Banks steadily progressing on sustainable banking principles
The Bank of Ghana (BoG) has disclosed that banks in the country are steadily making progress on the Sustainable Banking Principles (SBP) guidelines.
Advertisement
An analysis of four rounds of reports received from the banks, beginning March 2021 to September 2022, suggested that the banks were making steady progress with the implementation of the SBPs, with an average compliance rate of 53.37 per cent as of September 2022.
Speaking at the launch of the International Finance Corporation’s (IFC) Integrated Environment, Social and Governance (IESG) Ghana programme, Deputy, Banking and Supervision Department of the BoG, Ismail Adam, said the success so far was due to activities undertaken by the central bank.
This, he said, included building the capacity of staff on the SBPs as well as getting a dedicated office within the Bank to oversee the full implementation of SBPs; and developing a road map to ensure banking industry training on all the principles by the end of 2023.
The recent occurrences in the global economy, including the COVID-19 pandemic and macroeconomic challenges in most countries, have created a lot of uncertainty.
Many countries are trying to recover from the devastating effects of the COVID-19 crisis, in addition to macroeconomic challenges including high inflation, unemployment and economic recession.
Mr Adam said sustainable banking was even more important in times of such uncertainties as it could help mitigate inherent and potential risks and create long-term value for all stakeholders in the banking business.
He said one of the key challenges facing the banking business was the uncertainty and volatility of markets and economies.
“However, sustainable banking can help address these challenges by promoting risk management with a forward-looking view, as well as helping to build more resilient and sustainable economies,” he stated.
To remain resilient in times of uncertainty, he said sustainable banks must focus on risk management; innovation; stakeholder engagement; transparency and disclosure; and collaboration.
Opportune time
Mr Adam said the IESG project could not have come more opportune as the central bank continues its journey to fully operationalise the SBPs.
He said the objective of the Ghana IESG programme was to support IFC’s strategy in Ghana by increasing the uptake of ESG good practices in the financial sector, as well as local corporates, to achieve a more diversified and resilient economy, stronger and sustainable local businesses and to boost investments in Ghana.
Key milestone
For his part, IFC’s Senior Country Manager for Benin, Ghana, Guinea and Togo, Kyle Kelhofer, said by adopting the Sustainable Banking Principles, the Ghanaian banking sector recognises that a holistic approach to risk management must include ESG considerations.
He said the introduction of the SBP was turning out to be a key milestone and driver in Ghana’s sustainable finance journey.
“Since then, we’ve seen momentum in other parts of Ghana’s financial sector, such as the Ghana Stock Exchange developing ESG disclosure guidelines, active participation in the Network for Greening the Financial System (NGFS), and others.
“We are encouraged that the financial sector is recognising the importance of managing ESG risks and also optimising green opportunities…as it should since World Bank estimates that environmental degradation costs US$6.3 billion annually, which is over 10 per cent of Ghana’s GDP,” he stated.
He said the IFC’s work on ESG risk management in Ghana was to provide advisory services to the banking sector and other businesses to help address these ESG risks while identifying new growth opportunities.
IESG programme
Mr Kelhofer said the IESG programme builds on two previous advisory initiatives, the Environmental and Social Risk Management and the Corporate Governance programs, which ran from 2015 to 2020 and supported the development and deepening of sustainable banking, as well as the strengthening of corporate governance frameworks and institutions in Ghana.
As a member of the World Bank Group, he said the IFC was the world’s largest development finance institution focused on the private sector in emerging markets.
In the last decade, he said, IFC had brought approximately US$4 billion into the Ghanaian economy through investments in agribusiness, financial institutions, infrastructure, manufacturing, natural resources, and tourism and provided advisory services to government as well as business.