Banks and Sustainability Principles

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Obinna Chima examines efforts by banks to promote the Nigerian Sustainable Banking Principles

As part of efforts to ensure that the ecosystem is preserved, the Central Bank of Nigeria (CBN) had, few years ago, rolled out guidelines on the Nigerian Sustainable Banking Principles (NSBP).

The NSBP guidelines are aimed at integrating environmental and social policies into decision making processes in commercial banks, discount houses and development finance institutions.
The guidelines were also aimed at minimising or mitigating negative impacts of financial institutions’ operations on the environment and local communities where they operate.

The NSBP consists of nine over-arching principles for managing environmental and social risk in business decisions; managing the banks’ own environmental and social footprint; safeguarding human rights; promoting women’s economic participation/empowerment; promoting financial inclusion of communities and groups with limited or no access to formal financial sector; meeting the imperatives for good governance, transparency and accountability; supporting capacity building in the sector; promoting collaborative partnerships to accelerate sector progress; and reporting to take stock of sector progress and attendant needs.

According to the regulator, for the successful implementation of the principles, financial institutions would be required to develop a management approach that balances the environments and social (E&S) risks identified with the opportunities to be exploited through their business activities.

The CBN stressed that the adoption of the principles would not only help banks in mitigating the E & S risks associated with their business operations and those of their clients, but also help them to achieve greater efficiencies and better position them to take advantage of opportunities in the global market place where environmental and social issues are becoming increasingly important.

Besides, the central bank said the banks would also enjoy higher productivity, higher staff morale, lower turnover and absenteeism due to strong employee relations and workplace practices.

CBN Governor, Mr. Godwin Emefiele, assured them that the central bank would continue to work towards the implementation of the Nigeria Sustainable Banking Principles, the achievement of the United Nation’s sustainable development goals and the Paris Climate Change Agreement.
Also, the Nigeria Deposit Insurance Corporation (NDIC) recently urged banks to consider also other issues around sustainability, before lending.

Managing Director of NDIC, Umaru Ibrahim said banks should ensure that activities of companies that pollute the environment were not financed. He said the United Nations Environment Programme (UNEP), through its UNEP Financial Initiative on the Environment and Sustainable Development at the Earth Summit in 1992, placed it as pertinent concern for financial systems across the world.

According to him, sustainable banking in Nigeria, therefore, should focus on energising the influence of the banking sector (being financier of economic and social activities) towards transforming the longer term interest of environmental preservation and societal balancing into key parameters for allocation of capital.

Green Bond Programme
Speaking at a recent launch of Nigeria’s Green Bond market development programme, which is also part of efforts to promote the sustainability principles, the Group Deputy Managing Director, Access Bank, Roosevelt Ogbonna said the initiative would contribute significantly to the economic growth of Nigeria and the broader African continent

“We recognise that a better and prosperous future is linked to the well-being and health of our planet. Thus, the protection of the environment is relevant to us. This encourages us to continue to invest in innovative technologies and techniques that promote the efficient use of resources and address sustainability issues when managing risk.

“We continue to impact lives positively and responsibly in communities across Africa. Through this, we are able to continually contribute to the socio-economic development of these communities and help to achieve the new Sustainable Development Goals (SDGs). Over the years, our areas of focus in community investment have included gender equality, women empowerment, entrepreneurship, leadership, education, health, arts, and sports.”

The launch was one of the major events that took place during Green Bonds Week, which saw local and international stakeholders gather in Lagos to discuss the impact of climate risk on investment portfolios, the role of regulators in developing the local market and growing green bond issuance.
Lagos State Governor, Akinwunmi Ambode, while addressing guests at the formal launch of the programme said that the initiative would present profitable investment opportunities to stakeholders and investors, adding that the finance would help to reduce greenhouse emission and mitigate harsh effects of climate change in the State.

Ambode, who was represented by Lagos State Deputy Governor, Oluranti Adebule, assured stakeholders that his administration would take maximum advantage of the opportunity embedded in the Green Bond Market to reverse the current harsh trends of climate change.

He expressed optimism that the green bond would enhance the execution of projects to mitigate the effects of climate change in Lagos, while asserting that the success achieved during the N10.69 billion Green Bond issued by the Federal Government of Nigeria last year was a testimony to the fact that climate bond investment is a viable option for promoting sustainable growth in the environment.

Also, the Climate Bonds, Director of Market Development, Justine Leigh-Bell, described the Nigerian Green Bonds Market Development Programme as a big step towards unlocking the full potential for domestic issuance while developing a pipeline of green investment opportunities and engaging with local and international investors.

Sustainable projects covered under the green bond programme were: renewable energy, energy efficiency, sustainable waste management, sustainable land use (forestry and agriculture), biodiversity, clean transportation and clean water. Their structure, risk and returns are otherwise identical to those of traditional bonds.

Banks’ Efforts
To the Group Managing Director/CEO, Herbert Wigwe, the bank sees sustainability as providing innovative solutions to support global efforts in addressing social, environmental and economic challenges.
He explained that corporate sustainability is entrenched on three pillars: profit, planet and people and these pillars have been embedded into how the bank carries out its business across various locations.
“This comes with a vision to be the most sustainable and respected bank in Africa, financing and facilitating brighter futures for all of our stakeholders through innovative services and best in class operations,” he said.

He pointed out that the bank’s sustainability footprints are grouped into four units- economic development; environmental responsibility; sustaining societies; collaborations & partnerships.
In terms of disclosures, Access Bank said it benchmarked its performance against the nine Nigerian Sustainable Banking Principles and produces at least annually, a public Equator Principles report, on transactions that have reached Financial Close and on its Equator Principles implementation processes and experience.

According to Access Bank, every year, one per cent of its profit before tax is allocated to sustainability initiatives incorporating environmental, social and governance (ESG) rating as part of lending criteria. It has also introduced a financial inclusion strategy and developed a USSD platform as fallout to bring the unbanked population into the financial system.

The bank’s efforts in this regard over the past few years, Wigwe added, had resulted in improvement in environmental footprints. For instance, waste reduction initiatives form a key part of the bank’s cost reduction strategy. In terms of gender balance, the bank said its board composition was above the CBN regulation of 30 per cent. It carried out early branch closure policy to cut down electricity costs and introduced employee volunteering scheme to provide employees with a platform for giving back to society.

The bank has also created an inclusive and empowering environment for its employees through various initiatives. One of such initiatives is the introduction of sustainability as a part of the ‘W initiative’ targeted at women empowerment, whereby it has educated 55,000 women so far, through W Academy.
Also, First Bank of Nigeria Limited recently held its corporate responsibility and sustainability (CR&S) Week in over 3,000 secondary schools across the country to improve financial literacy and inclusion among students. The scheme, which involves career counseling session, is part of activities marking the second edition of the bank’s CR&S Week for this year.