Case study Grupo Promerica

Grupo Promerica Net-Zero Banking Alliance (NZBA) Target Setting

Grupo Promerica is a group of Latin America-based financial companies committed to financing sustainability and creating positive impact today for generations to come. Three banks of Grupo Promerica are signatories of the Net-Zero Banking Alliance (NZBA), which was launched in 2021 and brings together a global group of banks representing about 40% of global banking assets. Grupo Promerica approached EcoAct to help measure the carbon footprint of two of his banks and set reduction targets, consistent with a maximum temperature rise of 1.5 °C.

The Challenge

The financial sector is under more and more pressure to commit to net-zero and achieve effective emissions reductions. The Glasgow Financial Alliance for Net-Zero has accelerated the implementation of clear decarbonisation strategies for banks and financial institutions all over the world. Thanks to the NZBA, the finance industry now has a target setting methodology for emissions reduction by 2050 including short-term targets by 2030.

In this context, Grupo Promerica wanted to step up their net-zero ambition across their different geographies. EcoAct was chosen to work on the climate strategies of two of their banks, Banpro in Nicaragua, and Banco Promerica in Costa Rica.

As the NZBA is a relatively recent framework, the first challenge was to grasp final guidelines to meet reporting requirements and recommendations.

The objective was to address their multi-asset portfolio regarding carbon assessment and target setting. By working with financial and climate data, the challenge was to equip the two banks of Grupo Promerica with an optimal combination of insightful information assessed at portfolio, asset class, sector, geography and/or project level.

Unfortunately, sustainability strategy is not yet a top priority in most Latin American countries, even though Grupo Promerica has a strong sustainability vision for its business. As CSR considerations are growing in those markets, we were proud to be chosen by Grupo Promerica to help them build a robust emissions reduction plan adapted to their national specificities.

Promerica Group belongs to Promerica Financial Corporation, one of the largest regional financial groups in Central America with consolidated assets of over USD 15 billion. The Group consists of nine banks in Costa Rica, El Salvador, Dominican Republic, Ecuador, Honduras, Panama, Guatemala and Cayman Islands. Founded in 1992 , the Group permanently redefined the strategies aligned to the sustainability vision, in order to provide support to people and companies, especially in the productive sectors.

Today, the group offers its services to millions of clients in the Americas with a variety of financial services from consumer loans and project finance to commercial and residential real estate.

Circle sky;

Banco Promerica advances in the establishment of goals for the pending sectors and in the application of actions to reduce emissions in the sectors with the goals presented for the NZBA. We align ourselves with international objectives such as the Paris Agreement and goals such as the NDC of Costa Rica and the Decarbonization Plan. We are committed to sustainable recovery and to supporting the development of an environmentally responsible society.

Michelle Espinach Mendieta, Sustainable Banking Manager

The Solution

Our mission with the two banks of Grupo Promerica included several steps to ensure complete portfolio carbon performance assessment, and target setting.

  1. Scoping: Identification of asset classes with operational efficiency

At portfolio, asset class, sector, issuers and asset level, we conducted a climate performance analysis of the two entities, including the following asset classes:

  • Corporate financial assets: Listed and unlisted equity bonds and business loans
  • Sovereign financial assets: Bonds
  • Project finance (eg. Renewable electricity generation)
  • Real assets: real estate (Commercial and residential)
  • Consumer loans: vehicle loans

Thanks to the engagement of internal stakeholders, we managed to collect these data and calculate the associated carbon footprint.

  1. Carbon footprinting: Management of carbon exposure

For each asset’s classes, our experts were able to determine their carbon exposure using the relevant carbon footprinting methodology. Our method is aligned with the latest regulatory reporting frameworks and standards developed by sectorial initiatives globally. The most relevant voluntary reporting frameworks for the financial sector include the TCFD recommendations, PRI Climate reporting, CDP Climate Change, Science-Based Targets, the GHG Protocol and PCAF methodologies (used for scope 3 category 15 – Investments).

Having a robust carbon footprinting methodology serves as a basis for (i) identification of best practices, (ii) establishment of common rules for climate accountancy at the financial instruments and portfolio levels, (iii) improvement of reported and estimated data at issuers’ level; (iv) better disclosure carbon footprint at portfolio level.

At that point, our goal was to enhance climate-aligned capital allocation and to operationalise target setting.

  1. Target setting: NZBA compliance

Regarding the geographic perimeter, our climate finance experts selected the most ambitious and relevant scenarios (in this case, the Net-Zero Emissions scenario from the IEA and the NGFS).

Based on the NZBA sectoral classification of carbon-intensive sectors and the methodological availability, we were able to define reduction trajectories for the following sectors: Real Estate (distinctively residential and commercial real estate), Power generation and Transport.

In addition, we prepared all materials for the Board and provided support for the official submission to the NZBA.

  1. Definition of a tailored action plan

In parallel to our carbon footprint analysis, our team organized awareness workshops for Banco Promerica and Banpro employees on climate issues, carbon offsetting and NZBA

Along with internal stakeholders, we defined a carbon roadmap associated with a clear action plan by asset class and for both Grupo Promerica’s entities. For instance, workshops were dedicated to vehicle loans, real estate loans and data quality improvement for both Banco Promerica and Banpro.

Sector-specific methodologies dedicated to the finance sector are developed each year and our approach is based on the most up-to-date and rigorous frameworks. However, some asset classes would benefit from the development of a carbon accounting framework and a more rigorous collection process, such as the Agriculture sector with the FLAG methodology from the SBTi.

The result

  • Full carbon footprint analysis of both Banco Promerica and Banpro entities: corporate and portfolio measurement
  • Definition of reduction trajectories by assets and by sector, aligned with the most ambitious climate scenarios available
  • Support for submitting the targets to the Net-Zero Banking Alliance for the two banks of Grupo Promerica
  • Four workshops animated by EcoAct experts to improve awareness on climate related issues for both entities, in collaboration with local teams as co-construction is key
  • Implementation of a sectoral action plan for carbon emissions reduction