Androscoggin Bank’s Corporate Impact Program: Promoting sustainable lending and investment in Maine

In this special guest episode of Issues of Interest, Pat Morin and Kirsten Dionne speak with Androscoggin Bank CEO, Neil Kiely, about a recent sustainability loan project the bank worked on with our ESG practice. Pat, Kirsten, and Neil discuss how the project came about, how they approached it in service of Androscoggin's overall ESG goals, and how this effort is reflective of the broader ESG space in Maine, New England, and beyond.

Transcript

Joe Jalbert: Hello and thank you for tuning in today to issues of interest from Baker Newman Noyes, where we cover assurance, tax, business advisory, and technology topics and trends affecting the banking and financial services industry. I'm Joe Jalbert and I lead the banking and financial services practice here at BNN. Banks and financial institutions are constantly navigating volatility and change. Here at Issues of Interest, we help you stay current on what's happening in the industry so you can achieve success for your institution. 

Just a quick note to our listeners about this month's issues of interest episode. We are pleased to be running a special guest episode from our ESG practice about a recent sustainability loan project they did with a large bank in Maine. We're excited to share this story with our listeners as one example of how a financial institution in New England is tackling sustainability goals. Our team had a great time working on this project, discussing its impacts, and, as always, partnering with our clients across industries to make a positive impact in our communities. We hope you find this content helpful for how you are approaching ESG at your institution.

Pat Morin: Hello, I'm Patrick Morin, principal of the risk assurance and information systems practice at Baker Newman Noyes, and I lead BNN's new ESG services group. I'm here today with my colleague Kirsten Dionne, who is a senior in our assurance practice at BNN. And our special guest today is Neil Kiely, CEO at Androscoggin Bank. I’m excited to be here today talking with you both about an ESG project we partnered on for Androscoggin related to your sustainability goals. This project is currently in beta launch and aims to have a deep impact on lending and investments, particularly in Maine. Before we dive in, Neil, can you share a bit about Androscoggin Bank and your role?

Neil Kiely: Absolutely. So Androscoggin Bank is a $1.6 billion commercially focused bank headquartered right here in Lewiston, Maine. And a few years ago, we embarked on a journey to ensure that we stayed relevant to our clients, given all the changes that were happening in business generally and in our industry, and specifically, and ultimately that led us to become only the 9th bank in the country to achieve what's called a B Corp certification as a differentiator. And for those who are not familiar with B Corp certification, it's analogous to organic certified for food or LEED certified for building. But instead it's a rigorous assessment of how a company operates across multiple dimensions, so how well it treats its employees, how well it serves as clients, how well it supports its local communities, and how environmentally sustainably it operates. I'd say Patagonia is probably the best-known B Corp certified company in the world. So that's a little bit about the company. My role as CEO obviously is setting the vision and leading the teams and charting our path around sustainability has been a passion for me and really excited to talk about our new program.

Pat Morin: Great, thanks Neil. Just thought I'd share that I attended the climate main summit last week with some of your folks and there's clearly a tremendous opportunity in so many vectors and sustainability space. And the product we're going to talk about is, I think, going to be a resource individuals can leverage to help in those efforts. But first, let's talk about why we're here. So we're proud to have had the chance to work with Androscoggin Bank on this project. When we learned about it, it was an opportunity to have potential positive impacts for Maine in areas such as poverty, health, wellbeing, gender equality, sanitation and more. As an example, we heard last week how the importance of clean air in schools is such an important factor for education and the health of our kiddos. And so there's resources in this program for that. But ultimately here to share about the success of our story as an example of great work and what can be accomplished with a focus on values and dedication both to communities at home and beyond. Can you tell us about how did this project come about?

Neil Kiely: Happy to, Pat. You know, what we're talking about here is our new, what we're calling our corporate partner sustainability deposit program. And the origins of this idea actually sprang from another innovative social impact program that we launched a year or two ago. This came out of some deep discussions with some of our nonprofit partners who are doing work in The New Mainer immigrant space. And in talking to them about their needs and what we might be able to help with, they identified that a significant portion of the new Mainers here also subscribe or adhere to the Islamic faith. And because of that they are prohibited from paying interest in the conventional sense, and because of that they're prohibited from using conventional mortgages. So what that meant is there are a number of families that are living in Lewiston and Portland and other apartments who are unable to purchase their own homes and have the dignity that comes from raising your family in your own home and unable to build equity, which we know that can have generational impacts. So, long story short, we worked with national Islamic finance experts and local Islamic leaders, and over a period of twelve to 18 months, we crafted this program to develop an innovative solution to enable them to buy homes in a way that was compliant with their faith principles. So obviously really well received by The New Mainer Islamic community. Well received generated a lot of positive press locally and even nationally. NPR picked it up. But what struck me most about the feedback we received were the calls and outreach we received from local business owners and CEOs. And it kind of fell into two camps. One, it was expressing admiration for a business that took an innovative approach to solving a social challenge. But it was also, I think there was a lot of appreciation from folks as fellow Mainers about the work we were doing to change the arc of individual lives right here in Maine. There's deep appreciation for that, and I think, some interest in how they might get involved. So that led to thinking about, one, we wanted to amplify our lending efforts, certainly beyond Islamic mortgage, but to other sustainable categories, like women in BIPOC led businesses, renewable energy, clean water, some of the other factors you talked about. So how can we achieve more fuel for that kind of work? And so, we wanted to raise deposits. Two, though, we saw this as a really unique opportunity to engage like-minded companies and corporations to participate in that work and to participate in the impact as well. So, we concede with this program of a sustainable deposit program where corporations could very easily and with a lot of flexibility, dedicate their surplus funds to this program. And in turn, to help have a direct impact, we would take those funds and we would commit to lending them within the 17 categories of the UN Sustainable development goals. Among those categories we just talked about. And I'll just say we're in beta. We've had a handful of conversations, but our intuition was right. It's resonating deeply with companies. They're very, very excited to participate.

Pat Morin: Great. So, tell you a little bit about how we approach the project. Let me first tell you how it even got to us. You had reached out to one of my partners, and on initial receipt of your inquiry, it was unclear how we could serve you because it didn't fit the mold of anything we typically do. And as often as the case, those services find their way to the more strategic and advisory folks of the firm. And I'll tell you, Neil, you had me at the word taxonomy. I was like, boy, I want to dig in and learn about that. So, once we found the time to connect, Kirsten and I met with your team to learn about your objectives. And based on that, we developed a research plan for the project. Then Kirsten and I met to strategize on how to move forward. Then we just got right to work. Kirsten, could you share a bit about our approach and how we got through this project?

Kirsten Dionne: Yeah. So, as Pat just mentioned, we met with Neil and his team, and through those conversations, we got a better understanding of what the banks objectives were for the project, what their vision was, and how it would fit into their banking activities. We also got a good understanding of what their current loan portfolio and customer demographic looks like now to see if they had customers out there already supporting these activities that might align with what we were trying to achieve. So, as Pat mentioned, we worked together to develop a research plan. We were able to identify some larger banks that currently offer and advertise ESG and sustainability related loan products to use as a model. So we just use these as a guideline to see if these types of products should be considered by Androscoggin. And then from there, using large language model tools, including ChatGPT, and Microsoft's copilot, we did additional research to identify more specific loan types for consideration. Then, as we were able to drill down, that information gets more specific. We tabulated sets of loans that would fit within these various categories from the United Nations Sustainable development goals, things like affordable housing, sustainable agriculture, and energy efficiency. And for each, we broke up the loan attributes, such as qualification criteria and related sustainability objectives. Then we summarized this data into a framework that would hopefully support the bank's programs and activities.

Pat Morin: Thanks so much, Kirsten, that was great. Curious, Neil, if you could share how the bank's experience was.

Neil Kiely: So, in short, Patrick and Kirsten, it was great. I think that obviously, we were designing this program for corporate partners, so it had to have a certain elevated level of rigor, authenticity and credibility. And so looking inside, we have an incredibly talented team inside, but we were looking out at, as you said, taxonomies and digging in with needed insights in terms of the UN sustainability development goals. And we needed folks that kind of survey the landscape of information out there and what was being done and distill it back for us. So we turned to you with those expectations in mind, and you absolutely nailed it on all counts. I think, just listening to Kirsten, we can say again why we hired you all. And it was incredibly thorough and efficient. You were able to collect large amount of data and other examples. Again, we weren't duplicating something that somebody else did, but it was brilliant to go out and look at next level models or examples so that we could draw from them. So it was a fantastic experience in that regard in terms of the data and the output, but also just collegiality I mean, we're working on something new and you all were willing to roll up your sleeves and you had the passion to help us bring this to life, which was just made it a lot of fun as well.

Pat Morin: Thanks, Neil. That's interesting that youuse that word. Because I was going to say, from our perspective, we really enjoyed working with your team, the passion for this project. And it really made it easy for us to stop what we were doing already to work on this with your team. And really what came through to us was that your team really wants to make a difference. And at the same time, we, as part of our core at BNN is to support our community. And so I always dive in and I'm sure Kirsten does too, to appreciate the opportunity to work on project like this that add value to our communities. So we got through the project and what's next? Can you explain what are the outcomes from the project and what will happen with them?

Neil Kiely: So I'll tell you one of the first, most important outcomes of this. We were able to take the finished product and sit down with a company called Geiger. They're the world's largest privately held and family-owned promotional products distributor. And they're also a leader in the sustainability space. And when I say a leader in the sustainability space, I mean everything from they have a gold certified LEED building for their headquarters, and they also have a gold certification for EcoVadis, which is very prestigious sustainability certification. Gold level means top 5% of companies in the US and they have platinum level in the UK. So this is a company that walks the walk in terms of sustainability and social impact. More importantly, as a privately held family-owned company, they actually go beyond simply meeting the technical requirements of these rigorous certifications. They actually embrace the spiritual of sustainability and social impact. So we were able to sit down with them with this program in hand, and they immediately understood what we're trying to do. And we're excited about having a local impact. And reflecting their leadership position, they immediately decided to sign on as one of our founding partners, which is fantastic. And I will say, too, we consider a partnership. When you have a company like Geiger that has very high expectations and authentic commitments, those expectations are going to challenge us to elevate our game and make sure that we continue to improve and innovate this program to have more impact. So it's conversations that we were able to have like that. And we've had a handful of other conversations that folks are starting to sign on as partners, which is really exciting. And we look forward to building out this partnership in Maine and hopefully beyond Maine.

Pat Morin: That sounds great. It's always good to find partners like that that are really willing to jump right in or actually already embodied the examples of what we are trying to do. You know, one thing that I have learned since doing this project and being a bit involved with ESG for the past few years is it's not as mysterious as it sounds. If you just listen a little bit, it's oftentimes subtle changes or just a change in perspective. And so what I appreciated about this is this project gave us an opportunity to work on a really unique project that's going to be locally impactful. Our hope is that, and I believe it will allow and to support our community in such important ways. And it allowed us to combine our banking industry knowledge along with our understanding of ESG developments to enable the bank to offer something new. Both Kirsten and I found this project quite meaningful and interesting. As I mentioned, we're developing an ESG practice within the firm, both to help organizations prepare. And then at the time when they need to report, we'll be able to help them provide some assurance around that. But it's a passion for us as a team. And through this, we can support businesses, often based locally, who also want to make a positive impact for both society, business, and environment. We really do appreciate having had this opportunity.

Neil Kiely: Absolutely. I would say that one of the key benefits of benefit corporation, which we've actually experienced in reality, is that it's became a major driver of attracting great talent. So over the last year or two, every new employee who has joined the bank has cited B Corp certification as a material reason why they joined the bank. And so we've had tremendous success recruiting exceptionally talented employees out of much larger institutions in particular, who are making a choice about culture and values, and they want to do this type of work. And I'll just tell you that in terms of engagement, also, while people here having the opportunity to work on projects like this that have direct social impact, and they can see the fruits of their labor working. One, a novel product, right, that's always exciting in your career if you can actually bring a new product to market. But two, one that has a local impact, a social impact. One that you're proud to talk to your friends about. So these are a major driver or attractive element of our cultures. And we're seeing it reflected the people that we get and the people we're retaining. So a huge, powerful competitive advantage.

Kirsten Dionne: From my perspective, as we've mentioned, there was no model to follow we are building from the ground up. Neil and his team were great in terms of giving us some examples to work with as well as what they were hoping to get out of all of this. But I think something surprising that came from this for me was just all of the activities you could consider to be ESG or sustainable that you wouldn't necessarily think off the top of your head. But as Pat and Neil have echoed, just maybe changing your mindset or shifting how you look at something and practices that you're already doing, you could consider to be sustainable or ESG related, or follow those goals that we've discussed. I think it's something that seems like it's almost achievable for anyone if they just shift their perspective. But it takes a team like Neil and the folks at Androscoggin to put that into fruition.

Pat Morin: A key takeaway on our side was that we learned such a variety of activities that can be considered ESG or sustainability related. Like I mentioned before, it's a matter of perspective and focus. Therefore, there's a big opportunity for local banks like you at Androscoggin to support these types of activities through loan product offerings and similar. And I would think it's great news for Androscoggin, BNN and each of our clients and customers as we believe this is translatable to all types of activities, business banks and financial institutions across the country. So what's next? How does this fit into what's happening in the sustainability space?

Neil Kiely: I think that this is a main street application of ESG and I think it's just the tip of the iceberg. And here's why. I think if we go up to 50,000ft a little bit and talk about sustainability at the national and global levels, we have a lot of trends that are driving, I guess, this megatrend, if you will, around sustainability. The first is demographics. We have a younger generation that are aligning their purchases of consumer goods and other services with their values. And they're very focused on sustainability and social impact. The same generation is the next generation of employees, as you and I know, Pat, and they're making demands on their employers about how companies operate in a socially impactful way, in a sustainable way. So those major drivers, beyond that, the investor world are taking note. They're very focused on climate change, environmental issues, and asset managers are allocating or screening companies based on sustainability disclosures and commitments. And then finally the regulatory framework. The EU is ahead of the US in terms of disclosures and compliance requirements. But we also have California in the United States. And then we have the SEC all the very one end, just clarifying and putting strict requirements about disclosures to prevent pink washing, greenwashing, and then moving out on the continuum and actually requiring affirmative disclosures about certain things. What people in Maine may not realize on Main Street businesses is that if you're a company of any size nationally, you probably are touched by the EU's regulation, SEC or California. And so what's happening is they like to say they don't have a choice but separate. Aside from whether they are pursuing ESG for their own reasons, they're going to be forced to comply with a lot of these disclosures and regulations. And what's happening is they are cascading those commits down to their supply chains. And what's happening in Maine is companies are waking up, realizing that the larger companies, national companies that they sell to, are now requiring them to disclose and make similar commitments. And we're seeing that happening in Maine. And I would say, I want to put a caveat on this. This is not as though this is being imposed on companies against their will. I think what, what most folks in Maine are waking up to, as you just said, Pat, is that we already operate this way. Right? I mean, Maine is known for environmental stewardship and we are pioneers and we've cleaned up our rivers. We take, you know, we're proud of our pristine forest. We live this way. The Gulf of Maine Research Institute's a leader on climate change studies here as well. The same thing in terms of how we treat our employees in Maine. Small businesses are the backbone of philanthropy and community support. We already do this. What this really is a way of us starting to talk about how we do this or formalize how we do this and report out for some of the largest suppliers and larger organizations. And I think for us as a bank, we're dedicated to space. We have the internal expertise. I have a background in renewable energy. I was a large-scale wind and solar developer. So we speak the language. But I think main street companies are going to, as they take their natural inclination to operate this way and they translate it into disclosures and commitments, there’s going to be a tremendous need for outside expertise like for you and Kirsten to help bridge that gap. So I think that it’s a really exciting time to be in this space in Maine. It’s really on the cutting edge. We’re seeing this kind of megatrend starting to hit locally. There’ll be a lot of opportunities to convert this into business opportunities and to make this accretive and drive and grow their businesses here and really exciting for us as a bank, think for also for the companies to have you all as trusted resources to take advantage of this huge opportunity.

Pat Morin: Thanks. Neil, your comment about the current generation being focused, my two older kids absolutely make decisions about who they do business with based on the organization's sustainability disclosures and particularly their business practices and maybe investments that they hold. So, and in order to provide the comfort around that so that those who read their reports, those sustainability disclosures, we're seeing an increased need for organizations to get independent validation of those efforts and commitments which you talked about earlier where organizations here in Maine and abroad who may be selling to larger companies, that's part of what's called the supply chain and they're in the circle. That's called scope two disclosures relative to the large companies that have their own disclosures. Scope one, which is the direct impact, and then scope two is the impact of the a supply chain and the like. And so I think you mentioned earlier that both the European rules as well as California and their rules are fairly, they don’t require you to be in California. You just need to be conducting business in California and be of a certain scale so you may have disclosures you weren’t aware of. Requirements.

Neil Kiely: I will just jump in on that. 1 second said, for business owners listening or CEO's out there, there's actually a challenge because there's a number of certification bodies out there. So B Corp is one certification that is a whole company certification, which may be appropriate for some companies, may not be appropriate for other companies. EcoVadis, there are other ones out there. So I think part of the service that you can offer to companies is looking at their unique situations and what kind of requirements either they have or the companies that they're supplying or selling into have and choosing the right taxonomy, the right certifications and commitments for their situation and their needs and their business. I think that in itself, those are very strategic decisions as we have so many competing bodies out there. That's a tremendous value, I think, that you can offer to clients is making those strategic decisions upfront. Which commits do you make? How do you make them? How do you calibrate them so they're appropriate and realistic?

Pat Morin: That's great. So back to what we've been seeing. Actually, I comment on that a little bit in that we do other advisory or attestation work, and it's always best for organizations to set their objectives and to determine what they want to accomplish and do a good job at it with good controls in place and embed it into their practices so that when they go for one of these certifications or do the sustainability disclosures, they are much more likely to be successful in that rather than if you design your approach to meet the letter of the requirement, it's not embedded in what you do and it's not genuine. So ESG is here. It's been here for a while. If you think of it in the broader term, and it's not going away, companies that are prepared in the way that I just described will be in a better position to be competitive about it. And if they start thinking about it now, I think I mentioned earlier at BNN, we are prepared to provide assurance based services related to ESG programs. And with each project, though, like this one, we're covering opportunities to be creative and flexible in how we might partner with leading organizations like Androscoggin to help implement impactful change. I didn't mention, but we do have a separate advisory group that can offer customized solutions related to incorporating tools and programs to help support the reporting requirements. Kirsten, I was curious, did you have any other thoughts you'd like to share about anything we've talked about so far?

Kirsten Dionne: No. Everything you guys have brought up, it's been pretty spot on for what my experience and being involved in this project was. I think ESG is something that is becoming more and more important. And like you touched upon, it's here, it's not going away. And it's something I think that a lot of our clients that we serve should really start looking into in a way that Androscoggin has already, and they could be a great model for them.

Pat Morin: Great. So as we've been talking, and one of our objectives in this conversation this morning is to point out that organizations looking for support with their ESG programs don't really have to adhere to a cookie cutter approach to the services and still achieve a positive outcome. We can be flexible, and we can be creative and figure out a way to get you there. Neil, anything else you'd like to add?

Neil Kiely: I'll just say one final plug for your team is that they're business owners and entrepreneurs. I actually started my career as an entrepreneur, so that's the way I think. So one of the things I particularly appreciated was your ability to step up and take concept, a new concept, a novel concept, and to take it to fruition in a really fast and effective way. I think that's unique for outside consultants. This was definitely not a cookie cutter approach, and you move very quickly and very flexibly and very entrepreneurially. So that was a great experience.

Pat Morin: Great. And Neil, would you to share how listeners can get more information about your products?

Neil Kiely: Yeah, absolutely. This is how we roll around here. So for any of our corporations out there that want to learn more about the bank or the program in particular, feel free to send me an email directly. It's Nkiely at anderscogginbank dot com.  We're in the relationship business. Always happy to have a phone call, an email follow up, or a meeting. Especially folks that are like minded companies or leaders who are interested in the sustainability space.

Pat Morin: Great. And if you'd like to learn more about how BNN can help support your ESG assurance and reporting, contact us at info @bnncpa dot com. You can also find additional information, articles and helpful resources at bnncpa dot com. Thank you all for listening.

Joe Jalbert: Thank you for listening to Issues of Interest from Baker Newman Noyes. The BNN banking team thrives on solving complex business challenges and helping institutions meet their goals. You can find more of our industry content and subscribe to our newsletter@bnncpa.com dot. If you'd like to connect with a member of our team, email info at cncpa dot com. Bye now.

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