Perspectives on nature-related finance: Carlos Santos, Banco Bolivariano

A growing number of financial institutions throughout the world are starting to adopt the Taskforce on Nature-related Financial Disclosures’ (TNFD) recommendations. Global Canopy recently ran a TNFD implementation support programme with South American banks to help them get started with nature-related assessments, covering all phases of TNFD’s voluntary assessment approach, LEAP (Locate, Evaluate, Assess and Prepare).

Banco Bolivariano was among participants in the programme. We chatted with its Head of Sustainability, Carlos Santos, about the importance of nature in banking, key takeaways from the programme, his top tips for peers starting to explore the TNFD’s recommendations, and more.

This insight is also available in Spanish and Portuguese.

Name: Carlos Santos Job title: Head of Sustainability Bank name: Banco Bolivariano Location: Guayaquil, Ecuador

In what ways does your bank interface with nature?

Ecuador is one of the most biodiverse countries on earth, holding about 10% of the world’s plant species and a vast array of unique wildlife across its Amazon rainforest, Andean highlands, coastal regions, and the iconic Galápagos Islands. Banco Bolivariano is closely tied to this natural wealth through its lending to key sectors like agriculture, construction, aquaculture and others, all of which interact with the country’s ecosystems. Our bank has a long history of corporate banking in these sectors.

We issued our first blue bond last year – a significant milestone for us in promoting environmental sustainability. This issuance comprises a five-year US$80m blue bond, which supports funding for projects focused on sustainable seafood production, water and wastewater management, solid waste management, and the circular economy¹. It’s backed by investment from IDB Invest and FinDev Canada. The bond structure includes performance-based incentives tied to environmental goals, with penalties for non-compliance. This issuance aligns with our strategy to support environmental protection while meeting investors’ objectives. Ecuador is a major global exporter of shrimp, and Banco Bolivariano has long backed the shrimp industry. This bond will fund sustainable projects in seafood production, aligning with the bank’s commitment to sustainability and Ecuador’s economic interests.

How has your bank’s perspective on nature evolved, and how does your role fit in?

Banco Bolivariano’s perspective has evolved from initially perceiving environmental issues in isolation from the rest of the bank to now integrating sustainability into the heart of our operations and strategy. My role is to integrate nature into our core business.

“My objective is to ensure all areas of the bank recognise nature as a stakeholder in decision-making processes, and getting internal recognition that our business structure is closely tied to the health of our ecosystems. As a bank, I believe we are an agent of change, and through our credit offering, we can encourage clients and industries to integrate nature into their processes, fostering a shift toward more sustainable practices.”

I’ve been at the bank for two years – part of a four-member team – and my role has changed in line with this evolution in the bank’s thinking. My role has expanded over the years to drive initiatives to promote sustainability across all parts of the bank and its operations. A key aspect of my role is to assess the potential risks and impacts on both nature and the bank when providing finance to clients in industries that may affect the environment. For us in the sustainability team, tools like ENCORE have been crucial in assessing and understanding environmental risks. These tools provide valuable insights that help us identify potential impacts and make informed decisions to promote responsible and sustainable financing.

Why is it important for your organisation to integrate nature into your business strategy and operations, and why should other banks consider doing this?

Integrating nature into our business strategy is crucial not only for managing environmental risks but also for unlocking long term value. As a bank, our clients’ activities, especially in sectors like agriculture, energy, and aquaculture, are deeply connected to natural resources. This approach also creates opportunities for innovative products like green and blue bonds, meeting investors’ demand for sustainable investments. Aligning with environmental goals strengthens our market position and supports the resilience of Ecuador’s nature-dependent economy – a strategy other banks should consider.

At what stage is your bank with regard to integrating nature into its ‘business as usual’ operational processes, decision-making and business strategy?

We are at the early-bird stage! We recently released our first Task Force on Climate-Related Financial Disclosures (TCFD) report, which was a big milestone for us. And we’re one of the first private banks in Latin America to start adopting the TNFD. It’s been a positive move for us. Recently I went to a sustainable banking conference in Argentina, and Banco Boliviarino was recognised as a leader in pushing the TNFD recommendations and applying nature to sustainable finance. I believe we have a responsibility to lead by example and inspire other banks to start adopting the TNFD, acting as a regional reference-point.

We’re developing our operational response to the TNFD recommendations, and I believe it’s important to involve all areas of the bank in this. At the moment, our risk department is being trained on the TCFD and we will soon arrange training for them on nature and the TNFD. We aim to integrate climate and nature – TCFD and TNFD – into one report that we plan to release in December 2024. We’ve looked to AXA as a leader in this type of integrated climate-nature reporting.

What are some of the challenges that your bank has encountered when integrating nature into operations?

For me and my team, a significant achievement has been changing the bank’s perception of sustainability as a cost centre to instead recognising it as a value-driver. We have a big challenge in integrating climate change and nature – both at the same time! And we need to train all our colleagues in the bank – from the leadership team through to all our frontline staff – in these topics. The lack of robust environmental data to guide our decision-making is an ongoing challenge, but ENCORE and the WWF Biodiversity Risk Filter have been helpful tools in this respect.

How did Global Canopy’s programme change your bank’s views and understanding of the TNFD, and what were your key takeaways?

Global Canopy’s familiarisation programme highlighted the TNFD’s strategic value to our bank. It’s not just about producing a report – it’s about proactively managing risk and identifying opportunities related to nature. It broadened our perspective on environmental risk to include implications of nature-related impacts and dependencies across the bank’s portfolios.

A major takeaway from the programme is that holistic risk assessment is key because the LEAP approach emphasises the importance of considering both direct and indirect impacts on nature in financial risk assessments. Data-driven decision-making is vital, underscoring the need for environmental data collection and integrating nature into the bank’s strategy for effective risk management.

How will this likely change your bank’s ways of working?

We are actively figuring out when and how to apply the LEAP approach with different clients, prioritising sectors that represent a high risk in our portfolio. We’ll continue to invest in enhancing our data collection and analysis tools to better determine nature-related risks. This should enable us to have meaningful conversations with our clients and investors about nature. Hopefully our knowledge and approach will encourage clients to come to us for advice on making better decisions for nature.

What tools do you think are most useful in supporting your bank to screen dependencies and impacts on nature?

Environmental and social risk analysis systems are helpful in providing robust insights into the level of risk each operation or client represents. We have an internal system that evaluates each operation and categorises its level of environmental and social risk. For those that we determine to be of highest priority, we use ENCORE. It helps us identify our financial activity’s impacts and dependencies on natural capital by providing details on ecosystem services and associated risks. It’s a really good tool to help us prioritise areas where we need to mitigate environmental impacts.

What are your top tips for counterparts in other banks who are starting to explore the TNFD recommendations and the LEAP approach?

First, start with foundational knowledge. Learn the basics of nature – ecosystems, biomes, and how natural services support the economy. This will help you better engage with nature-related risks. Also, familiarise yourself with the TNFD, and how it differs from TCFD, to navigate environmental risk management effectively.

Next, identify the relevant sectors in your portfolio. Look at which sectors are most exposed to nature-related risks. In our case, we focused on agriculture and aquaculture, which helped us build our expertise in a targeted way. My advice is to start small – pick one or two sectors, and as you gain experience and your processes mature, you can expand.

Then, it’s essential to conduct a comprehensive assessment. We applied the LEAP approach to our clients and used tools like ENCORE to really dig into those sectors. This allowed us to identify key impacts and dependencies on nature.

Aligning with your business strategy is another crucial step. I recommend referring to UNEP FI’s PRB Nature Target Setting Guidance. This resource helped us ensure that our sustainability efforts were fully integrated into the bank’s core business strategy. And most importantly, remember that applying these insights to your day-to-day operations is what makes the difference.

Another tip is to leverage industry best practices. Many companies already have strategies in place due to their reliance on natural resources. Stay close to your clients, learn from their approaches, and collaborate with peers and environmental organisations. Sharing knowledge is essential to accelerate progress.

Engage your C-suite level leadership from the start. Their support for the TNFD recommendations sets the tone for the entire organisation and demonstrates a strong commitment to sustainability.

Finally, apply and integrate these principles into your daily operations. TNFD is not just about producing a report – it’s about adding value to your business and building long term sustainability. This approach benefits not only the bank but also our clients and stakeholders.

Global Canopy is a founding partner of the TNFD, and was an official piloting partner for the TNFD prior to the launch of the TNFD Final Recommendations in September 2023. We continue to provide technical expertise to the TNFD, and to build capacity among companies and financial institutions, preparing them to get started with adopting the TNFD recommendations. Global Canopy’s TNFD implementation support programme for South American banks was funded by Norad.

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¹ Based on the Green Bond Principles 2021 (GBP) and the Sustainability Bond Guidelines 2021 (SBG), issued by the International Capital Markets Association (ICMA).