Yes Bank - Case study

YES BANK, since inception, has firmly placed inclusivity and sustainability as part of its vision and strategy. Natural Capital is one of its key focus areas that has helped the Bank ensure risk mitigation, and cleaner portfolios. Being the fist Indian signatory to the Natural Capital Declaration (now the NCFA) helped the Bank build its domain expertise and today, YES BANK has one of the largest Renewable Energy lending portfolios among private sector banks, is the first Indian bank to be ISO 14001 certified for Environmental Management System and is recognized as a Climate Disclosure Leader globally.

“Our participation in the development of Finance Sector Supplement to the Natural Capital Protocol has allowed us to apply this methodology to YES Bank assured green bonds, and to measure the impacts and dependencies of the projects which these bonds have financed. This process has allowed us to improve existing risk mitigation measures and to assess the impacts we are having through the lending of these assets. I would urge other financial institutions to use the Natural Capital Coalition’s Protocol, sector guides and Supplements. They have helped us to assess risks, highlight opportunities and build on our overall organizational strategy.”
Namita Vikas Group President & Global Head – Climate Strategy and Responsible Banking, YES BANK

YES BANK took a commitment of mobilizing USD 1 billion towards climate action and financing 5 GW of renewable energy till 2020 on the eve of COP 21, in order to support India’s ambitious renewable energy targets of 175 GW renewable energy capacities. The Bank identified green bonds as one of the key financing instruments to channel finances for India’s green growth. YES BANK has issued three green bonds so far amounting to approximately USD 260 million (INR 1645 Crores).

The Bank decided to apply the Natural Capital Protocol on its green bonds to study their alignment to natural capital concerns and measure the impact and dependencies of the projects funded by these bonds. The Protocol was also used to understand the risks and opportunities arising from their use and investment of the proceeds.

The objective of the assessment was to assess whether all natural capital impacts and dependencies are accounted for the projects funded by green bonds proceeds whilst checking the efficacies of existing strategies used to manage them and have better stakeholder engagement.

Outcomes:

These projects not only have a positive environmental impact but also strengthen India’s energy security. The green projects funded by the proceeds of Green Bonds issued by YES BANK will annually generate around 2.35 million MWh of electricity which is equivalent to the volume of electricity required to light up around 2.32 million households in India, in a year.

However, it is important to understand that though renewable projects being financed through green bonds have a huge positive environmental impact, there may be negative impacts as well which if not managed properly can be disturbing for the environment and society. Some of these identified impacts have been listed below:

  • Wind energy: noise, visual impact, impact on bio-diversity, change in land use, habitat loss, rehabilitating locals, etc.
  • Solar energy: change in land use, water, habitat loss, rehabilitating locals, etc.
  • Construction phase of these projects also carry significant environmental and social impact

The exercise of applying the Natural Capital Protocol (NCP) Financial Sector Supplement (FSS) on Green Bonds have helped the Bank establish that the existing measures put in place are effective enough to mitigate any natural capital risk that may arise from the project’s operation, as well as identify the positive contribution to society through reduced carbon emissions, or through national energy security. The Protocol has also helped the Bank to validate its internal policies and processes in place to benchmark itself with Green Bonds Principles and confirmed its alignment with NCP FSS to a high degree.