In 2008, a study conducted by IFC’s Independent Evaluation Group (IEG) on ‘Improving Results in Sub-Saharan Africa (SSA)’ showed that many Financial Institutions (FIs) in the region did not achieve satisfactory Environmental, Social, Health and Safety risk management ratings and that there was a lack of capacity amongst FIs to implement Environmental and Social (E&S) risk management. In response to this, IFC developed an advisory project, the Environmental and Social Risk Management (ESRM) program, with the objective of increasing the uptake of E&S standards by FIs in SSA to improve the E&S performance of FIs and their clients in the long term. The ESRM Ghana program is funded by donor partner, the Swiss State Secretariat for Economic Cooperation (SECO), and was launched in 2017.
About the ESRM Ghana Program
Background of the ESRM Ghana Program
As part of the preliminary activities in the design of the ESRM Ghana project, a baseline assessment was conducted in 2015 to review the existing practices of the sector and assess the local capacity available to effectively implement E&S good practices. The survey targeted three key stakeholders – financial institutions, supporting institutions and regulators. The objective of the baseline was to inform the development of the ESRM program, based on the analysis of the opportunities and design interventions needed to address the challenges identified.
In summary, the baseline found that:
- Awareness around E&S risk management was low to medium, with greater awareness amongst foreign owned banks
- For banks, the key barriers to the adoption of E&S best practices were high implementation costs, lack of capacity to implement systems, and absence of guiding laws and legislation
- The key drivers for adoption of E&S best practices at banks included requirements from development finance institutions (DFIs) to access DFI funds, improved credibility and reputation, and compliance with local legislation including labour, health and safety, etc.
- Most banks were aware (to a certain extent) of the permitting requirements for compliance with the Environmental Protection Agency (EPA)
- DFIs such as IFC, FMO and Proparco, amongst others, played a major role in influencing banks to incorporate E&S best practices in their business activities
- The development of guiding principles for the sector on E&S risk management was generally seen as favorable to the survey participants
The findings from the baseline survey were incorporated into the design and strategy for the ESRM Ghana program.
ESRM Ghana Program Strategy
The ESRM Ghana Program uses a four-pronged approach to support the banking sector in integrating E&S best practices into its lending activities
ESRM Program Partners
The program has partnered with many institutions for the implementation of the program activities such as:
- The Bank of Ghana
As the banking sector regulator, the Bank of Ghana (BOG) is leading Ghana’s sustainable banking narrative. In 2015, the BOG created the Sustainable Banking Committee, mandated to develop a customized framework on sustainable banking for the Ghanaian banking sector. The BOG also sits on the Committee, led by a senior member of the Secretary’s department.
In 2018, the ESRM program officially signed a cooperation agreement with the BOG, detailing work activities around supporting the development, and implementation of the Sustainable Banking Principles. In summary, the agreement supports:
- Organizational strengthening and capacity building of BOG staff and the Sustainable Banking Committee
- Technical input and support in the development Ghana’s Sustainable Banking Principles
- Technical input and support in the implementation of the Ghanaian Sustainable Banking Principles
Support development of sustainable lending opportunities and incentive frameworks
The BOG is a member of the Sustainable Banking Network, a platform for regulators, and industry associations convened to address the topic of sustainable finance.
More information on BOG’s Sustainable Banking activities:
- The Chartered Institute of Bankers Ghana (CIBGH)
The Chartered Institute of Bankers (CIBGH) serves as a professional body for banks and financial institutions in Ghana. It aims to stimulate the development of competent and more qualified human resources to enable the banks to offer efficient and competitive services to meet modern-day sophisticated demands and satisfaction. Its course content and structure are streamlined along the requirements of Alliance of African Institutes of Bankers (AAIOB) for global recognition. CIBGH is also a member of World Conference of Banking Institute (WCBI).
The partnership with the CIBGH will culminate in the development of a customized curriculum on E&S risk management for the CIBGH stakeholders.
For more information, visit www.cibgh.org
- The University of Ghana Business School (UGBS)
The University of Ghana Business School (UGBS) is one of the premier business schools in West Africa and a key training partner of the ERSM program. The UGBS is engaged in research and offers academic courses and degrees in sustainable development. The school houses the Center for Climate Change and Sustainability Studies (C3SS), which is a hub for research, training and capacity building on climate change and sustainability.
The partnership with the UGBS will culminate in the development of a customized curriculum on E&S risk management, which will be integrated into selected courses offered by the UGBS.
For more information, visit www. ugbs.ug.edu.gh
- The Environmental Protection Agency (EPA)
The EPA is a strategic partner for the sustainable banking initiative in Ghana as a technical E&S partner. The EPA is part of the Sustainable Banking Committee formed to develop local principles for the banking sector. The EPA also is a key implementing agency of Ghana’s Nationally Determined Contributions (NDCs) towards the Climate Change Paris Agreement.
In 2018, the EPA signed a technical cooperation agreement with the IFC to build the capacity of financial institutions and promote better environment and social risk management practices within the banking sector. The agreement will culminate in the development of curricula and sensitization on E&S risk management for banks and their clients. To date, the EPA and ESRM program have collaborated and hosted four seminar series on relevant topics.
For more information, visit www.epa.gov.gh