For anyone who knows the company, be it a customer or investor, Alliance Finance Company Plc (AFC) winning the 2021 ACCA Sustainability Reporting Award in the Financial Services and Insurance category, while significant, is a no-brainer. That is because holistic sustainability is more than a slogan but a core strategy at AFC. Here, AFC’s Chanuka Dilhani, Manager – Sustainability and Strategic Planning, explains how a sustainabilityfocused business strategy is helping it to navigate the challenging economic environment and sustain growth
Alliance Finance wants to mainstream sustainable financing. What does that mean, and why does it matter to Alliance Finance?
It’s all about the big picture, really. Micro, small and medium enterprises (MSMEs) that are conscious about making a social and environmental impact have a crucial role in developing the country sustainably. Our mission is to bridge the gap so that global development finance institutions and impact investors can channel investments to businesses that push the sustainability agenda in Sri Lanka. All our financial products and solutions, be it deposits, leases or loans, are designed to enhance living standards while contributing to sustainability.
Can you take us through some of your sustainability initiatives?
It all starts with our people. They are the ones driving the strategic and sustainability agendas of AFC. Our sustainability objectives are as important as our strategic ones and therefore included in job descriptions and KPIs of our people. We have a private superannuation fund to which AFC contributes double the statutory requirement; our gratuity scheme contributes 400% over the minimum legal limit; and we have profit-sharing bonus schemes to appreciate, motivate and reward our people.
AFC is the first financial institution in Sri Lanka to commit to the Karlsruhe Resolution to promote the UN Sustainable Development Goals and the Paris Climate Agreement. We then broadened our corporate vision to make the world a better place and adopted three high impact goals directly linked to SDGs. Our first high impact goal is to reduce the national carbon footprint by 120,000 metric tons by 2030; the second is addressing poverty alleviation with an action plan to improve access to finance amongst marginalised communities, and the third is to develop 100,000 social enterprises in the MSME sector by 2026.
We allocate 8% (about Rs80 million in 2022/23) of our profits for sustainable initiatives annually. We have several projects targeting biodiversity conservation and ecosystem restoration, social entrepreneurship development and creating more sustainable digital branch operations.
Among our many projects is one to plant a million trees by 2026 also foster ethnic harmony and unity. Incidentally, that’s also how many trees it would take to negate the annual carbon emissions of the vehicles in our leasing portfolio. Last year, we rolled out the first batch of gas-powered three-wheelers in a pioneering project to convert engines to more efficient and eco-friendly fuel sources. Apart from these, all 92 branch offices in the AFC network have their own social or environmental projects.
How has that sustainability focus, amidst a crisis, benefitted the company?
We continued to drive our sustainability agenda with vigour, and we are proud to be living proof that sustainability can be good for business even during hard times. Despite a torturous couple of years for the economy and the NBFI sector, our lending portfolio expanded by 34%, even as the rest of the NBFI industry saw marginal growth, and profitability grew by 155% (as of end-December 2021).
The relentless drive and passion for holistic sustainability from our shareholders and board members, accompanied by significant investment, are the reasons for our success, for the most part. The cascading impact of our sustainability culture that is well facilitated and lived by the senior management and every employee has made a difference on the ground.
It is fair to say that in the banking and finance sector, holistic sustainability has always been a true differentiator of AFC as a value-driven financial institution. Our commitment to sustainability has helped us garner financial support from best-in-class DFIs and impact investors for our sustainable business initiatives throughout this unfolding crisis.
Can you tell us about your network of impact investors and how those relationships have evolved over the years?
We have so far attracted over $48 million from impact investment firms like Symbiotic, Tridos Investment Management, DWM, Enable Capital Management, FMO and IFC. In 2021 alone, we attracted impact investments worth $15 million, a testament to the growing confidence and trust of the global impact investment community in Alliance Finance.
The funds generate loans for MSMEs that can have a positive sustainability impact. We extensively evaluate their compatibility with our sustainability philosophy and require them to sign their consent to monitor even their suppliers and other business partners for environmental and social impact. AFC conducts business diligently, avoiding people and companies that are not sustainability-oriented and those that disregard other basic best practices such as the ILO labour conventions.
As we look to the future, we will only continue to drive the sustainability agenda with much more grit and intent because that’s the best way to help our stakeholders through this economic crisis and lay solid foundations for a more equitable, inclusive, and prosperous future.