The Group considers the interests of its main stakeholders when developing the strategy and the processes to improve its operations. We continuously strive to positively contribute to society through the entire scope of our business activities by developing socially-oriented products and services, implementing responsible approaches to our business operations, carrying out sponsorship and charitable activities.

SOCIALLY-ORIENTED PRODUCTS AND SERVICES

Georgia Capital realises significance of its investment activities across Georgia for the Georgian emerging economy. The Group is actively investing in industries with strategic importance to the development of the country.

ENERGY

The average growth of electricity consumption in Georgia has been 5.3% over the last 10 years. The Group is investing in renewable energy to respond to growing demand by developing hydro and wind power plants across Georgia. As of 31 December 2019, the renewable energy business operates HPPs and wind farms of 91MW installed capacity and, in addition, has a pipeline of up to 350MW capacity hydro and wind power plants. The Group’s involvement in the renewable energy business supports the country’s sustainable growth.

TOURISM

Georgia’s tourism industry has achieved remarkable growth over the past decade, hitting record numbers of tourists arrivals of 7.7 million in 2019, with a 11.5% CAGR since 2011. Tourism represents the largest component of service exports in Georgia’s Balance of Payments (BoP), accounting for 72%, up from under 40% a decade ago. Georgia has the potential to place itself on the world map as a prominent tourist destination due to its unique nature and cultural heritage, its tradition of hospitality and by focusing on niche areas, for example, wine, medical and wellness tourism. The Georgian Government, with the support of the World Bank, has developed a tourism strategy with target goals for 2025, including preserving cultural heritage, developing air and road infrastructure, and attracting higher spending markets.

The Group’s real estate business, m2, has entered the hospitality industry, targeting to have a portfolio of more than 1,000 operational hotel rooms. The first 152-room Ramada Encore hotel, located on Kazbegi Avenue, Tbilisi, has been operational since March 2018. m2 is also developing a 4-star Ramada hotel in Kutaisi (under construction, 121 rooms), where the international airport serves low cost airlines, making the city popular with tourists visiting Georgia. In 2019, m2 signed a management agreement with Kempinski to manage the only luxury hotel in its portfolio. Following initial acquisition in December 2017, m2 held a 60% stake in Kempinski hotel and the business announced the buyout of the remaining 40% equity stake in February 2019. The business expects to position Kempinski hotel as a culinary hub, both for locals and tourists. The facilities will include a range of exclusive gastronomic experiences. Built into the neighbouring mountain, the hotel will invite guests to taste the best Georgian wines, as well as explore spectacular views of Tbilisi old town. The business has two more internationally branded hotels in the pipeline: a 4-star business-class hotel, Ramada Melikishvili (under construction, 125 rooms) and Zugdidi hotel (at design stage, 130 rooms).

In 2019, m2 created a new brand name, Amber Group, under which the business will develop the following hotels: Seti Square Mestia (under construction, 52 rooms), Kakheti Wine & Spa (under construction, 60 rooms), Gudauri (operational, 121 rooms), Telavi (at design stage, 110 rooms), Shovi (at design stage, 109 rooms), Mestia Svaneti (at design stage, 140 rooms). Amber Group will focus on the unique Georgian culinary and the traditional Georgian winemaking, and will promote Georgia internationally.

EDUCATION

Education is a key sector to boost long-term potential economic output in the country. Currently 90% of primary and secondary schools are public, which is very fragmented and unaffordable for most of the population, making room for private sector development. The quality of education at public schools is poor due to a low supply of quality education professionals and teachers earning a very low salary. By 2025, the Group aims to have up to 30,000 learners, with GEL 185 million gross capital allocation. In 2019, Georgia Capital acquired majority stakes in three leading schools in the attractive private education market. Georgia Capital plans to develop a training centre for teachers and retrain the recent graduates from the university, motivating the new generation to provide quality education through adequate pay.

Green School represents affordable private school within Georgia Capital’s education portfolio. The school offers affordable tuition to the emerging middle-class in Georgia and is regarded as one of the best value for money mass schools in the country. According to the plan, the school will add two new campuses and increase number of learners to c.2,000 by 2021. Green School acknowledges its social responsibilities and tries to make its input in different ways. The school provides free education for 170 socially vulnerable children.

AFFORDABLE HOUSING

Over the last 10 years, the Georgian real estate market has experienced a significant increase
in demand. One of the factors driving the demand of the housing market is a decrease in the average household size, which has already dropped from 3.7 individuals in 2008 to 3.3 in 2018, in Georgia. This figure is expected to move closer to the EU average of 2.3, however, the family size in Tbilisi has been shrinking steadily. Based on the social development pattern in comparable countries, the overall
trend is expected to be continued, which will generate additional demand for housing. Also, around 35% of housing units in Tbilisi were built more than 40 years ago and are reaching the end of their usable life cycle. At the same time, the Georgian real estate market is vulnerable to various economic and financial uncertainties and numerous construction projects remain unfinished for long periods of time. In response to this social challenge and increasing demand, the Group’s housing development business, m2,was established in order to offer affordable housing to the emerging middle-class in Georgia and especially to young families.

m2 is a major player in Georgia’s real estate market, offering its customers turnkey apartments with fine-tuned infrastructure. m2 has completed 10 projects so far, and has delivered them to its customers within, and frequently ahead, of the agreed deadlines.

m2 plans the design and construction processes so that each square metre is distributed efficiently. m2 uses energy-efficient construction components, bringing up to 43% energy efficiency in its buildings, which in turn translates into lower utility expenses incurred by the tenants. The level of energy savings in m2 buildings is significantly above the average residential property in Tbilisi.

m2 started the construction of a completely new district, m³ Saburtalo, which provides mixed-used real estate development project, aggregating residential, commercial,and entertainment buildings in a single neighbourhood. m3 Saburtalo will be a new district in Tbilisi with a modern architecture. The district was designed with a multifunctional infrastructure and distinctive landscape design. The central part of the district will be occupied by a park. In June 2017, m2 acquired BK construction LLC, a real estate construction company, which has reduced m2’s construction cost and improved the design management process through vertical integration, giving m2 the ability to reach the lower-end segment.

SPONSORSHIP AND CHARITY

As part of sponsorship and charitable activities, the Group continues to focus on promoting and enhancing access to education, conserving nature, supporting people with disabilities and special needs, and facilitating innovative projects that focus on social good. The Group’s sponsorship and charity activities encourage partnerships with various foundations and Non-Governmental Organisations (NGOs) to deliver sustainable results and bring positive change. In doing so, we follow our undertakings in respect of social and community matters set out in our Environmental and Social Policy. In 2019, the Group spent a total of GEL 3.4 million to finance different sponsorship and charitable activities.

Georgia Capital and GHG support the Caucasus Nature Fund (CNF), as we are involved in the Project of Maintenance of Caucasus Natural and Cultural Heritage. The fund helps to support the effective long term management of the protected territories of Armenia, Azerbaijan and Georgia. Georgia Capital and GHG donated US$ 10,000 and GEL c.44,800 to the project, respectively.

Georgia Capital was a founding Partner of UK Season in Georgia 2019. Within the programme
the UK Embassy delivered more than 60 events across the country that captured the best of friendship between Georgia and UK. Georgia Capital donated GBP 50,000.

Georgia Capital participated in the selection of the Fulbright Program Scholar and sponsored selected candidate with GEL 138,862.

Our water utility business, managed by GGU, regularly runs charitable activities for the social service agency, Child and Environment, and international humanitarian network, Catharsis, in Tbilisi. The water utility business covers the annual water supply expenses for Child and Environment, the agency that cares for homeless children and children with disabilities. Twice a year, GGU sponsors the project “Dinner for Everyone”, which is organised by Catharsis for approximately 3,000 people.

In 2018, the renewable energy business, managed by GGU, implemented several social projects supporting education, tourism and sports in Mestia, Svaneti region. Tourism is the most important source of income for thelocal population in Mestia. For the purpose of tourism development in the region, our renewable energy business is arranging training for family-owned hotels to assist the owners and managers in improving their services, and attracting more visitors.

In 2019, the renewable energy business continued to implement several social projects to support education, tourism and sports in Mestia, Svaneti region. In 2019, the business fully upgraded the libraries at all schools in Mestia. The aim of the project is to promote youth education and create more opportunities for young people. GGU supported several important ski competitions for Svaneti region tourism development. In 2019, the renewable energy business also started implementing social projects in Zoti, Guria region. Social projects are mainly focused on education and sports. In 2019, GGU also participated in a planting trees programme in Tbilisi to support the creation of environmental and green spaces in the city.

The healthcare services of GHG cover more than 75% of the Georgian population with clinics, located across the country providing access to high-quality medical care, even to those living in remote mountain regions. In 2019, GHG carried out 28 different free screening programmes in total for up to 72,000 patients. Furthermore, in 2019, GHG’s hospitals business carried out 24 different free-of-charge medical check-ups, benefiting up to 2,830 patients. Such free-of-charge medical check-up and screening programmes include managing tuberculosis, cancer screenings, hepatitis C screening and antenatal programmes. As in other parts of the world, diabetes in Georgia is on the rise, with the incidence rate per 100,000 citizens now reaching 506. To address the disease’s increasing prevalence, GHG offers a 50% discount on test strips to patients with diabetes. Apart from this, during the year GHG spent up to GEL 2 million to provide free medical services to the socially and economically disadvantaged groups of the population. In cooperation with other healthcare institutions, GHG arranges free blood donations for its patients. In 2019, GHG introduced GPC laboratory in its pharmacies and has already opened eight blood collection points and plans to continue the process to arrive at c.50 blood collection points in the coming years. GHG traditionally participates in the Government subsidised Children’s Oncology Programme and offers cancer treatment to children with different oncology disorders (leukemia, tumours and lymphomas) in GHG’s Iashvili Pediatric Tertiary Referral Hospital, a multi-profile pediatric medical establishment, that is the sole provider of pediatric oncology services in Georgia. In 2019, more than 672 patients with different types of cancer received treatment at Iashvili’s onco haematological department.

Promoting and Enhancing Access to Education

In November 2018, m2 opened a college for vocational education in the Zestaponi Municipality (Western Georgia). The college was built and developed as part of a memorandum of cooperation with the Ministry of Education and Science of Georgia, which was signed in 2017. The college offers 11 short-term vocational courses to more than 600 construction specialists/workers annually.

GGU has been involved in vocational programmes to promote and raise the awareness about the company and specific professions of water supply and sewerage systems among the younger generation. GGU trained future employees (10 students) with relevant knowledge of water supply and sewerage systems. Together with local and international partners, GGU has successfully implemented several vocational programmes, among which were programmes for welders, locksmiths and plumbers.

The water utility business opened the Training Centre in 2017, aiming to prepare professional, highly-qualified technical staff. Training Centre programmes and teaching modules are based on the best practice of the world’s leading training centres and retraining programmes. Local and international experts have created academic projects that help GGU to develop engineering and other technical qualifications in line with today’s technological development and innovations. At this time up to 3,000 employees have been trained/retrained in the Training Centre.

As a leader in the industry, our P&C insurance business, managed through Aldagi, is responsible for insurance education, not only in terms of professional development, but also informing the younger generation about insurance and its role in society. Aldagi employees frequently attend university events delivering information about insurance in general, insurance products and principles. Aldagi has developed a unique professional development programme to give various stakeholders and interested employees a deeper understanding of the industry.

In 2019, GHG’s clinics business launched the Student’s Programme. GHG signed a Memoranda of Understanding (MoU) with 22 universities, in which c.20,000 students were involved. Within this programme, GHG offered students an extended coverage under UHC and additional discounts on various medical and dental services. During the year, the healthcare business spent GEL 100,000 on these activities. Within the framework of MoUs, successful students were also offered a six-month scholarship and employment in different administrative positions at GHG’s clinics. In 2019, GHG sponsored medical conferences (GIMPHA, Laparoscopic Surgery Conference, Emory Conference, Reproductive Health Conference, etc.) and workshops, which brought together medical scholars and healthcare practitioners from Europe, Asia, the US and Georgia to share knowledge and experience that influence and shape healthcare delivery. Total financial support of the conferences amounted to GEL 297,427 in 2019 (GEL 531,544 in 2018).

Promoting and Enhancing Healthy Lifestyle

Our beverages business produces and sells Georgian wine locally and exports to 17 countries. The business actively promotes responsible drinking and have developed a special campaign, “DON’T DRINK AND DRIVE”.

As part of its sponsorship activities, the Beverage business seeks to promote a healthy and active lifestyle. As the sponsor of the Georgian Rugby Union, Georgian National Olympic Committee and Georgian National Paralympic Committee, the business aims to attract more youngsters to healthy activities. The Beverages business is part of a charity programme that supplies books for children without parental care and from large families, as well as for the rural school libraries.

As part of its initiative to promote a healthy lifestyle, m2 became the general sponsor of the Georgian Rugby Union. m2 and “Rugby Union of Georgia” signed a Memorandum of Cooperation in 2019. m2 has been funding the rugby club “Lelo” for several years, as well as the regional football in Telavi and Zugdidi.

Aldagi started promoting safe driving with a project that offered safe drivers a chance to receive up to 30% price discount on their car insurance policy premiums.

GHG is sponsoring a medical TV programme reaching out to a wide range of the Georgian population to raise health awareness and promote healthcare practices. In 2019, GEL 167,800 was spent on financing these TV programmes (GEL 120,300 in 2018).

To promote a healthy lifestyle among children, in 2019, GHG entered into MoUs with 10 kindergartens and is in the process of negotiation with a further 35 kindergartens and schools. The business provides free medical support and screening programmes for different diseases to the pupils and teachers of the participating entities.

Supporting People with Disabilities

In 2019, m2 funded the rehabilitation course for children with autistic spectrum disorders in Kutaisi with GEL 100,000.

In 2017, m2 began construction of a specialised family-type home for children with severe disabilities in Tbilisi. The construction works were implemented as part of the project framework of Protection of Children with Disabilities – a project carried out by the Ministry of Labor, Health and Social Affairs,
USAID and United Nations Children’s Fund (UNICEF). The project aims to create specialised family-type services for children with severe disabilities, where they will receive care in a family environment and will be provided with all services necessary for their adequate growth, individual development and smooth integration into society. After completion of the construction and renovation works, seven children with severe forms of disability were moved to live in the house in 2018. All m2 buildings are accessible to people with disabilities.