Nova Ljubljanska Banka d.d. (NLBR) Earnings Call Transcript & Summary

Thank you for standing by. I'm Costantino, your Chorus Call operator. Welcome, and thank you for joining the NLB Group conference call and live webcast to present and discuss Creating Better Footprint, NLB Group Sustainability Report 2022. [Operator Instructions]. And the conference is being recorded. [Operator Instructions]. At this time, I would like to turn the conference over to Mr. Blaz Brodnjak, CEO; Ivan Tomic, General Manager, Strategy and Business Development; and Ms. Alenka Recelj Mercina, Head of Sustainability. Ladies and gentlemen, I will now read out today's agenda. Firstly, ESG landscape, expected trends in the next 5 years and importance of the NLB Group; secondly, NLB Group's sustainability strategy and journey towards Net Zero; and lastly, NLB Group 2022 key sustainability highlights and 2023 road map. And with that, I would like to pass the floor to Mr. Brodnjak. Mr. Brodnjak, you may now proceed.

Thank you very much, and good afternoon, and warm welcome, everyone, to our first webcast of this nature, specifically giving attention and focus to the entire sustainability and framework and landscape while we have been, of course, breaching many or majority of boundaries of the planet as we speak. And amidst of the continuous fights of [ lagomorphs ] for who will actually prevail in this context, we have, in NLB Group, sincerely and truly and generally -- genuinely committed ourselves to really take these things very, very seriously and really start working intensively on what kind of footprints we actually do create. And this is not only, of course, climate issues related. It is also societal issues related. While, of course, we are promoting passivism; while we are, of course, also promoting sustainable way of living; while we are promoting returning to the habits of our grandparents. We namely firmly believe that the key of sustainable turnaround actually lies in us simply returning to the ways of living a couple of generations ago, which means that we simply contain consumerism logic. We simply don't buy what we don't need. We don't throw food away, and we consume locally produced seasonal one. But of course, we are faced with also framed -- structured framework that is addressing this globally and especially so and specifically so even more intensively in the later period within the European Union and European monitor union context. So there has been a significant focus to this area of activities coming from European Commission, European Central Bank and many other bodies. And of course, there have been organized movements and organized institutions that have been dealing with this lately very, very -- in a very determined way. NLB, as the institution has by that obviously joined several movements of this nature, committing not only to Net Zero alliance, banking alliance, also to UN principles for responsible banking, also actually committing to the very ambitious plan by also obtaining external evaluation to the ESG rating and so on. On the other hand, this story, of course, will not end here. This is just the first step of the very long journey. We have committed ourselves to be away from fossil technologies as much as possible already years ago, especially when it comes to coal. But on the other hand, we really are fully determined to actually drive the whole region forward in this -- on this path. So we have been the first one of this nature from the financial institutions headquartered in this region. And this specific event today is actually signaling this role, it's a bit pretentious to all of us actually drafting the agenda for the others in this region, not only when it comes to, of course, the -- what we do on our own, but of course, what we do with our decisions impacting others. And this is not limited clearly to the carbon footprint measurement. It is, of course, also directly influencing credit decisions and by that directly guiding the economy of the region in a certain direction. We can't do it alone, but we have been systemically important in six countries of the region. And by that, of course, our decisions matter, and they do matter to the extent that we believe can influence others to move also in this way. In the upcoming years, we expect even more strengthened framework when it comes to, of course, regulation, when it comes to formal expectations of various stakeholders, including, of course, very prominent ones in being investors. On the other hand, clearly, we are still -- we have a long way to go still in proper capturing of data, in proper capturing of what we actually do cause with our behavior and our activities. If you hear the horns in the background and sirens in the background potentially, this is, for example, a protest of farmers today who have been now more or less confronted by a much more strict expected framework when it comes to the use of phytopharmaceuticals protections, which means that, of course, when it comes to self-sufficient production of food, this will actually cause certain impact by them being forced to use more scientific methods, forcing them to, of course, be more innovative in how to produce food and of course, forcing them in many other directions. And this will be a conflict. This will be a struggle. And this is something we need to -- we can anticipate. There will be a strong pushback from various parts of the society. And we simply have to be strong enough as a collective way of working. [ lagomorphs ] finally realizing that the only way forward is systemic thinking on a global level. But the only way forward is solidarity. More developed countries actually provide certain framework to help less developed countries out while containing our own consumerism, while addressing our demographics in a sustainable way as well, while supporting meritocracy and key societal pillars to include the handicapped one's to the extent that, of course, there is a kind of a balance in society. It's not only about democracy. It's about truly caring because there are various ways of democracy obviously in this world, trying to being imposed on some others by us understanding there are limitations of these democracies as well in a global context. So my message is that in NLB Group, we are fully committed. We mean it truly and genuinely, and we are changing the ways we live, not as the business, but as individuals. It is going to be a quite a hefty journey in front of us. And before we reach everyone's heart in our business will take some time, but we want to go more forward. We want to go more farther than that. We want to reach hearts of every individual in this society in this region, in the impact area of our business and operations. And by that, my colleagues, Ivan and Alenka, will introduce, while concretely, we have been working on and what is coming. And I will shortly wrap up then at the end after we will, of course, also give you a chance to raise any questions or any dilemmas you might have. So I pass by that, the word to Ivan, whom I kindly ask to continue and then Alenka will take forward.

Thank you, Blaz. So I'll start first a little bit on the footwork that's been happening in the background in last years, talk a little bit about what have we done, what have we already achieved and what we're planning to on the achievement side. Later on, Alenka will address it in more details. So here, let me first explain where did we place actually sustainability in our organization. Probably the best analogy is the Roman or a Greek temple [ Andre ]. If you have that probably have seen that strategy temple where you have the mission and vision on top that are supported by strategic pillars that stand on the foundation. And normally, foundation, you have the values. So that's where we placed it. Sustainability is part of the foundation of this company. So it's transferred so to the entire organization. It does touch upon every aspect of banking, every organizational unit. So we have one small team that is coordinating all the efforts. And we are not -- some other banks opted for creating a bank within a sustainable bank within a bank. We didn't go for that option, we went for a very small central team that cooperates heavily with the colleagues all around the bank. Then I'll start here. How did we start? I'll take it counter-clockwise. So first, we -- on the previous page -- I'm still on Page 6. So basically, here, we first defined okay, eighth stakeholder groups, and we took a look, okay, what is stakeholder group's need from us, what their needs? I mean, us as well as employees, what investor needs. And then we map that to sustainability. So one example could be, is it risk management? Is it profiting from earlier trends? Is it -- be it employer of choice, is it reputation? Then we realize that we need to put a dozen actually colleagues from [indiscernible] the high teens number of policies and procedures that are the foundation of the risk management so that we are able to scan environmental and social risk that we are avoid, the adverse one that we promote actually the positive ones. Then it was very natural that we understand the principles for responsible banking and that we align our business model to all six. Then last year, we have undersigned the Net Zero banking alliance that will -- and we started working on that this year that will define basically which exactly sectors we will be promoting. And as one of the key roles of any financial -- systemic financial institution, our role is to support growth, but we want to support growth in sustainable sectors. And we want to be transparent with everyone. We want actually other institutions, be it financial or not, to follow the way. That's why we want to play it as transparent as possible so that we also inspire others in our region to follow sustainable -- sustainability movement because we do believe the sustainability is a force for good for our region and for other regions in the world. So how did we actually slice and dice this sustainability mountain? First, we put our group's sustainability framework basically that [indiscernible] an online document on our website. And it lays down the foundation, how do we approach sustainability and what do we exactly do. I will then move to the next page with the time line. So I would say that from 2020 and 2021, the beginning was the year of the footwork. Maybe the most important is that we joined UNFI and that we approved the sustainability program, and we put -- basically, we rolled up our sleeves to address different elements of sustainability. Then in 2021, we did develop the framework with the three pillars, which we will see on the next page. We implemented the SMS procedure in the bank, and we showed our sustainability report that for the first time, actually transparently, showed to us internally and external public, what is our operational carbon footprint. As well, we went through the UN-PRB exercise to align our business model. Then in 2022, there are three main milestones. We achieved a 46% reduction in our carbon footprint. So we went from 4 tons to 2 ton, which was quite remarkable within one year. We also received the rating from Systanalytics that placed us in top 15 banks that have been rated and we joined the Net Zero banking alliance. Moving on to the next page. Just briefly here, I wanted to show how do we -- so basically, how do we approach sustainability in our bank. There are three main pillars: one is sustainable operations; second, sustainable finance; and then third one is contribution to society. Within sustainable operations, this basically addresses what do we do internally as an organization. It doesn't matter what type of organization. So that our environmental and social footprint is improving that we do measure our impacts that we have responsible procurement that HR aspects are catered for. So this is quite large. It's a program we did -- a program that has several road maps on its own. Then moving to sustainable finance. That one is obviously key for future where we will be defining our targets within specific sectors. We will, of course, measure our carbon footprint when it comes to the financed emissions, and we will be tackling each sector by sector. And we'll be placing targets for especially high intensity sectors. And then the last and third component, we singled out actually from sustainable operations contribution to society because this part actually defines our sponsorships and donations that we are aligning with UN SDGs. Then moving on, I would go to the next page. I already mentioned there is no need to go deeper that we are fully aligned with the six principles of PRBs. And even if you take a look, this meeting is part of principal four and Principal six where we want to be transparent to all stakeholders and as I said, inspire other organizations to follow the way. If I would single out one, obviously, is the impact and target, I think we did in 2021 set some of the targets. We can see them actually directly on the next page. I think it's Page 9. Yes. So we put here three areas. So these are the targets we put in the first year: first area, climate; second, resource efficiency; and third, inclusive and healthy economies. On the financing side, we put EUR 785 million new production, only for corporate. For the first time, we are marching fairly decent toward our targets. We already have almost EUR 170 million pipeline fulfilled. There are new projects that did happen, but they are recorded only when the money is dispersed to the clients. And we will be looking at expanding this target once we complete the Net Zero banking strategy towards the end of this year. Moving on to the next one for -- by 2030, actually, we agreed that we will produce 70% -- that we will actually use 75% of all electrical -- for all energy actually coming from renewable sources. And last year, we managed to bring the target to 70%, and there are two main reasons is that in Slovenia and in Serbia, we do procure 100% carbon-free actually electricity. Then going on with the resource efficiency, the target of 50% paperless. 50% reduction from the baseline in 2019, which was the year before COVID. We are not that far away. We are already at 43% of the 50%. And the last target from the UN-PRBs is that we set our target on the digital penetration to be at 55%. We are just north of 40%. And it's moving towards the direction we do set. Here, we are a little bit limited and dependent, of course, on the market. Our markets are not the most, but not the least, digital on the plant. And we are setting a full program of incentives for people across all age groups to onboard -- to get them onboarded to digital accounts. Let's move on here. I already mentioned that we obtained the first rating last year. But bear in mind that this rating is based on 2021 deliverables. So we do expect actually improvement in the rating just because there are 2022 deliverable not factored in. And one of them, I already mentioned, minus 46% of operational carbon footprint will be addressed in the next year rating. Then I'll just finish off with the next page on the journey towards Net Zero. We did commit that by 2030, we will half our emissions, financed emissions. And by 2050, we will be aligned to Net Zero goal. First, so we started actually this year, this challenging exercise that has several phases. And we are in the first phase right now. We are measuring our emissions across different portfolios. I mean, mostly being corporate, retail and sovereigns. So that's in the plan for this year from the strategy itself. With that, I will pass to Alenka.

Thank you very much, Ivan, and good afternoon, everybody. Now I will provide some, hopefully, interesting insights with regards to sustainability agenda. We will touch upon 2022 key sustainability highlights, and then we will conclude this presentation with the road map for this year. Since we only have, let's say, 25 minutes left, I believe that I won't go into each and every detail. I would like to emphasize here that this presentation will be available for you on our web page, nlb.si. So you are kindly invited to download it and look to it again after this webcast. So the year 2022 was, for sure, quite turbulent, not only on the level of European regulatory framework with regards to sustainability, but it was also very turbulent for our ESG agenda for sure. In this region, a lot of crucial things actually happened in the year 2022, which pushed our institution, our bank into ESG direction as well. So as my colleagues mentioned, we decided to join a second initiative, Net Zero Banking Alliance. And this actually meant the start of development of comprehensive NLB Group Net Zero business strategy, which will show the results by the end of 2023. This is everything in line with the NZBA road map that is -- that we committed to. So hopefully, our next sustainability report will focus very much on category 15 financed emissions together with clear portfolios decarbonization targets. So we believe that this will be another interesting next step for our bank. So now I will try to focus a little bit more on numerical aspect of sustainability because, obviously, we have some numbers. But on the other hand, we struggled with some ESG data very much, which I believe is the same as all other financial institutions throughout Europe. So our carbon footprint measurement was prepared for the year 2022. We lowered our operational carbon footprint. I have to emphasized here, operational carbon footprint. So financed emissions were not measured for the year 2022. So we lowered it 46% compared to the year 2021. So 70% of our electricity comes from zero carbon energy source. And this, of course, added very much to good carbon footprint results. With regards to S in ESG, we again received Top Employer award. This happened 8 years in the row. Top Employer awards is provided by a Dutch Institute, and it's a very important international award. So we're very proud. Next important thing also was development of comprehensive human rights policy. I would like to point out that at the beginning of 2023, our bank also joined National Action Plan for respect for human rights in the economy. So this is Slovenian Action plan for respect of human rights in the economy. And together -- I mean, we have 3 years now to establish full system to monitor and to report on human rights status and situation in our bank. We also appointed human rights custodian in our bank and policy was also implemented in all of our members throughout the group. To raise awareness, we organized first NLB Group Sustainability Day. It was devoted to ESG elements, to ESG importance, to achieve better understanding of different parts of the bank, how crucial for our future work sustainability is. And for the year 2023, we plan to prepare our second Sustainability Day for everybody, so for our -- all employees in our group. With regards to G, so governance, we were very active in our Sustainability Committee. There were five sessions held. We tackled more than 22 topics. A lot of action plans were developed based on discussions at Sustainability Committee, where the whole Management Board is present and all -- and the majority of B-1 as well. Our Board team is becoming more and more compressive. We added another tabloid, another reporting to it at TCFD. We are, of course, at the starting point with the TCFD, but we are very much determined to make it more -- to go deeper with regards to data and share of women in management position. We believe it's pretty decent at 56% currently. So with regards to sustainable finance, our second pillar, which was already mentioned, there was EUR 167 million of sustainable corporate financing done in the previous year and EUR 53 million of green loans granted to private individuals. We developed a decent range of different sustainability-related products that are available to take from shelf, I would say. We also developed a web page, where our clients can see our offer. We are active in EBRD program, women in business in Montenegro where we can -- where there is a very good, I would say, environment to enhance women in business. Of course, we're not only careful about opportunities, but we are very much aware of risks related to ESG. As you may know, ECB -- NLB is ECB-related entity. And that's why we are enhancing our ESG risk management and climate risk management and with continuation of the implementation of ESG factors in lending process. We also developed an environmental and social management system and -- to tackle ESG risk management challenges, but I will say a little bit more later on. So regarding attribution to society, I would like to emphasize here that in the year 2020, the frame of health project was executed for the third time on the group level. And this time, we addressed companies in the region that prioritize sustainable ideas and solutions, altogether three concrete companies in the region participated and the best project was awarded with a price of EUR 50,000; second place project, EUR 30,000 and so on. So we were quite intense with this project. In the year 2022, also a special inclusive charity project was carried out in the festive season when we donated more than EUR 500,000 to humanitarian institutions. So if we move on, this is our corporate sustainability governance scheme. As you may see, it became quite comprehensive and NLB Group implemented this governance framework top down and bottom up. We wanted to make sure that all bodies,the competence lines and organizational units include the sustainability in ESG -- and ESG considerations in the respective work area and our responsibilities. Governance is also a focal point of our sustainability report for the year 2022. So you are invited to take a look. And with governance, of course, remuneration is very much related. So in the year 2022, part of the variable part of the salary of NLB Group's management Board's members was subject to performance assessment against goals in five key areas, namely sustainability, corporate governors, ESG risk management, transition and sustainability financing opportunities, operational and environmental impact and contribution to society. So weights were different for each member, of course, of the range spends from 5% to 20%. Regarding our operational carbon footprint, actually, a lot was already said. Once again, the most important thing is that we lowered our Scope 1 to 3 carbon footprint from 4 tons of CO2 per employee to 2.36 tones for employee from the year 2021 to the year 2022. And that we actually, as you will see further on, we integrated quite a lot of key energy efficiency measures. Maybe I will just quickly run through those that were implemented in the year 2022. We invested in branch renovation. We reduced actually ventilation and heating schedules and increased the waste -- increased waste air recovery percentage. Then we turned off night lighting where this was possible to do. We are constantly raising employee awareness regarding energy efficiency. Then heating and cooling were much reduced. So there were already a lot of measures done, but we plan also quite a lot of measures for the -- for next year's, such as installation of solar power plants, divestment of owned areas, reduced heating ventilation and cooling company business, work-for-home schemes and reconstruction and refurbishment of different office buildings. So in the area of risk management, as I said, our bank is ECB-regulated entity. ESG risks do not represent a new risk category, but rather one of risk drivers of the existing types of risks. So the management of ESG risks follows ECB and EBA guidelines with tendency of their comprehensive integration into all relevant processes. So the group conducts materiality assessment, which is part of our overall risk identification process. And we do this to determine the level o transitional and physical risk to reach the group's is exposed. It was realized that transition risk is assessed is much more material compared to the physical risk. We also expect that with the implementation of Net Zero strategy that its impact will gradually diminish. Based on industry segmentation of portfolio and corresponding emissions, the group has actually relatively low exposure to emission-intensive sectors. Again, much more about our risk management framework is available in our sustainability report for the year 2022. So to measure ESG components within our loan origination and monitoring process, we embed environmental and social management system. Actually, a big push to develop this system was our business partnership program with EBRD and MIGA. We actually implemented their environmental and social requirements and developed quite an extensive environmental and social management system. And this system, it starts with the exclusion list. So if I now jump to our exclusion list, which is quite extensive. Here, I would like to say that NLB group actually is committed not to provide any new financing to thermal coal mining or coal-fired electricity generation capacity in anyway, including eventual transitional enhancements. This exclusion list, as I said, is fully aligned with EBRD and MIGA as to a very important international financial institution with regards to sustainability. And for sure, this exclusion list will be developed in future years as well. So here, I would like to touch upon our portfolio product -- sustainable product portfolio. There were quite some new products for legal entities developed in the year 2022. Actually, we offered three new green loans for legal entities. NLB Green partner loan to finance the construction of turnkey solar power plants, NLB green loan for investments in the energy efficiency of business buildings. And then NLB green loan for reducing the carbon footprint that cover the area of energy efficiency, circular economy and sustainable agriculture. For your information, I would like to add here that for SMEs, we provide lower interest rate on green loans. This interest rate is about 45 basis points to 160 basis points lower than our, I would say, ordinary offer. And we -- there is no credit approval costs related to this offer. With regards to pride individuals, interest rate is lower for about 50 basis points, and we also offer EUR 100 lower credit approval costs. So there is quite an appealing offer as well. Our people -- very important slide, almost last but definitely not least, very much -- this is why there is a lot of text here because we really want to say a lot about this things, about employee well-being. We are very much aware that employee well-being will be a focal point of next 5 years with regards to sustainability. I would like to emphasize here that NLB Group's complying with, I dare say, all IO standards, local legislation, collective agreements and policies. And that's why we actually have a minimum of grievances and basically no loses with regards to labor practices. We also developed quite some initiatives to improve the organizational culture. We are very much trying to develop constructive behavior files. The values that our indicators for the future are growing, people encourage entrepreneurship and encouraging people. With regards to employee health and safety, we very intensively promote healthy habits. We provide safe and healthy jobs to our employees throughout the group. And we implement the joint measures like regular trainings with the risk assessment of individual groups of workplaces and measures to reduce the dangers that may occur in a different workspace. In the year 2022, 36% of employees who worked from home for a better work-life balance. Actually, our bank continuously enables employees to work from home. Of course, those employees whose presence is not essential to the business process. Regarding diversity, inclusion and gender pay gap, I would like to say that in the year 2022, the policy on the provision of diversity was developed, and most of the targets -- 2022 targets were already met. This policy on provision of diversity is developed for the level of management body and senior management of NLB d.d. Regarding gender pay gap, we realized that there is a slight gender pay gap, which is very much in line with average Slovenian gender pay gap in a Slovenian economy. The main reason for the gender pay gap in our institution is in a higher proportion of men in better paid positions and higher proportion of women in lower paid positions compared to overall gender structure in bank. However, we introduced many initiatives to close the gap and above all to raise awareness among employees to reduce the presence of unconscious bias. Employee engagement was pretty good. Actually last year, employee engagement in NLB Group has been measured and survey was completed by 73% of all employees, which is estimated to be above average. We have 44% of people that are engaged, 39% that were not engaged. And 70% of actively disengaged employees. So to wrap up, our sustainability road map. Here, I would actually like to mention only four things. I believe that the most important will be employee well-being, which we already mentioned a couple of times. Employees are super important for our agenda, for our sustainability agenda. The next thing that will be very much important in this year is our carbon footprint. We will measure financed emissions category 15. And we will, of course, disclose our baseline with regards to finance emissions. We will further develop and implement our Net Zero business strategy with decarbonization targets. And this will, for sure, stay our focal point. And we are very much aware that we will have to work with clients with regards to carbon footprint to get appropriate ESG data and to work on firm transition strategies so that we can move all and everybody move into the same direction, which is zero carbon for sure. We will be very focused on sustainable business opportunities and ESG risk management in line with our supervisors expectations and, of course, in line with all the regulatory requirements. So I believe that, that would be all from my side. We have a really good signing. I see. So thank you very much. I would like to invite you now. If you have any questions, please, the floor is yours.

[Operator Instructions]. The first webcast question comes from Maya from Slovenia. And I quote, "how do you prepare on upcoming CSRD directive and ESRS standards?

Alenka, will you answer?

Yes, I'm happy to answer this question. So regarding CSRD and of course, CS3D, which will be even more demanding, we prepare actually quite intensely. I must say that we are very active in Slovenian Banking Association and in European Banking Federation and -- in different partnerships. So -- and with the aim to get as much information as possible and to prepare our bank to -- for this reporting step. We are well aware that we will have to implement all of the ESRS standards that our sustainability report will have to be verified. We are also discussing already with different verification agencies how to do it and how to become partners in this next step. We are well aware that a lot of new data will have to be disclosed. And we're also aware that we will have to prepare sustainability reporting actually in a little bit different format so that it is machine readable. And we are also looking forward on new information from European commission with regards to environment -- European single access point. We're really looking forward to common standard, sustainability standards so that all of the banks can be put on the same denominator and report with regards to same KPIs so that we can be properly -- so that we can compare each other and that we can release what our peers are doing in how do we compare with our competitors. So CSRD for sure, would be a big step, but we have already provided -- actually, we made an analysis of ESRS standards and a decent gap analysis. We believe that GRI standards that we already addressed are to a certain extent aligned with ESRS. So it will make our future reports a little bit easier. And of course, the most important thing is just to stay on top of this agenda. And we believe that since we are very well placed in different partnerships that we will get all information needed to actually to implement ESRS. So yes.

One thing has to be mentioned, though, one -- of course, quality of approach and accessibility is Slovenia. And of course, we are also operating in five other countries. So what we are talking about is more or less Slovenia. So we do have challenges when it comes to, of course, data gathering and some other common approaches when it comes to the entire operations in the entire region, right? So this is our focus to come, how actually to integrate the whole region in this very ambitious agenda, especially when we look at what is the production mix of electricity, what level of actually the energy efficiency we can be talking about when it comes to, of course, consumption of energy and so on. So it is, of course, a tedious challenge and a tedious journey, but we are fully committed to come to the common denominator also when it comes to our group perimetry, right? So it's on one side Slovenia with maybe better insights and standard of gathering certain information. But what we need is full commitment of the entire society, including governmental bodies. So this is something that is lacking, I guess, is efficient attention. So central registries depository, repositories of information and so on. [ Energy IDs ] and so this is something that is still needs to come in a proper way so that it's easily accessible. We are the driving force when it comes to the bank association to somehow standardize and put to the common nominator any reporting needs for the companies and what has to be in principle submitted to make also lives of companies easier because if you have 15 banks approaching them, and they have to, of course, fill in 15 forms. This is, of course, not something that's highly effective and efficient. It has to, of course, become a movement of just about every one, not only the banks.

The next webcast question comes from [indiscernible] from Slovenia. And I quote, "how do you support, raise awareness and engagement of NLB Group clients in terms of sustainability?"

That's a pretty broad question. NLB has been more or less active in all past possible dimensions, allying partnering with institutions that are dealing with this is the core ambition or core initiative, has been attending conferences, has been organizing our own events. Alenka was mentioning sustainability today, which is internal, but we have been active externally, really, really, very actively in last years. And we will simply continue to be even more active in this way. Simply organizing today's event is a step in this direction. We want to incentive for everyone to start being transparent fully when it comes to this entire universe of many activities and key pillars of the entire sustainability and ESG equipment. So we claim -- I personally believe we have been amongst the pioneers of the region when it comes to that. And of course, this doesn't stop with the communication and information. This is more or less something that you see from the outside, but it's, of course, and continues with many, many activities just a part of which actually Alenka presented today. So there is much more, and it's omnipresent basically. We, as I said at the beginning, we need to make sure that we touch everyone's heart among our employees and in the longer term, also among our clients and all our stakeholders. And I am provoking usually, first, we need to stop shooting at each other and sending weapons all over the world. And second, we simply start changing our lives dramatically, which means we don't speed at highways. We simply eat local, seasonally produced food. And we don't consume for anything we don't really need. As long as we are not prepared to do that, the world will not change.

The next webcast question comes from Verena from [ Prosensiko ] and I quote, "what do you see as the biggest challenges in reaching Net Zero business target by 2050?".

I first -- I mean Alenka and Ivan will sure add something. I personally believe it's consistency and the determination that is not yet there. There are inconsistent messages. There is a lot of hypocrisy. There is a lot of moves and decisions that are a problem -- that are in my eyes problematic. If you, on one side, claim, you want to get Net Zero, emission neutral and you burn more coal than ever in history, and you are above 2019 level, something is wrong. Something is seriously wrong, right? It's not only because of the wars, it's because of the general global collective commitment. Is it there or not? Are we looking at systemic thinking or are we looking at still [ lagomorphs ] fighting for who is going to prevail? And that's the biggest challenge, if you ask me. [ lagomorphs ] needs to understand that it's about the entire planet, not the interest of one particular party to prevail. Ivan, go ahead.

Yes. I will add it. There are some challenges, I would say, #1 challenge for us as NLB group, is actually is to get transparency on the data because we operate in different regions where clients do not have all the data necessary for us to calculate our carbon exposures. So that's internal. The external one is actually the regulation itself. We see that regulators are changing the way they calculate carbon emissions. Some countries, ministers of energy, consider certain sectors highly carbon intensive, some not. So we see that in the next 26 years, and we can foresee that the regulation will change. I mean you take a look nuclear, take a look at some other industries. So we will set our targets, obviously, by the end of this year. But I do see that the regulatory change might affect our plan, and there we don't have an option. We have to comply to regulations that is set on the government level.

It is about real systemic investment, right? So forced electrification without the upgrade of the grid is just the sand in the eyes. You want to install PVs all over the country, but the grid doesn't take it. And the storage capacity is not yet available to the sufficient extent and so on. So messaging needs to be consistent, and it's not necessarily consistent at this point of time and not necessarily enough investment is actually rooted and directed towards enabling the green transition. So it's -- one thing is a lot is talking about that and second is you see, shut down the coal power plant, but what's the alternative? And who is going to invest in the alternative. And is it happening? And is the grid ready to take it and so on? So it is a lot of words, but insufficient action in various countries, including Slovenia.

Maybe one more just from my side. I will say that in this region, we might be lucky. And as a bank, we are not financing one of the dirtiest industries on this plant, let's say, there are no [indiscernible] traders in this region. It's not the deforestation, it's not that high. So on that systemic level, we have -- we might have a little bit easier job than our, let's say, peers in other parts on this plant.

The biggest challenge will be air pollution in principle, which is based on insufficient centralized heating systems in the cities of the region, still a strong thermal production on coal. So this switch is needed, but we see countries investing. So we see significant investment in Serbia, Kosovo, Croatia, a lot of wind parks, a lot of larger solar plants are in the pipeline. We finance those. So we want to be a part of this transition by simply promoting positively and supporting with finance, energy efficiency and renewable production projects while withdrawing support to any coal-related technologies. So we don't -- we have not been financing for years, even enhancement -- even any enhancements when it comes to the coal technology. So in this respect, we are trying to assess this way. But it's a challenge. Still a mixed -- production mix in the countries is still not very favorable. Slovenia is 1/3 -- nuclear, 1/3; hydro, 1/3; and 1/3 thermal. And once we shut down the only real power sizable thermal, we will be more or less fully renewable. It's just not yet clear what this renewable source is going to be.

Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Mr. Blaz Brodnjak for any closing comments. Thank you.

I would just like to thank everyone for hanging in there. It was our first one. So provide feedback to us, please. What do you want to hear from us, how you want actually us to conduct that to be more effective maybe in messaging? And we kindly invite everyone simply to onboard this journey. I mean we live in a specific part of the world with our own challenges. But overall, there is really full commitment of our team. NLB has been a pioneer and will be even more vocal, even more active when it comes to advocating these topics, but we're moving in this direction with our internal impact and, of course, external impact. And we have been one of the pillars actually of also CSR in this region, basically supporting many cultural, sports, humanitarian initiatives. And we will do it more. So the more we will be successful, the more we will support these pillars of the sustainable development as well. We are firm believers into meritocracy and clear corporate governance. There have been challenges in this respect. We will be loud and vocal about that as well. And until the next such occasion, stay healthy, consume local and seasonally produced food. And don't buy anything you don't really need. Thank you very much.

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a good afternoon.