GSB Uses ESG Scores for Corporate Loans

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by KnowESG
KnowESG_ESG scores for loans by GSB
Image courtesy of Freepik

The Government Savings Bank (GSB), under the leadership of President and CEO Vitai Ratanakorn, has taken a significant step towards promoting sustainable practices in the corporate lending landscape.

GSB has become the pioneering bank to incorporate Environmental, Social, and Governance (ESG) scoring into its evaluation process for loans provided to large businesses with a credit limit of 500 million baht or more. This innovative initiative aims to support companies that have a positive impact on the economy, society, and the environment.

In this new approach, large businesses seeking loans will be thoroughly assessed based on their contributions to ESG standards as well as any potential involvement in negative news or activities. Each business will receive an ESG score, with the maximum score being 10 points. Loan applications scoring below 2 points will face rejection, while those achieving 8 points or more will not only secure approval but also enjoy reduced loan rates by 0.10-0.20%.

Despite businesses scoring below the threshold of not being eligible for immediate loan approval, GSB expresses its commitment to engaging with these companies and guiding and supporting them in improving their operations to achieve higher ESG scores.

The bank's dedication to promoting social welfare and financial inclusivity is evident in its efforts to subsidise interest rates for retail customers who belong to unserved segments and vulnerable groups. GSB diverts part of the profits obtained from large businesses to implement measures that benefit these customers, exemplifying its dedication to creating a tangible positive impact on society.

In line with its mission, the bank has also introduced innovative financial products, such as auto title loans at lower interest rates compared to the market, enabling low-income borrowers to access funds by leveraging their motorcycles as collateral. Notably, the bank has already provided auto title loans to an impressive 1.8 million individuals.

Looking ahead, GSB is set to establish a subsidiary named Ngern Dee Dee, which will focus on lending to unsecured and high-risk retail customers. Operating as a P Loan, this subsidiary will offer an interest rate set at 3-5% lower than the market, with credit limits ranging from 10,000 to 100,000 baht per borrower. This endeavour is a testament to the bank's commitment to financial inclusivity and serving the needs of all customers.

As of the second quarter, the bank's outstanding loans amounted to 2.35 trillion baht, reflecting an increase of 57.4 billion baht from the previous year's end. Simultaneously, deposits reached 2.68 trillion baht, marking a rise of 3.6 billion baht.

The bank's net profit stood at an impressive 17.3 billion baht, while non-performing loans (NPLs) accounted for 2.63% of the outstanding loans. To maintain a strong financial position, the bank has set a target to keep NPLs below 2.95% for the entire year.

ESG, an integral component of GSB's business approach, goes beyond solely focusing on financial returns. Instead, it revolves around sustainability and emphasises a company's commitment to environmental stewardship, social responsibility, and robust governance practices.

By employing ESG scoring, GSB ensures that its lending practices align with these crucial criteria, showcasing its dedication to responsible banking and contributing to a sustainable future.

The ESG concept plays a vital role in building credibility for businesses by demonstrating their dedication to meeting ESG standards and requirements. Many listed companies utilise ESG data to prepare comprehensive sustainability reports, which they disclose to shareholders, investors, and the public alongside traditional financial reports.

Notably, approximately 80% of institutional investors' investment portfolios are allocated to ESG-compliant organisations, highlighting the increasing significance of sustainability and responsible business practices in the global financial landscape. With GSB leading the way in incorporating ESG scoring into its lending decisions, it sets a remarkable example for other financial institutions to follow, fostering a more sustainable and socially conscious business environment.

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Source: Bangkok Post


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