Last December, Shriram Finance announced its decision to have a separate vertical for green financing. Christened Shriram Green Finance, it has set itself a target to achieve an AUM, or assets under management, of `5,000 crore in three-four years. With an existing presence in the retail NBFC space, the new venture will initially build its EV portfolio in Karnataka, Kerala, Delhi NCR and Maharashtra.
“It is important to be a part of the overall ecosystem,” says Umesh Revankar, Executive Vice Chairman, Shriram Finance. For the company, sustainability revolves around empowering the underbanked and underserved. “For around five decades, our business strategy has focused on uplifting livelihoods,” he says.
For the company, it was life as usual till high levels of interest from global investors in socially impactful and transparent financing models changed everything. “This external interest aligned with our internal commitment to articulating our social outcomes more systemically,” says Revankar. ESG moved towards becoming a strategic priority in the 2020 fiscal. He says it led to the establishment of a social finance framework to lay the foundation for mobilising ESG-labelled funding. “We raised the highest volume of social-labelled financing by any NBFC in the country with landmark transactions such as our award-winning ECB and securitisation deals.” This striving to adapt to evolving situations makes Shriram Finance a worthy recipient of the Sustainability Leadership Award (Upper Layer NBFC).
The focus on ESG gained momentum during this phase. “A board-level ESG committee, chaired by an independent director, was constituted. We also set up a strong governance structure, drew up a focused ESG strategy, and had a dedicated vertical for reducing carbon emissions through financing of green assets,” says Revankar.
Within Shriram Finance’s key sustainability pillars, a critical piece is the value chain code of conduct. “These are supported by policies and regular ESG training for our employees. Our environmental and social management system guides our lending practices and ensures alignment with ESG principles,” says Revankar. Then, there is the EV financing part, one that is still evolving.” Revankar says the company has proactively launched initiatives to promote cleaner mobility financing. “We run targeted campaigns offering longer tenors and concessional interest rates for EVs, particularly in two and three-wheeler segments.” This is in line with Shriram Finance’s focus on first-time borrowers and last-mile operators. “It leads to a double impact of social inclusion and environmental benefits.”
The scale factor—a pan-India presence and a customer base of more than 9.56 million—helps in pushing the cause of vehicle financing through the social finance framework and green financing initiatives. “Through this, we have mobilised over $6.5 billion through onshore and offshore channels, including loans, bonds and securitisation,” says Revankar. He pauses to outline how petrol engines have been around for a century, while diesel is about 60 years old. “EVs are a recent phenomenon and their efficiency is now being understood. Nordic countries initiated it and the growth there has been very impressive.” The secret lies in creating both scale and infrastructure to propel growth. According to Revankar, his company’s differentiation comes from, apart from the green vertical, encouraging women borrowers (for whom concessional rates are offered on loans and higher rates given on deposits) and reporting lower emissions across the portfolio.
Revankar is clear that the current initiatives will lay the foundation for “a much larger, long-term sustainability roadmap.” The systems and frameworks that are being put in place, he says, such as ESG-linked KPIs, value-chain assessments and product-level innovations, will drive the next phase of transformation. On the anvil are plans to expand into green financing (for EVs, battery infrastructure, rooftop solutions), deepening engagement with regulators and investors and scaling up climate-risk assessments into lending decisions and offering preferential rates for low-carbon assets. “We believe that the steps taken by the company and, increasingly by the regulators, on ESG disclosures with compliance will catalyse participation from ESG-focused investors. This will enable access to lower-cost and long-tenor capital for companies with strong ESG credentials,” he adds.
Sustainability, for him, is not a box to tick but an evolving journey. “Our goal is not just to adopt the best practices but to lead the way in redefining responsible and inclusive finance,” Revankar sums up.
@krishnagopalan
