African Markets Make Significant Progress in Sustainable Finance Reforms, Report Finds



African Markets Make Significant Progress in Sustainable Finance Reforms, Report Finds

WASHINGTON, 27 February 2018 / PRN Africa / -- Emerging markets have become a major force in driving development and fighting climate change, as 34 countries have initiated banking reforms to expand sustainable lending, according to the first comprehensive Global Progress Report of the Sustainable Banking Network, an IFC-supported organization of banking regulators and associations.

Three SBN members are advancing sustainable finance in Africa: Kenya, Nigeria and South Africa. Nigeria is leading the way as the most advanced, with the Nigerian Sustainable Banking Principles and guidelines for high risk sectors in place since 2012. The report underlines several good practices introduced in Kenya, where the Sustainable Finance Initiative Guiding Principles are endorsed by the national banking association and the Kenyan Central Bank, and include not only environmental and social aspects, but also governance issues. In South Africa, the voluntary Principles on Social and Environmental Risk Management were developed by the banking association, with the active participation of 32 South African and international banks. Along with industry associations and regulatory agencies, the National Treasury is leading efforts to develop a national shared vision for sustainable finance to be launched this year.

The 34 countries globally covered in the report account for $42.6 trillion in bank assets—more than 85 percent of total bank assets in emerging markets. Some are wealthier than others, but all of them have made progress in advancing sustainable finance. Eight countries—Bangladesh, Brazil, China, Colombia, Indonesia, Mongolia, Nigeria, and Vietnam—have reached an advanced stage, having implemented large-scale reforms and put in place systems for results measurement. These reforms require banks to assess and report on environmental and social risks in their lending operations and put market incentives in place for banks to lend to green projects.

“This progress is an important step toward achieving the Sustainable Development Goals by 2030,” said Ethiopis Tafara, IFC's Vice President for Legal, Compliance Risk and Sustainability. “It shows that even the poorest countries can adopt sustainable finance reforms. The Sustainable Banking Network has demonstrated in a short time how much can be achieved when regulators, policymakers, trade associations and development institutions collaborate to advance sustainable finance.”

The report provides practical indicators and tools for countries to apply to their own domestic markets, regardless of their size or stage of development. This is important because it facilitates learning by all members and accelerates the pace of change. It is based on an innovative results-measurement approach that has been agreed by all 34 member countries—a remarkable achievement that is breaking new ground for measuring progress at the global level.

“The report provides concrete and practical information to SBN member countries to help them develop sustainable finance policy initiatives,” said Franklin Ahonkhai, Director, Financial Policy and Banking Supervision, Central Bank of Nigeria, a member of the SBN Measurement Working Group that led the development of the unique methodology behind the report.

Emerging-market countries increasingly are learning from one another as they adopt sustainable-finance policies, according to the report. For example, with SBN support, Mongolia Banking Association visited Kenya in March 2017 and learned from Kenya's advanced e-learning platform to raise awareness about sustainable banking practices, which has been used to train 80 percent of Kenyan bank employees.

SOURCE International Finance Corporation (IFC)