in various programmes that support entrepreneurs. In 2015, the Bank partnered with a non-profit Agricultural Projects Management Agency which supports agricultural SMEs. Together, we co-financed agricultural loans at fixed annual interest rates which were significantly lower than previous loans SMEs received by other institutions. In 2016, the total amount of Bank loans issued to SMEs was GEL 1.3 million, of which GEL 75 million was issued through the Preferential Agriculture Lending Programme.

In 2016 the Bank enhanced financing to micro-business owners that were previously considered as a non-bankable segment.

The Bank now has a dedicated staff and established processes for its new product “micro-express loans” that targets microbusiness segment and offers loans under GEL 10,000.

In 2016 the Bank partnered with European Bank for Reconstruction and Development (EBRD) to offer the market a much needed local currency funding. Bank of Georgia is committed to further extending its financing to SMEs. Furthermore, the Bank is keen to develop financial products and lending practices, to specifically service women-led SMEs, which will ultimately increase their involvement in developing Georgia’s private sector. The loan facility signed with EBRD enables the Bank to issue longer-term local currency loans, providing essential support for micro, small and medium sized enterprises to converge to DCFTA requirements, as well as underserved women entrepreneurs.

In 2016 the Bank created a “Startup for Women” programme under EBRD’s Women in Business (WiB). WiB enables the Bank to take more risk in financing this segment by offering partial first loss coverage. The programme started in late November and eight projects amounting to GEL 228,600 were already financed by the end of 2016.

Combined with supporting SMEs financially, the Bank also plans to launch an SME portal in the beginning of 2017. The portal will provide financial and business-related advice to entrepreneurs in order to enhance their finance management skills and ensure the sustainable development of their businesses. The portal will contain information on training, provide entrepreneurs with knowledge and skills in accounting, legal documents, business development, sales and marketing.

Environmental and social risk management processes of SME clients are embedded throughout the Bank’s activities. By ensuring that comprehensive environmental and social risk assessment and action plans are undertaken, we encourage our SME clients to be in compliance with national environmental and social legislation in order to achieve good environmental and social standards. During site visits, we provide advice and guidance on good practice and standards in these areas, update clients with regards to environmental, health and safety as well as labour issues and monitor compliance with environmental and social legislation. In many cases of non-compliance, our proper and timely management of the SME clients’ environmental and social risks facilitate avoidance of financial and legal sanctions during inspections conducted by the state enforcement agency.

AFFORDABLE HOUSING
Currently, the Georgian real estate market is vulnerable to various economic and financial uncertainties. Numerous construction projects remain unfinished for long periods of time while there is a strong growing demand for housing from the Georgian population. In response to this increasing demand, the Group’s real estate development business, m2 Real Estate was established in order to offer affordable housing to the emerging middle class in Georgia, especially young families. m2 Real Estate has completed six projects for the development and sale of affordable residential apartments.

The company uses an innovative approach to design and construction processes so that each square metre is distributed efficiently and is tailored to the customers’ needs and wishes. As few customers can afford to buy large flats with an area exceeding 100m2, the company continuously works to optimise the size of apartments to meet the current demand of its customers without compromising the apartments’ convenience and usability. A large segment of the Group’s customers are represented by young Georgian families. We believe that by continuing to offer affordable housing products, we are helping to significantly enhance the quality of their lives.

SPONSORSHIP AND CHARITY
As part of our sponsorship and charitable activities, the Group continues to focus on promoting and enhancing access to education, conserving nature and supporting people with disabilities and special needs. The Group’s Sponsorship and Charity Policy encourages partnering with Foundations and Non- Governmental Organisations (NGOs) to deliver sustainable results and bring about positive change. Our priority is to help solve the cause, not the symptom. The Group chooses to focus on three areas bearing the utmost importance for Georgian society. Sponsorship and charity funds are channelled through the Tree of Life Foundation that, in its turn, distributes funding via means of grants competitions thus assuring a transparent and fair way of financing.

Georgia Healthcare Group PLC (GHG) is the largest private healthcare services provider in the Georgian market. The company operates a network of medical centres and hospitals through its healthcare services business. It covers more than 75% of the Georgian population with clinics located across the country providing access to high-quality medical services to the population including those living in remote mountain regions. Accessibility of medical services is ensured by scheduling regular visits by specialists to small towns and villages and by providing patients with transportation to larger clinics in urgent cases and in cases when more sophisticated treatment is required.

The GHG healthcare services business also provides free regular medical examinations at various locations throughout the country including Batumi, Khulo, Keda, Shuakhevi, Poti, Kvareli, Telavi and others. In addition, GHG’s specialists deliver free medical services, including examinations and treatments for socially and economically disadvantaged parts of the population. In cooperation with other healthcare institutions, GHG arranges free blood transportation and donations for its patients.

GHG traditionally participates in the state Children’s oncology programme under which it offers oncology treatment for children in Tbilisi Iashvili Paediatric Tertiary Referral Hospital, its multi-profile paediatric medical establishment. The clinic is a unique provider of this service in Georgia, for which about GEL 2 million is annually subsidised. In 2016, 701 young patients received treatment under this programme.

Sponsoring medical TV programmes is GHG’s way of promoting good health awareness and practices, which helps the company reach a wide range of the Georgian population. GHG has five TV shows: The Doctors, Day Show, Impulse, Medical hour and Mechanical Ventilation (Khelovnuri Suntkva, a soap opera). The shows share their expertise in a simple and clear manner on various health and wellness issues such as screening programmes, allergies, cardiovascular disease, oncology, arthritis and others. Sometimes celebrity interviews are conducted, health news, healthy recipes and helpful tips are also broadcast during the shows. As GHG’s medical TV programmes proved to be very popular in 2015, it increased their scale and financing from GEL 177,180 in 2015 to GEL 730,841 in 2016.

GGU regularly runs charitable activities for the social service agency ’’Child and Environment”, international humanitarian network ’’Catharsis” in Tbilisi and ’’Retirement Home” in Rustavi. GGU covers the annual water supply expenses for “Child and Environment” – the agency that cares for homeless children and children with disabilities. Twice a year GGU sponsors the project “Dinner for Everyone” which is organised by ’”Catharsis” for approximately 3,000 people.

Promoting and enhancing access to education.
Bank of Georgia University, established in 2014, welcomed its third intake of MBA in Finance students in autumn 2016. The cost of studies in 2016 were again largely subsidised by the Bank – GEL 101,250 in total, giving a possibility to up to ten top students to study free of charge while the next 20 can enjoy a 0% loan and start repaying one year after graduation. Besides providing high-quality education, Bank of Georgia University offers its students hands-on experience by offering them the possibility to observe various business processes at the Group’s companies.

In 2013, the Bank became the first Georgian company to cooperate with one of the most prestigious scholarship programmes in the world, the Chevening scholarship, in order to provide Georgian students with an opportunity to pursue education in the UK. The Group provided GBP 65,405 in total and funded three students in 2016. The partnership with Chevening has been extended for the next year and the Group is looking forward to selecting students who will continue their Master’s studies in the UK.

In 2014, the Bank signed a partnership agreement with the prestigious US Fulbright scholarship scheme. Thanks to the Bank of Georgia’s contribution, one student from Georgia will be able to enrol in a two-year Master’s degree programme at a US university in 2017. Funding provided to the student for two years amounts to US$ 100,000.

For the past four years the Bank has been supporting a public speaking competition organised by the English Speaking Union, Georgia. The competition allows top students who are in their senior year at a high school, or freshmen year at a university, to prepare a speech on a predetermined topic and present it in front of a competent jury. The winner is granted a fully paid trip to London to attend the global public speaking competition. We aim to support this competition in 2017 as well.

The Bank has been supporting every single TEDxTbilisi conference from when it was first organised in 2012. A TEDx conference is a locally organised TED format event, where communities, organisations and individuals join to initiate a conversation and connect with each other on different matters which are important to the society.

Conserving nature.
Another priority of the Group’s charitable activities is the preservation of wildlife diversity. In 2016, the Bank granted US$ 100,000 to the Caucasus Nature Fund (CNF) to provide support to the Protected Areas of Georgia.

Supporting people with disabilities. Since 2014, the Bank has focused its efforts on supporting people with disabilities, mainly children – one of the most vulnerable social groups in Georgia. In 2016, the Bank broadened the scope to include all people with disabilities and donated GEL 101,313 to the Tree of Life Foundation for this cause. The Foundation distributed the funds through two grant competitions – one intended for the relevant NGOs that work on the issues of people with disabilities and another with the specific aim of promoting social entrepreneurship. In order to qualify for the competition, proposals had to focus on the creation of a small enterprise with a social component aimed at improving the livelihood of people with disabilities.

In total, the Tree of Life allocated over GEL 1 million to support education, nature conservation and people with disabilities and special needs.

In addition to external projects, the Bank continued to focus on the adaptation of its own infrastructure. In 2016, an additional ten service centres have become available for people with disabilities.