The Development Bank Ghana (DBG) is to build a centre of excellence to champion the integration of Environmental, Social, and Governance (ESG) systems in the operations of banks and Specialised-Deposit Taking Institutions (SDIs).
Speaking at a five-day Environmental and Social Risk Management Training of Trainers (ToT) Programme for Banks and Specialised-Deposit Taking Institutions (SDIs) at Koforidua, Mr John Akuoko-Tawiah, Head of ESG, Sustainability & Climate Finance at DBG, said the Centre might be ready early next year.
The seminar is being spearheaded by the DBG, World Bank and Finance Ministry and would help identify financial institutions’ challenges in the implementation of Environmental and Social Risk Management systems.
ESG systems have become essential for financial institutions and SMEs due to the growing recognition of their importance in risk management, compliance, access to capital, reputation, cost savings, innovation, competitiveness, sustainability, stakeholder expectations and due diligence.
Integrating ESG into business strategies can lead to long-term sustainability and competitiveness in today’s evolving economic landscape.
Mr Akuoko-Tawiah said the ESG Centre would have a tailored and overarching special purpose vehicle to provide training and support to financial institutions.
“We see a lot of training and support in silos, but we think that we need to have an overarching centre of excellence that is geared towards ESG as the governance side of the environmental and social management system, and also the opportunity side that is the sustainable finance,” he said.
He said by building the capacity of the institutions, DBG was making its partners and other financial institutions ready to receive development finance linked investments to bring transformation into the financial sector and the private sector.
“As part of the training, we will want to understand why banks and SDIs are not able to implement Environmental and Social Risk Management systems correctly per our requirements and also provide solutions to that.”
We are currently coming up with technical assistance that’s supposed to scale our partner banks who have an Environmental and Social Risk Management system that is kind of nascent so that they can be able to effectively implement them and also integrate into their lending decisions,” he stated further.
Mr Andrew Ameckson, Deputy Director Financial Sector Division, said the training would help financial institutions to better understand environmental and social risk management, sustainable finance, and explore sustainability-related business opportunities.
He said Environmental and Social Risk Management was crucial for the Development Bank Ghana (DBG), as it plays a pivotal role in supporting sustainable development projects in the country.
“The integration of effective risk management practices enables DBG to align its operations with international sustainability standards, mitigate potential negative impacts, while creating and enhancing positive social and environmental outcomes of financed projects,” he said.
“Through the effective implementation of its environmental and social management system, DBG seeks to align its activities with the Sustainable Development Goals,” Mr Ameckson added.
He said Environmental risk management would ensure that projects financed by the DBG were designed and implemented in a manner that minimized negative impacts on the environment by avoiding or mitigating issues such as deforestation, pollution, and habitat destruction.
In this direction, the bank helps ensure that projects contribute positively to local development, enhance livelihoods, foster social cohesion and guarantee long-term economic viability.
“DBG requires existing and potential participating financial institutions to meet minimum environmental and social requirements as set out in DBG’s Environmental and Social Policy.”
DBG implements this policy using an environmental and social management system which sets out the framework for conducting E&S due diligence and assessing the eligibility of potential Participating Finance Institutions, he added.
The Board of Directors of DBG approved the bank’s Environmental and Social Management Policy and associated Procedures on December 1, 2021.
The Policy enables DBG to align itself to best international practices and local legislation governing environmental and social issues and forms the basis of DBG’s Environmental and Social Management System (ESMS).
The ESMS commits the Bank to implementing effective environmental and social management measures in all its activities, products, and services. DBG has noted that it is committed to ensuring good environmental and social performance through the integration of sustainable development in its financial and non-financial activities and by seeking to address the E&S risks of its financing and lending activities.