Loan appraisal and the role of the local member groups. Alessandro Celoni

Transcription

1 Loan appraisal and the role of the local member groups Alessandro Celoni

2 The Seven Cooperatives Principles SEVEN COOPERATIVES PRINCIPLES 1. VOLUNTARY AND OPEN MEMBERSHIP Cooperatives are voluntary organizations, open to all people able to use its services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination. 2. DEMOCRATIC MEMBER CONTROL Cooperatives are democratic organizations controlled by their members those who buy the goods or use the services of the cooperative who actively participate in setting policies and making decisions. 3. MEMBERS' ECONOMIC PARTICIPATION Members contribute equally to, and democratically control, the capital of the cooperative. This benefits members in proportion to the business they conduct with the cooperative rather than on the capital invested. 4. AUTONOMY AND INDEPENDENCE Cooperatives are autonomous, self-help organizations controlled by their members. If the co-op enters into agreements with other organizations or raises capital from external sources, it is done so based on terms that ensure democratic control by the members and maintains the cooperative's autonomy.

3 The Seven Cooperatives Principles (2) 5. EDUCATION, TRAINING AND INFORMATION SEVEN COOPERATIVES PRINCIPLES Cooperatives provide education and training for members, elected representatives, managers and employees so they can contribute effectively to the development of their cooperative. Members also inform the general public about the nature and benefits of cooperatives. 6. COOPERATION AMONG COOPERATIVES Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, national, regional and international structures. 7. CONCERN FOR COMMUNITY While focusing on member needs, cooperatives work for the sustainable development of communities through policies and programs accepted by the members.

4 Are Codes of Ethics trustworthy? CODES OF ETHICS Respect. We treat others as we would like to be treated ourselves. We do not tolerate abusive or disrespectful treatment. Ruthlessness, callousness and arrogance don t belong here. Integrity. We work with customers and prospects openly, honestly and sincerely. When we say we will do something, we will do it; when we say we cannot or will not do something, then we won t do it. Communication. We have an obligation to communicate. Here we take the time to talk with one another... and to listen. We believe that information is meant to move and that information moves people. Excellence. We are satisfied with nothing less than the very best in everything we do. We will continue to raise the bar for everyone. The great fun here will be for all of us to discover just how good we can really be. (Abstract from the Code of Ethics of ENRON)

5 STAKEHOLDERS ENGAGEMENT Members engagement: more human capital than share capital Some cooperative principles informing the relationship between banca Etica and its members: 1. VOLUNTARY AND OPEN MEMBERSHIP Banca Etica needs new ideas, visions, passion, skills and supports the registration of new members. 2. DEMOCRATIC MEMBER CONTROL Banca Etica supports the members engagement in any governance issue, the participation to the Annual General Assemblies, to the daily life of the bank. Banca Etica supports the members engagement in the loan appraisal process. 5. EDUCATION, TRAINING AND INFORMATION Members need to be trained and educated to exercise democratic control. Banca Etica organizes every year training courses dedicated to its members about financial education, corporate social responsibility and governance rules. Banca Etica supports the local groups of members in organizing events aimed to promote the ethical and sustainable finance and its principles.

6 FIGURES OF PARTICIPATION

7 The Environmental and Social Appraisal SOCIAL ENVIRONMENTAL APPRAISAL Banca Etica assesses the social and environmental features and impact of its loans through 2 main tools: Lists of excluded or eligible economic sectors and activities according to its principles and values; The Environmental and Social Appraisal The Creditworthiness Analisys of the loan applicant is backed up by a social and environmental Appraisal. The Social and Environmental Investigation involves the local groups of members and particularly the Social Evaluators (active members enrolled in a special register after having attended and completed a training course).

8 The Social and Environmental Appraisal SOCIAL ENVIRONMENTAL APPARAISAL It is the analysis of every social, enviromental and governance feature of a legal person who is applying for a loan. It aims to: Assess the level of corporate social responsibility of the legal person; Avoid reputational risks to Banca Etica; Spread the culture of the corporate social responsibility within the stakeholders of the bank; Involve and engage the members of Banca Etica in what we consider our most important and distinctive process. Its outcome complete the creditworthiness analysis (Integrated Analysis) The commitment of the members is strengtened by carrying out a complex and professional task (importance of delivering)

9 The Social and Environmental Appraisal SOCIAL ENVIRONMENTAL APPRAISAL Three levels of in-depth analysis: Social Environmental Questionnaire; Social Analysis of the Financial Statement ; Social and Environmental Assessment.

10 SOCIAL ENVIRONMENTAL QUESTIONNAIRE The Social and Environmental Questionnaire List of questions the loan applicant (legal person) has to fill out: Obtain information on how the applicant manages the corporate social responsability features and the social and environmental impacts of its activities; Communicate and spread the principles of the sustainable banking. Six main schemes: Associations and NGOs Foundations Cooperatives Social Cooperatives For Profit Enterprises Individual Small Firms

11 SOCIAL ENVIRONMENTAL QUESTIONNAIRE The Social and Environmental Questionnaire (2) Structure of the questionnaire 9 areas: Mission (1main indicator, 1 questions) Governance (4 main indicators, 11 questions) Relationships with employees (12 main indicators, 28 questions) Relationships with suppliers (3 main indicators, 13 questions) Concern for Communities (4 main indicators, 7 questions) Environment protection (3 main indicators, 14 questions) Relationships with clients (5 main indicators, 7 questions) Tools of Corporate Social Responsibility (4 main indicators, 8 questions) Social and Environmental Impact of a specific project (4 main indicators, 6 questions )

12 SOCIAL ENVIRONMENTAL QUESTIONNAIRE The Social and Environmental Questionnaire (3) Any answer is scored according to specific criteria: E.g. Women in the Board : 0%, up to 30%, beyond 30%; any single option receives a different score; Any area of analysis is weighted specifically; E.g. Relationships with employees : 25% for profit organizations, 10% in case of foundations; Different weights for any single indicator; E.g.: Salary of the management ; 10% in case of for profit organizations, 5% in case of social cooperatives. Single and multiple choice questions; Mandatory or optional answers.

13 Social Analysis of the Financial Statement SOCIAL ANALYSIS OF FINANCIAL STATEMENT Analysis of the financial statement in order to understand not only the financial stability and the conventional ratios, but also social, environmental and governance criticalities; The analysis is carried out by the credit analyst The credit analyst is supposed to have a confrontation with the Social Evaluator and, if necessary, with the Local Group of Members

14 Social Analysis of the Financial Statement SOCIAL ANALYSIS OF FINANCIAL STATEMENT

15 Social Analysis of the Financial Statement SOCIAL ANALYSIS OF FINANCIAL STATEMENT

16 The Social Environmental Assessment SOCIAL ENVIRONMENTAL ASSESSMENT Task carried out by the Social Evaluators; Steps of the Assessment: Field visit and interview of the Applicant; In-depth analysis of relevant aspects and criticalities of the Questionnaire; Analysis of any additional document given by the Applicant; Research and analysis of any other information available from other sources; The outcome of the assessment is part of the final report of the Social Evaluator: Score from 0 to 100; Opinion of Local Group of Members; Final judgement of the Social Evaluator: positive or negative

17 Who is the Social Evaluator SOCIAL EVALUATOR Is a voluntary member of the local group of members; Is enrolled in an internal register kept by the Bank ; Completed a training course with both theoretical and practical tests; Has to refrain from the assessment in case of conflict of interests During 2014 the Evaluators carried out 566 social and environmental assessments.

18 ADVANCED SOCIAL AND ENVIRONMENTAL ASSESSMENT The Advanced Social and Environmental Assessment The Advanced Assessment is used in presence of at least two of the following peculiarities: Great enterprises (employees >250; revenues > 50 milllions); Complex company structure; Company operating in developing or risky countries; Active in controversial business. The Advanced Assessment is carried out by a trained and skilled coworker and uses the analysis ESG (Environmental, Social and Governance): 3 areas of analysis 26 main indicators 72 secondary indicators In any case the local members group has to give its opinion about the proposed loan.

19 CASE STUDIES CASE STUDY 1 CONSORZIO PESCATORI GORO (CO.PE.GO.)

20 CASE STUDY 1

21 Goro and Consorzio Pescatori Goro CASE STUDY 1 Population: 3828 inhabitants Distance from Ferrara: 70 km (1.30 hour by car) Consequence of isolation: dramatic school dropout after the first eigth years of school (33% in 2012) Fishing tradition (first cooperative founded in 1931) The bay of Goro is a natural habitat for the breeding of clams In 1971 all the fishing cooperatives merged into the Consorzio Pescatori Goro Today the cooperative has 605 members (44 women) The cooperative is the greatest italian fishing cooperative and supplies with its products the whole italian market (revenues 2013, )

22 Consorzio Pescatori Goro (CO.PE.GO.) The social and environmental assessment observes: CASE STUDY 1 Respect of the evironment (no intensive fishing and breeding, strict respect of the individual and collective daily quotas of crop) Monitoring of the ecological equilibrium of the bay Traceability of the product until the single clam Cooperative governance (day-by day decision taken by the Board, strategic choices voted by the members Assembly, proper turnover of the Board) Respect for the employment contracts Concern for community,expecially for the education of children (every year the cooperative donates technical equipment and gift money to the local schools)

23 Consorzio Pescatori Goro (CO.PE.GO.) CASE STUDY 1 In 2013 the Cooperative decided to tackle the school dropout rate and its consequences (unemployment and addiction) and obtained by the Regional Amministration and by the Ministry of Education the full permission of: Establishing a school for young people between 15 and 18 years Organizing a triennial course of professional education in fishing Issuing an officially certified Diploma of Professional of the Sea The school has been established in the premises of CO.PE.GO. The University of Ferrara has established the programme. The educational activities are managed by a Centre of Professional Education. The Diploma is now a mandatory requirement to become a member of the cooperative.

24 CASE STUDIES CASE STUDY 2 ASSOCIAZIONE LEPIDO ROCCO

25 Associazione Lepido Rocco CASE STUDY 2 Funded in 1905 Members: the Municipality and 40 entrepreneurs The Board is formed by: 3 Directors elected by the Assembly 4 Representatives of the Municipality, the Regional Administration (Veneto) and the Chamber of Commerce of Treviso 1 Representative of the employees (no right to vote) 4 Centres of Professional Education 1000 students (35% from migrant families) 130 teachers

26 Associazione Lepido Rocco CASE STUDY 2 36 educational programmes in 4 Areas: Young people between 15 and 18 years (High School Diploma) Professional qualification for employed and unemployed people Professional education for graduates Permanent education Deep relationship with the local socioeconomic context (e.g., the tourism sector hires the 90% of the graduates). International connection through the network CO.N.E.CT. (22 partners in 14 countries). The professional classes include specifical courses of environmental education. Growth of employment (+ 50% in 3 years).

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