The Bank of Ghana (BoG) has launched the Ghana Sustainable Banking Principles (SBPs) to provide the guiding principles to underpin effective Environmental and Social Risk Management (ESRM) policy frameworks for banks.
Speaking at the launch in Accra on Wednesday, the Governor of the Bank of Ghana, Dr Ernest Addison noted that “responsible banking practices will have to ensure that environmental and social risks associated with projects financed by banks are well managed.”
“For banks to remain sustainable over the long-term, it is important that their own internal operations and financing activities meet the present needs of economic agents today, while not compromising the ability of future generations to meet their own needs,” he added.
Dr Addison said, “Considering the important role of the financial sector in economic development, the issue of sustainable financing is critical and therefore requires a robust environmental and social risk management (ESRM) policy.”
He said the BoG recognises environmental and social risk management (ESRM) as key components of banks’ overall risk management strategy.
“We are not alone in this regard. Central Banks and banking regulators around the world have mainstreamed ESRM in their prudential risk assessments, given the potential impacts of environmental and social factors on the long-term safety and soundness of banks.”
Dr Addison said the launch of the SBPs is coming at a time that “we have a strong and resilient banking industry. Not only is the industry now well-capitalized, solvent, liquid and profitable; but also, the stability and resilience of the sector have been greatly enhanced.”
“We have witnessed credit picking up, and the strong capital positions of banks provide some strong support for credit growth going forward,” he said.
He, therefore, believes “that banks will take advantage of these SBPs and sector guidance notes to develop effective ESRM policies to promote the sustainability of their banking business as well as the sustainability of the Ghanaian economy.”
About the Ghana Sustainable Banking Principles (SBPs)
The development of the SBPs is as a result of intense work spanning the past four years. Bank of Ghana, in collaboration with the International Finance Corporation (IFC), initiated the creation of a national platform to discuss the establishment of sustainable banking principles sometime in April 2015.
A Sustainable Banking Committee made up of representatives of the Bank of Ghana, the Ghana Association of Bankers (GAB), the Environmental Protection Agency (EPA), was inaugurated in December 2015 to spearhead work in this direction, with the mandate of coming up with relevant sustainable banking principles for the banking sector.
The Committee produced the first draft of the Sustainable Banking Principles and Sector Guidance Notes sometime in late 2017.
In July this year, the final phase of the exercise was undertaken where a CEOs Roundtable was organized to obtain the views of Bank CEOs on the draft SBPs and sector guidance notes before they were finalised.
The SBPs comprises seven principles for:
i. identifying, measuring, mitigating and monitoring environmental and social risks and opportunities in banks’ business activities;
ii. promoting good environmental and social governance practices in banks’ internal business operations;
iii. strengthening good corporate governance and ethical standards;
iv. fostering gender equality; v. facilitating financial inclusion;
v. enhancing resource efficiency and sustainable consumption and production; and
vi. Compliance reporting.
These SBPs will apply to five sectors which have initially been identified. These are:
a) Agriculture and forestry;
b) Mining, oil and gas;
c) Construction and real estate;
d) Energy and power; and