WASHINGTON, 22 June 2020 / PRN Africa / -- Low-income countries are targeting reduced environmental and social risks, new green finance opportunities, small and medium enterprise finance, lending to women, and financial inclusion as essential components of sustainable finance, according to a new report released by the IFC-facilitated Sustainable Banking Network (SBN).

The report, “Necessary Ambition: How Low-Income Countries Are Adopting Sustainable Finance to Address Poverty, Climate Change, and Other Urgent Challenges,” provides a first-ever look at the drivers and innovation that underpin sustainable finance efforts in low-income countries and captures lessons that will benefit other emerging markets.

Representing 86 percent ($43 trillion) in banking assets in emerging markets, SBN includes 11 countries classified as low-income by the World Bank Group's International Development Association (IDA). These countries had gross national income per capita below an established threshold of $1,175 in fiscal year 2020. The countries—Bangladesh, Cambodia, Ghana, Honduras, Kenya, the Kyrgyz Republic, Lao People's Democratic Republic, Mongolia, Nepal, Nigeria, and Pakistan—face immediate and significant impacts from climate change, pollution, biodiversity loss, and social inequality that require urgent responses. At the same time, however, the new report shows that SBN IDA countries are keeping pace with more mature markets in driving the adoption of sustainable finance practices.

SBN was established in 2012 to bring together financial sector regulatory agencies and banking associations from emerging markets committed to advancing sustainable finance. IFC, a member of the World Bank Group, is secretariat for SBN.

Sustainable finance is a critical pathway for low-income countries to de-risk investments and spur the financial flows needed to strengthen economic resilience and social inclusion, particularly following shocks like Covid-19. The new report provides timely case studies and tools for countries planning to leverage green and inclusive stimulus to rebuild their economies while supporting climate action and sustainable development.

“Sustainable development is not a choice, but a necessity. IDA countries are the most vulnerable to climate change and other environmental and social shocks. They will also be hardest hit by the social and economic consequences of the COVID-19 pandemic,” said Georgina Baker, Vice President of IFC, World Bank Group. “Leading practices that reduce environmental and social risk in the financial sector, and unlock new investment opportunities, offer a powerful pathway to rebuild financial stability and attract investment.”

The report found that SBN IDA members' top priorities for future action include promoting green finance, such as green bonds and green loans, developing sustainable finance roadmaps, and supporting sustainable finance implementation. Continued support is needed from the international community to strengthen financial institutions and realize new investment opportunities.

"We have seen much positive evidence of changes in the way banks manage environmental and social (E&S) risks today compared to five years ago. To make the financial system more sustainable, the Mongolian Sustainable Financial Initiative (MSFI) created the E&S policy framework template and due diligence training in 2015, based on the IFC Performance Standards and sector guidelines. These have been adopted by all Mongolian banks in their entire process for issuing loans above a certain amount.” Mr. Naidalaa Badrakh, CEO and a Board Member from the Mongolian Sustainable Finance Association and co-Chair of the SBN IDA Task Force. 

Dr.  A'isha  U  Mahmood, Special Adviser to the Governor on Sustainable Banking, Central Bank of Nigeria, and co-Chair of the IDA Task Force, witnessed the regulatory transformation in her country,

“The Central Bank of Nigeria has aligned with the global momentum on sustainability since 2012 by providing policy and regulatory tools and frameworks that support the acceleration of green and sustainable finance in the entire Nigerian financial ecosystem. In recognition of the enormous investments needed for the transition to a low carbon economy, the Nigerian financial sector is allocating resources and mobilizing financial flows through innovative products and services to unlock the sustainable finance and investments necessary to transition to a low-carbon and resilient economy, and to achieve Nigeria's Climate and Sustainable Development objectives.” 

SOURCE International Finance Corporation (IFC)