Zim banks integrating ESG practises

FINANCIAL institutions in the country have started integrating sustainability and climate change principles as businesses around the world are swiftly shifting environmental, social and governance (ESG) principles from a moral responsibility to a mandatory legal requirement, a banking sector official has said.

Bankers Association of Zimbabwe (BAZ) chief executive, Fanwell Mutogo, told The Financial Gazette that the central bank was leading in building a resilient and sustainable banking system that supports sustainable growth and development — remaining a key focal regulatory priority.
“The number of institutions participating in the Sustainability Standards & Certification Initiative (SSCI) continue to increase.

“The recent monetary policy statement has also called for banking institutions to integrate ESG into corporate governance framework and risk management systems a position, which I can confirm had already commenced.

“Banks have policies and framework around ESG that are board approved,” Mutogo said.
Some of the strategies banks are implementing, according to Mutogo, include sustainability structures, certifications, integrating ESG into credit policies, capacity building on the ESG issues.

He added that policies include incorporating ESG in banking institutions strategies, for example, financial institutions lend to counterparts that take the environment seriously and assist on environmental risk assessments. Mutogo pointed out that banks were still very rudimentary in their reporting as this is still a very new area in terms of requirements.

“Absence of reporting standards makes this area even more complicated as the few banks that are doing it are using their own benchmarks and standards based on their institutions understanding of sustainability which is not ideal for comparison and trends purposes,” Mutogo said.
According to the Reserve Bank of Zimbabwe, as at December 31, 2021, nine banking institutions were participating under the central bank-led SSCI, while three microfinance institutions were accepted into the initiative.

Mutogo said financial institutions had now started applying non-financial factors like digitalisation, where a massive reduction in physical papers and the use of solar energy to power some of the bank’s ATMs and offices has been witnessed.
He said under the ESG initiative, banks had adopted online banking, which has resulted in less people driving cars to visit branches and corporate social responsibility (CSR) where the banking sector made Covid-19 donations.

To ensure compliance, Mutogo said BAZ has an established BAZ Compliance Committee subcommittee responsible for providing a forum for the consideration of matters of policy and mutual interest concerning member banks.
He said one of the key strategic goals was the adoption of international best practices in capacity development of banking professionals.
“The committed the ESG issues, the committee is in the process of setting up a sub-committee to address ESG issues which will be discussed at industry level,” he noted.

“Adverse perception of the level of commitment by banks forwards sustainability which will mean sanctions on banks in the form of increased capital buffers due to accessing foreign capital at a premium since most international credit partners are not keen to partner with banks who do not have sustainability programmers.

“This ultimately affects country ratings on climate risk issues as well as country commitment to international conventions such as COP 26,” he said.
On his part, RBZ governor, John Mangudya said the public increasingly expects financial institutions to demonstrate a sense of purpose that extends beyond merely profit.

He added that the central bank continues to work closely with a number of financial institutions in the implementation of the SSCI being driven by the European Organisation for Sustainable Development.
ESG reporting is aimed at helping companies operate responsibly in addressing global challenges, such as global warming and human trafficking.

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