Climate Change Data

Environmental Metrics

ESG Focus Areas

• Sustainability
• Customer Relationships
• Employee Development
• Community Investment
• Environmental Responsibility

Environmental Achievements

• Installed LED panel lights in new service centers, reducing energy consumption
• Implemented an Online Document Retrieval System, significantly reducing paper usage

Social Achievements

• Continued support for 'Kusum Sevana' daycare and preschool
• Launched an internship program for young graduates
• Donated medical equipment to Kandy General Hospital
• Provided drinking water to drought-affected areas in Polonnaruwa District

Governance Achievements

• Complied with all corporate governance requirements including CBSL Direction No. 3 of 2008, CSE Listing Rules, and the Code of Best Practice on Corporate Governance
• Established three Board-appointed subcommittees: Audit Committee, Integrated Risk Management Committee, and Remuneration Committee

Climate Goals & Targets

Environmental Challenges

• Increased default rates due to unrecoverability of advances granted during the high-interest-rate era
• Fluctuations in secondhand vehicle market affecting the disposal of repossessed assets
• Stiff competition in the finance lease market
• Declining interest rates impacting net interest margins

Mitigation Strategies

• Organized Motor Fairs to sell repossessed vehicles at concessionary rates
• Developed alternative sourcing strategies (e.g., loan agreement with IFC)
• Strengthened Integrated Risk Management Committee
• Improved credit evaluation process and management information systems

Supply Chain Management

Responsible Procurement

• Ensuring customers do not engage in environmentally damaging businesses

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: GRI G3.1

Awards & Recognition

• Strategic Level Training Partner by The Institute of Chartered Accountants of Sri Lanka

Environmental Metrics

ESG Focus Areas

• Sustainability
• Corporate Social Responsibility (CSR)
• Environmental Conservation
• Employee Well-being
• Governance
• Risk Management

Environmental Achievements

• Reduced paper usage significantly through an online document retrieval system.
• Installed LED panel lights in new service centers, reducing energy consumption.

Social Achievements

• Continued internship program, providing opportunities for young graduates.
• Supported Dompe Primary School with 5S system implementation and resources.
• Supported Kusum Sevana daycare and preschool.
• Implemented a formal ‘Whistle-blower Policy’.

Governance Achievements

• Approved and communicated a Whistle-blowing policy to employees.
• Established a Related Party Transactions Review Committee.
• Strengthened risk management oversight with a focus on internal controls, policies and procedures.

Climate Goals & Targets

Environmental Challenges

• Global economic slowdown affecting emerging markets.
• Persistently low interest rates.
• Decline in commodity prices.
• Surplus liquidity.
• Regional conflicts.
• Changing regulatory framework.
• Maximum Loan to Value (LTV) ratio imposed by the Central Bank.
• Deteriorating asset quality in the previous year.
• High staff turnover.
• High competition in the finance lease market.
• Increased customer awareness and price sensitivity.

Mitigation Strategies

• Stringent measures to improve collections and credit evaluation process, reducing Gross NPL ratio to 2.02%.
• Investment in technology to improve efficiency and customer experience (online real-time service, Web Application Firewall).
• Strengthened risk management infrastructure through investments in technology and data management processes.
• Consolidated newly opened branches and centers, achieving breakeven points.
• Revised provisioning policy to buffer potential losses from repossessed assets.
• Effective promotional campaigns to grow lending base and maintain portfolio quality.
• Cautious and prudent branch expansion strategy.
• Promoting the core business activities of the Company and strengthening loan appraisal techniques.
• Promoting savings deposits as a source of low-cost funding.

Supply Chain Management

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: GRI 4

Environmental Metrics

ESG Focus Areas

• Sustainability

Environmental Achievements

• Reduced paper consumption through online document retrieval system
• Installed LED panel lights in new service centers, reducing energy consumption

Social Achievements

• Launched internship program, providing training and employment opportunities for 28 students; 6 were absorbed into the company
• Donated bedding and garments to Anuradhapura General Hospital's kidney ward
• Provided equipment and consumables to Sudharshi Elders Home in Thiththapathara, Dompe
• Supported the Popham Arboretum project in Dambulla

Governance Achievements

• Established an Environment and Social Management System (ESMS) since 2014
• Implemented a robust risk management framework
• Maintained a low NPL ratio (1.64%) well below the industry average

Climate Goals & Targets

Environmental Challenges

• Fluctuating global and local economic conditions
• High staff turnover
• Competition from commercial banks
• Rising interest rates
• Changes in customer needs and preferences due to ICT advancements

Mitigation Strategies

• Strategic business model adjustments
• Improved credit evaluation and recovery processes
• Investment in technology and ICT systems
• Focus on customer retention and satisfaction
• Securing low-cost funding
• Employee training and development programs
• Branch expansion to reach diverse customer segments

Supply Chain Management

Responsible Procurement

• Building solid relationships with suppliers
• Minimising inventory holding
• Centralising procurement process to reduce costs

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: GRI G4, International Integrated Reporting Framework, Smart Integrated Reporting Methodology

Environmental Metrics

ESG Focus Areas

• Economic performance
• Energy
• Effluents and waste
• Compliance
• Labour practices and decent work
• Employment
• Occupational health and safety
• Training and education
• Labour practices/grievance mechanisms
• Local communities
• Anti-corruption
• Product and service labeling
• Customer privacy

Environmental Achievements

• Installed LED panel lights and energy-saving inverter air conditioners in new branches to reduce energy consumption
• Promoted reuse of materials like paper and envelopes

Social Achievements

• Increased deposit base by 31.5%
• Granted internal promotions when new branches opened
• 21% of new advances granted to women and women entrepreneurs
• Continued internship program, with one intern recruited permanently
• Made donations to Kandy General Hospital and Dompe Hospital

Governance Achievements

• Strengthened risk management framework
• Improved processes and controls relating to customer appraisals
• Maintained healthy capital ratios
• Concluded a rights issue to strengthen capital adequacy
• Complied with all corporate governance requirements

Climate Goals & Targets

Environmental Challenges

• Increased NPL ratio to 2.28% from 1.64% due to adverse weather conditions and economic downturn
• Increasing trend in market interest rates
• Intense competition
• Exposure to high-risk market segments
• Regulatory restrictions
• Deteriorating asset quality

Mitigation Strategies

• Strengthened risk management framework
• Strengthened customer appraisal processes
• Procured long-term low-cost funding
• Streamlined funding structure to exploit increasing customer deposits
• Introduced new value-added services
• Maintained stringent customer screening processes
• Strengthened recovery process
• Developed customer relations
• Provided growth opportunities to skilled staff
• Strengthened compliance function
• Promoted business on registered vehicles

Supply Chain Management

Responsible Procurement

• Centralised system for purchasing stationery and other equipment
• Lean procurement process to minimise inventory holding

Climate-Related Risks & Opportunities

Physical Risks

• Adverse weather conditions

Reporting Standards

Frameworks Used: GRI G4 guidelines, International Integrated Reporting Framework (2013), Smart Integrated Reporting MethodologyTM

Environmental Metrics

ESG Focus Areas

• Valued Partnerships
• Sustainability
• Financial Inclusion
• Environmental Responsibility
• Community Investment

Environmental Achievements

• Reduced paper usage through digitalization of processes
• Installed LED lights in new branches to conserve energy
• Replaced outdated air conditioners with inverter air conditioners

Social Achievements

• Opened five new branches, creating local employment opportunities
• Donated to Nagolla Primary School in Badulla District
• Provided financial assistance to the Popham Arboretum project

Governance Achievements

• Maintained capital ratios well above industry averages
• Complied with all applicable laws, rules, regulations, and standards
• Established Board Committees (Audit, Risk Management, Remuneration, Related Party Transactions)

Climate Goals & Targets

Environmental Challenges

• Deteriorating asset quality leading to higher impairment charges
• Slowdown in sector growth due to macroeconomic factors (interest rates, currency depreciation, fiscal policies)
• Introduction of SLFRS 9 and Debt Repayment Levy impacting profitability

Mitigation Strategies

• Strengthened credit appraisal processes and internal credit rating system
• Focused on growing deposit-backed funding base
• Secured USD 15 Mn. loan from IFC for women entrepreneurs
• Improved online customer interface and introduced new products

Supply Chain Management

Responsible Procurement

• Reliable supply chain for stationery, consumables, equipment, and services
• Lean procurement process to minimize inventory

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: GRI G4 guidelines, International Integrated Reporting Framework (2013)

Third-party Assurance: Messrs Ernst & Young advisory services; KPMG (external audit)

Environmental Metrics

ESG Focus Areas

• Financial Inclusion
• Green Lending
• Women Entrepreneurship
• Environmental and Social Risk Management
• Good Governance

Environmental Achievements

• Installed LED panel lights at new branches and service centers to reduce energy consumption.
• Replaced outdated air conditioners with inverter air conditioners to reduce energy costs.
• Expanded leasing activities of hybrid and electric vehicles.

Social Achievements

• Provided financial assistance to the Popham Arboretum project.
• 93% of new staff recruitments from localities, creating employment opportunities.

Governance Achievements

• Successfully issued a subordinated debenture, infusing Tier 2 capital of LKR 1.75 Bn.
• Increased core and total capital ratios to 15.48% and 21.54% respectively.
• Implemented a robust risk management framework.

Climate Goals & Targets

Environmental Challenges

• Challenging macroeconomic environment including subdued economic activities, political instability, and the impact of the Easter Sunday terrorist attacks and COVID-19 pandemic.
• Reduction in vehicle imports, vulnerability of the Sri Lankan Rupee, import restrictions.
• Deterioration in asset quality of the NBFI sector, increase in non-performing loans and declining profitability.
• Decrease in asset quality due to challenging operating context and spillover effects of the Debt Relief Programme.

Mitigation Strategies

• Built capital and maintained liquidity at healthy levels.
• Successfully completed a subordinated, listed debenture to the value of LKR 1.75 Bn.
• Secured a USD 25 Mn. loan from FMO to expand lending portfolio in green lending and women entrepreneurships.
• Strengthened credit appraisal process and related policies.
• Implemented actions to reduce the spread of COVID-19, launched a company-wide communication plan, and empowered management to make necessary decisions.
• Accommodated customer moratorium requests and supported customers, especially SMEs.

Supply Chain Management

Responsible Procurement

• Lean procurement process to minimize inventory holding.

Climate-Related Risks & Opportunities

Opportunities

• Development of energy-efficient products (Hybrid and electric vehicles)

Reporting Standards

Frameworks Used: International Integrated Reporting Framework (2013), Global Reporting Initiative (GRI) Standards, Smart Integrated Reporting Methodology

UN Sustainable Development Goals

• Goal 7 (Affordable and Clean Energy)
• Goal 8 (Decent Work and Economic Growth)
• Goal 13 (Climate Action)

Initiatives such as green lending, women entrepreneurship, and environmental risk management contribute to these goals.

Sustainable Products & Innovation

• Leasing of hybrid and electric vehicles

Environmental Metrics

ESG Focus Areas

• Responsible financing
• Financial inclusion
• Environmental and social risk management

Environmental Achievements

• Reduced electricity consumption compared to the previous year
• Significantly reduced paper consumption through an Online Document Retrieval System
• Reduced printing and stationery costs by terminating the replication of system-generated documents

Social Achievements

• 93% of new staff recruitments from localities
• LKR 345,000 spent on other CSR activities
• Implemented several measures to strengthen employee retention, including competitive remuneration packages and an effective grievance and counselling procedure

Governance Achievements

• Established four Board-appointed subcommittees: Audit Committee, Integrated Risk Management Committee, Remuneration Committee, and Related Party Transactions Review Committee
• Implemented a robust risk management framework
• Maintained core capital ratio and total capital ratio well above regulatory requirements

Climate Goals & Targets

Environmental Challenges

• COVID-19 pandemic affecting all facets of life and world economies
• Deterioration in credit quality, sovereign rating downgrades, and reduced foreign inflows due to the pandemic
• Drop in asset quality during the lockdown
• Muted loan growth
• Low interest regime impacting net interest margin

Mitigation Strategies

• Maintained higher levels of liquidity
• Strengthened credit appraisal processes
• Maintained higher than required capital ratios
• Successfully concluded a rights issue
• Developed and set up new lines of communication with customers
• Extended debt moratoria and payment holidays to qualifying customers
• Strengthened cybersecurity measures
• Developed new business strategies and targeted new customer bases
• Implemented new technological advancements to accommodate social distancing practices

Supply Chain Management

Responsible Procurement

• Purchasing policies and procedures
• Close relationship with key suppliers to ensure high quality of goods and delivery on time
• Lean procurement process to minimise inventory holding

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: International Integrated Reporting Framework (2013), Global Reporting Initiative (GRI) Standards, Smart Integrated Reporting Methodology