Informe de Sostenibilidad - cajarural.com · informe de sostenibilidad. contents. sustainable agriculture renewable energy energy efficiency sustainable forest management waste management

Informe de Sostenibilidad

CONTENTS

SUSTAINABLE AGRICULTURE RENEWABLE ENERGY ENERGY EFFICIENCY SUSTAINABLE FOREST MANAGEMENT WASTE MANAGEMENT AFFORDABLE HOUSING SOCIAL INCLUSION EDUCATION ECONOMIC INCLUSION

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Caja Rural de Navarra

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Caja Rural de Navarra, as part of its role as a regional cooperative retail bank, has been concerned to create a Sustainability Framework. The framework aims to develop those financing lines that have the greatest social and environmental impact on the regions where the Cooperative Bank is active. While all the bank’s business, including all its lending, is focused on creating value and driving the regional

economy, the sustainability framework specifically focuses on financing lines that show a clear commitment to social and environmental impacts.These lines are consistent with the principles of commitment to its local social and natural environment and in line with the ICMA Green Bond Principles1 and Social Bond Guidance2, the most commonly used international benchmarks for this business. The sustainability framework also

SUSTAINABILITY REPORT ON THE LOAN PORTFOLIO 2016

NON BINDING ENGLISH TRANSLATION FROM THE ORIGINAL IN SPANISH. IN THE EVENT OF DISCREPANCY, THE SPANISH-LANGUAGE VERSION PREVAILS.

1 http://www.icmagroup.org/Regulatory-Policy-and-Market-Practice/green-bonds/green-bond-principles/2 http://www.icmagroup.org/Regulatory-Policy-and-Market-Practice/green-bonds/guidance-for-issuers-of-social-bonds/

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includes guidelines for issuing “sustainable” financial instruments in wholesale markets. In these cases the Cooperative Bank commits a sum at least equal to the capital raised from the “sustainable” instruments issued to financing future or existing projects within its identified sustainability lending lines. This binds it to investing amounts that least match the amounts issued in projects that meet the criteria of the sustainability framework.

All relevant business areas of the Cooperative Bank have been commited in analysing and monitoring individual projects to be included in the sustainability framework. This provides a fund of detailed knowledge about each loan which allows them to be approved for inclusion in the sustainability framework and also

provides data for analysis and follow-up over time.

The framework incorporates the current sustainability reporting process, designed to provide greater detail on the amounts and categories in each sustainability credit line and on the impact these lines are having on wider society and the environment. The Cooperative Bank sees this analysis as a long-term project in which data can be continuously improved and refined over time.

The sustainability framework of the Caja Rural de Navarra loan book consists of 9 different financing lines, with a total volume of over €2,500 million and 35,000 borrowers. Details of Caja Rural de Navarra’s “sustainable” financing lines at end-2016 are shown below.

SUSTAINABLE

Financing lines [millions of euro]


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Caja Rural de Navarra’s sustainability framework was the subject of a Framework Review and Second Opinion report by Sustainalytics and

was analysed by DZ Bank’s ESG team, which awarded it the DZ Bank seal of Sustainability.

http://www.cajarural.com/rurales/3008/V02/acceso_ingles/pdf/DEF-sustainability_bond_frameworw_and_opinion_cajardnv.pdf

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AGRICULTURE

This category includes loans intended to reduce greenhouse gas emissions by making farms more efficient, reusing waste products, maintaining the rural environment, etc..

It is important to stress that Caja Rural de Navarra retains a special commitment to farming, both because of its origins and because of the important role played by the rural world in sustainable development and the future of the regions and

communities in which the Cooperative Bank operates.

The Cooperative Bank analysed each loan included in this category for compliance with the above aims. Based on an analysis of information collected, the current sustainable agriculture line totals €49.8 million, spread across 199 loans to 166 borrowers.


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RENEWABLE ENERGY

This category includes loans to fund the generation of electricity from renewable sources – solar, wind, geothermal, hydro-electric, etc. – and the use of bio-fuels, development of infrastructure or systems for renewable energy and the manufacture of components for these industries. Based on an analysis of information collected, we calculate that the total sustainable energy credit line totals €43.5 million, spread across 76 loan transactions to 48 borrowers. The Cooperative Bank also analysed loans in this category individually, classifying them into the following types based on their purpose:

Renewable energy generators:

50 transactionsoutstanding 22.5 mill. €

Manufacturers that mainly supply R.E. equipment:

26 transactionsoutstanding 21 mill. €

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ENERGY EFFICIENCY

This category covers loans whose purpose is to develop products and technologies that reduce energy consumption or manufacture components that contribute to this aim. Based on an analysis of information collected, we calculate

that the current loan book for these purposes totals €76.7 million, spread across 320 loans to 155 borrowers. The Cooperative Bank also analysed loans in this category individually, classifying them into the following types based on their purpose:

138 transactionsloan book 10.9 mill. €

Modernisation of industrial facilities to reduce their environmental footprint [improving insulation and reducing CO2 and NOX emissions]



Renewing equipment to use materials with a lower ecological impact and/or reduce consumption on the goods produced



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Renewal of buses and other transport vehicles



Electric bikes for urban mobility schemes

1 transactionsloan book 76,000 €

6 transactionsloan book 349,000 €

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SUSTAINABLE FOREST MANAGEMENT

This category covers loans whose purpose is forestation, reforestation and the development of forestry plantations.Based on an analysis of information collected, we calculate that the loan book for these purposes totals €1.8 million, spread across 4 loan transactions to 2 borrowers.

The Cooperative Bank analysed each loan in this category, concluding that this line has helped fund the planting of 425 hectares of forestry land.

WASTE MANAGEMENT

This category includes loans to develop equipment and technology that make more efficient use of resources and/or reduce waste generation. Based on an analysis of information collected, we calculate that the current loan book for these purposes totals €18.3 million, spread across 44 loans to 27 borrowers.The Cooperative Bank analysed loans in this category individually, classifying them into the following types based on their purpose:


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AFFORDABLE HOUSING

Affordable housing – which falls into two types: VPO, officially protected housing, or VPT, regulated price housing – are price-capped homes intended as principal residence for their occupants. They are allocated by public tender on terms that include requirements such as income level, number of family members, etc. The aim of VPO/VPT projects is to allow citizens with lower incomes (or who meet other qualifying criteria) to buy or rent good quality and appropriate housing at accessible prices. In our case, before lending to customers to buy such homes we must have pr2r authorisation from

the local authority which guarantees to us that the borrower meets all necessary requirements.In general, loans included of this type are to:

> Individuals taking out a mortgage to buy a VTO/VPT home. > Developers who take out a

mortgage to build a VTO/VTP building which will subsequently be sold on or let out at a social rent to people meeting the necessary requirements.

Recycling of industrial waste [metal, tyres]


Manufacture of commercial products from recycled materials


Industrial waste treatment


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Loan status Standard 98.82% +90 days overdue 1.18%

Breakdown of social housing loans by borrower:

> 98.8% were to individuals (of which 40% had two or more signatories and 60% had a single signatory). > 1.2% were to legal entities.

Nearly all loans, therefore, went to individuals and the Cooperative Bank is helping in this way to bring home ownership within the reach of a large number of people while simultaneously diversifying risk in this financing line.

The age distribution of borrowers (at the time they take out the mortgage) is as follows:

Key indicators report

First, the basic figures are: > Total investment of €711.5

million > Spread across 7,562 loans > To 7,155 borrowers, of whom:

Individuals 7,073Legal entities 82

Regarding the current status of these loans, only 1.18% of the loan book is more than 90 days past due, very similar to the ratio for other housing mortgages granted by the Cooperative Bank. This indicates that although the customers are normally on lower incomes they are just as likely to meet their payments as the Cooperative Bank’s other home mortgage borrowers and that their household finances can generally bear the cost of buying a home under these schemes.

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Age of borrowersUnder 25 3.03%25 to 30 26.15%30 to 35 32.17%35 to 40 17.38%40 to 45 10.14%45 to 50 5.54%Over 50 5.59%

More than 61% of loans granted to individuals were to people aged under 35, suggesting that this type of financing is making it possible for a great many people to access their first home.

Likewise, just over 5.5% of loans were to people over 50 who, due to various life circumstances, need a home later on in their lives and might otherwise be at risk of social exclusion.

The conclusions of the first paragraph above are confirmed by analysis of the number of children of those taking out these loans. Over 67% have no children at the time they sign the mortgage.

Number of children0 children 67.95%1 child 15.64%2 children 13.68%3 children 2.17%4 children 0.31%More than 4 children 0.25%

Also, data collected means we can show (see table below) that more than 55% of loans granted were in towns with a population of less than 25,000 residents with just over 14% going to villages of less than 5,000 inhabitants, helping sustain small populations and counter the risk of rural depopulation.

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Pop. per town/villageLess than 5,000 14.45%5,000 to 10,000 15.45% 10,000 to 25,000 25.32% 25,000 to 50,000 12.24% 50,000 to 100,000 1.77% 100,000 to 151,000 5.24%151,000 to 200,000 14.28%More than 200,000 11.25%

Finally, the chart below shows the average income per person in the family unit taking out the mortgage. More than 72% of such families have below-average incomes per head for the Autonomous Region where they live, underlining the social character of such financing.

Ave. income per popLess than€13,000 72.68%€13,500to€25,000 21.39%€25,000 to€50,000 5.41%More than€50,000 0.52%

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SOCIAL INCLUSION

Caja Rural de Navarra has a special relationship with organisations working for social integration and social development in the areas where it is active.Caja Rural de Navarra’s involvement with these bodies takes a variety of forms, not limited to financing their social projects, and in some cases involving the Cooperative Bank meeting part of the costs of their educational activities.Specifically, our social inclusion activities can be divided into the following categories:

Disability: training and employment Rural de Navarra has for many years supported organisations that bring together people with a particular type of disability (physical or mental).

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Informe de SostenibilidadCaja Rural de Navarra

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These organisations run training and rehabilitation centres as well as special employment centres to support people into work. Caja Rural de Navarra devotes €7.1 million to this financing line, which allows 14 organisations to do their work managing Special Employment Centres, residential facilities and day centres.Together they provide training and rehabilitation services to more than 3,000 people and employ 2,000 people with different abilities. This supports nearly all the people with different abilities in Navarra.

Sport

Caja Rural de Navarra has an important commitment to sport and the personal development and inclusion of people through sport.We fund infrastructure and sports equipment for the different sports clubs and federations that focus on regulating and facilitating controlled and directed sports activities that meet the criteria of equality, health and preventative care, largely focused on base level sport, which is where our financing has most impact.This financing line has lent a total of €9.8 million to fund 48 bodies serving more than 55,000 people of all ages.


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Culture

Caja Rural de Navarra also provides €7 million of funding for investments designed to foster social integration through culture.The money goes to 75 cultural bodies active in fields such as music, language, food, customs, folk traditions, literature, theatre, cinema and many others.Together, they generate social cohesion irrespective of the circumstances of those who take part.

Social and health care

We live in an ageing population and Caja Rural de Navarra supports the building of infrastructure and equipment to provide healthcare and social and health inclusion of the elderly and young people with some degree of dependence.We currently support 3 residential homes that look after more than 295 elderly people. Total financing for this segment is €3.7 million.

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Social-economy

The social and economic background in which Caja Rural de Navarra operates is rich in charities, professional associations and research centres. Caja Rural de Navarra provides strong support for all these by funding the infrastructure they need to do their work, keeping small companies and the self-employed informed on tax,

employment, legal and financial matters.

They also have representative bodies speaking to the government and other private organisations. We have invested €1.8 million to support a total of 39 professional associations whose membership includes more than 1,000 professionals from various sectors of the economy.

Exclusion

Caja Rural de Navarra has a clear commitment to people of any age, origin and social class.For this reason we firmly support organisations working to include groups at risk of social exclusion:immigrants, the gypsy community, young people, drug users and the elderly unemployed.

We provide €5.8 million in financing to support 31 associations supporting the social inclusion of more than 3,000 people.

Based on an analysis of information collected, we calculate that the current loan book for these purposes totals EUR 35.4 million, spread across 286 loans to 210 borrowers.


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EDUCATION

Caja Rural de Navarra is also strongly committed to basic, intermediate and advanced training.It is in direct contact with public and private training providers.Caja Rural de Navarra’s involvement with these bodies takes a variety of forms, not limited to financing their educational projects and in some cases involving the Cooperative Bank meeting part of the costs:

Financing investment

New buildings, new equipment and other infrastructure (sports, cultural, etc.). Caja Rural de Navarra currently has €17.9 million committed to financing investments by 67 training centres with more than 25,000 students between them.

International scholarships

For university students and professional training.This provides financial support for students wanting to study for some time in educational institutions or companies abroad so that none is prevented from doing so through lack of money.These scholarships currently fund a total of 419 students.

Financial and road safety education

The Cooperative Bank runs an education programme offering workshops in 80 educational centres throughout Navarre for students aged between 8 and 14.Based on an analysis of information collected, we calculate that the

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current loan book for these purposes totals €17.9 million, consisting of 93 loans to 67 borrowers.

ECONOMIC INCLUSION

This item includes loans that meet the following requirements:

• Small loans that support economic inclusion, whether because of their small amount or because they provide access to finance for remote areas (where the Cooperative Bank has a particular presence).To qualify, loans must meet one of the following criteria:

a. It must be for less than €25,000

b. It must be made through a Caja Rural branch in a village of less than 3,000 population with below average income for the Autonomous Region.

• Loans to Entrepreneurs.

• Loans to SMEs as defined by the European Union.

Small loans and remote areas

Based on an analysis of information collected, we calculate that the current loan book in this category totals €712 million, consisting of 28,573 loans to 24,760 borrowers.

This is, therefore, a highly diversified line comprising many loans with an average amount of €25,000, which means we reach a great many people, particularly in rural areas and small population clusters.

Entrepreneurs

Caja Rural de Navarra has historically reserved a special awareness and treatment for small entrepreneurs seeking to start up a new business.Our presence in sparsely populated rural areas makes this a common story and today we can be proud to claim that some of the small businesses we have supported have grown into large companies employing many people and contributing to the sustainable development of their local areas.

As part of this commitment, Caja Rural de Navarra has for 10 years now been offering a specific financing line to support entrepreneurs called Línea INICIA. It provides funds to people who, individually or in partnership with others, start up a new business or economic activity.The line comes with special conditions attached regarding the amount, interest rate, guarantees and the process of analysis and approval which make it special.Currently the situation is as follows:


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> Total lending is €32.7 million. > We are supporting a total of

635 businesses. > The success rate of businesses

is 47%. > 1,133 individuals have

benefited from these financing lines. > The businesses supported

are spread geographically throughout the Cooperative Bank’s area of operations: Navarre, Basque Country and La Rioja as follows:

Navarre 50% Basque Country 44% Rioja 6%

the economic and social development of the areas where they work.

Financing SMEs

The basic data for this item show an accumulated amount of €881.9 million, with 3,689 loans to 2,201 borrowers.

The following data series, based on our analysis, show a significant number of positive social impacts:

Regarding the current state of these loans, 7.37% of the total amount is more than 90 days in arrears. This is a good figure given the average for the financial sector.

Loan status Standard 92.63%+90 days overdue 7.37%

Second, the number of transactions with micro-enterprises, mid-sized companies and SMEs (as defined by the European Union), shows

>The current NPL ratio is 1.13%.> The sectors supported vary widely but the most important are:services, industrial, food and technology

>In the 10 years that the line has been running it has supported a total of 1,307 new businesses which have substantially helped

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Companies by formPLC 22.26% Limited company 70.20% Cooperatives 5.54%Other 2.00%

For a deeper analysis of the real state of companies we have financed under this line, we attach two tables showing turnover and number of workers in each:

Turnover[millions of euro]

Less than€1m 33.22%€1m to€10m 50.54%€10m to€20m 8.98% €20m to€30m 3.65% €30m to€45m 2.17%More than €45m 1.44%

that more than 83% of loans went to micro-enterprises and small companies, underlining the effective penetration of the financing granted under this line and the effort made by the Cooperative Bank to maintain the local business fabric.

Companies by sizeMedium 16.24% Small 45.26% Micro 38.50%

Also, regarding type of customer, figures confirm that the majority are to limited companies (consistent with the points made above) and more than 5.5% are cooperatives (mostly in the primary sector), figures in line with our origins as a Cooperative Bank and our business philosophy.

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Note that, despite the size of these companies, we are in one of the most industrialised regions of Spain and this is reflected in a strongly international outlook by many of the companies supported, as illustrated by the percentage of companies that export, import or both: in total around 28% of the companies we finance through this line.Companies trading internationally

Importers 6.71% Exporters 6.52% Both 14.81% Neither 71.96%

Finally, to illustrate the diversification of financing granted, we include below a table of the different sectors to which the companies we have financed belong.

Number of workersLess than 10 46.10%10 to 50 40.77%50 to 100 8.79%100 to 150 2.42% 150 to 200 1.23%More than 200 0.69%

These two tables show the small scale of most companies financed by this line. More than 83% have turnover of less than €10 million and slightly more than 86% have less than 50 employees. Our financing, therefore, contributes to maintaining this important business fabric and the employment it generates. One additional figure to note is that we have granted more than 3,685 loans to these more than 2,200 companies for a total combined amount of €881 million and their average headcount is 22 employees. Our financing therefore has helped maintain more than 49,000 jobs in our region.

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Business sectorsAgriculture, livestock, forestry and fisheries3.86% Manufacturing 37.07%Construction 17.45%Wholesale and retail distribution 15.63%Transport and warehousing5.54%Hotels and catering 2.68%Property 5.72%Professional, scientific and technical 3.63% Administration and auxiliary services 2.64%Other 5.78%

NON BINDING ENGLISH TRANSLATION FROM THE ORIGINAL IN SPANISH. IN THE EVENT OF DISCREPANCY, THE SPANISH-LANGUAGE VERSION PREVAILS.

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Informe de Sostenibilidad - cajarural.com · informe de sostenibilidad. contents. sustainable agriculture renewable energy energy efficiency sustainable forest management waste management