Banks tackle environmental degradation - As Nigerian banks moves to revolutionize environmental conservation through lending, our correspondent examines the initiative. The war against environment degradation is set to witness a revolution in Nigeria. Fighting for the integrity of the ecosystem would no longer be the preserve of environmentalists, civil society groups, government departments and agencies.

Nigerian banks too are taking a walk from just doing core banking businesses to make a bold commitment to preserve the environment. In unambiguous terms the banks have said; going forward, we will stop lending to firms that destroy the environment with their operations. We will not lend to firms that do not protect the integrity of the ecosystem in their operations. The banks are saying if you want the funding lines to remain open, you must change your operations to be more environmentally friendly. This statement is simple but bold and profound.

This formed core of a 3 days symposium (September 7 and 9, 2011)in Lagos on sustainable finance sponsored by Access Bank, in partnership withthe Netherlands Development Bank (FMO), the United Nations Environment Programme Finance Initiative (UNEP FI) with support from International Finance Corporation, UNDP, Chartered Institute of Bankers among others.

Though this commitment has been previously subtly promoted by Access Bank, several other Nigerian banks are joining the pack.

The symposium tagged Nigeria Sustainable Finance week had bankers, government environment officials, risk managers, agricultural researchers, investment analysts and UN advisors attending. It climaxed with a CEO round table with the CBN governor, Sanusi Lamido Sanusi attending and commenting.

The conference discussed the trends, opportunities, challenges and best practices in the fields of finance and sustainability, with a particular focus on the social and environmental issues in Nigeria.

It also featured high level discussions on Sustainable finance, with a focus on incorporating environmental exigencies into risks financing; agriculture financing; new trends in financing environmental issues; emerging business opportunities in global carbon trading and carbon credit offset investments inAfrica.

Participants agreed other banks in Nigeria, like Access Bank have done, should subscribe to the Equator Principles in lending.

The Equator Principles (EPs) are a credit risk management framework for determining, assessing and managing environmental and social risk in project finance transactions. Project finance is often used to fund the development and construction of major infrastructure and industrial projects. The EPs are adopted voluntarily by financial institutions and are applied where total project capital costs exceed US$10 million (N1.6 billion). The EPs are primarily intended to provide a minimum standard for due diligence to support responsible risk decision-making.

Different markets can develop their rules based on their environment but bearing in mind the spirit of the convention.

Signatories to this commitment included Access Bank Plc, Citibank Nigeria Limited, Diamond Bank Plc, First Bank of Nigeria Plc, GTBank Plc, Stanbic IBTC Bank Plc, Standard Chartered Bank Limited and Zenith Bank Plc with Nigeria's central bank governor Mallam Sanusi Lamido Sanusi witnessing.

Thus at the conference a working group was constituted to immediately commence the work on the agreed initiatives. Members of the working group are Access Bank, Diamond Bank, GTBank, Standard Chartered Bank, Citibank and Zenith Bank. The working group will work in conjunction with the International Finance Corporation (IFC) and the Dutch Development Bank (FMO) and develop ways on how sustainable financing can be driven in Nigeria.

The Sustainability Working Group will function on the platform of the Banker's Committee's Economic Development sub-committee led by Access Bank's Group Managing Director/CEO, Aigboje Aig-Imoukhuede.

The Central Bank of Nigeria (CBN) governor Malam Sanusi Lamido Sanusi said shortly after witnessing the signing that "We need to understand that as an industry, we will not continue to take savings and deposits from Nigerians and then lend to companies that will use the funds to destroy the environment. The long term survival of the system depends on the protection of the ecosystem."

"The banking industry will now start setting standards and foundations for protecting the environment and ecosystem in our lending; we are going to play an advocacy role to make sure that government takes the environment very seriously and confront the vested interest that are bent on destroying the environment" he concluded.

Aigboje Aig-Imoukhuede, GMD/CEO, Access Bank said that "going forward companies that deplete the environment in their operations would need to change the way they do things if they want to continue to get financing and we want the entirety of Nigerian banking sectors to take that position."

Recounted the atmosphere in the CEOs round table thus; "in our meetings with the CEOs, we had an intellectual discussion and we had frank discussions. I saw passion, I saw buying into sustainable financing, I saw collaboration, I saw understanding, I saw courage, I saw people speak with the courage to do things, and I saw urgency that exceeded my expectation."

He explained that Access Bank had embarked on a sustainability journey some five years ago. "I don't look at it as a campaign, it is a way of life; how Access Bank conducts and run its business with the society in mind, with doing good in mind and with a believe that we are more than just a bank. We are a responsible corporate citizen that is expected to add value to the environment" he noted.

"We've been journeying alone with support of certain development finance institutions, but we need much more people on this train. This is the clarion call to the banking industry. Access Bank can be the catalysts but the entire banking industry would be driving it" he explained.

FMO CEO Nanno Kleiterp with the commitment Nigerian banks have recognised that they are not in a competition but to join forces, on the economic development in Nigeria. "I have been impressed with the commitment of the banks, the regulator, in fact the entire financial sector, to promote sustainable development and to create local standards which are adequate for Nigeria. The learning principles are international principles that Nigeria has to adopt based on its circumstances" he said.

Meanwhile industry watchers are baring their minds on the new thinking by Nigerian banks. Moses Awuhe, a public affairs analyst said that going green is the best way now and Nigerians should support it. "The issue here is sustainable development. The banks have taken the right step in the right direction. I am not a finance expert but I do understand the issues around going green and sustainable development. Financing therefore has a very key role to play" he said adding that he is happy the "banks are blazing the trail in this direction. Your information is a wakeup call for us all. We really have no choice."

Terseer has a more critical view. He noted that "while going green is obviously the way to go, this new approach by the banks might not yield the desired result. Firstly, the banks themselves cannot be said to be going green. Their offices still burn tonnes of diesel annually, releasing GHG into the atmosphere."

"Secondly, how will the banks measure the environmental impact of businesses? They are not specialists in this and their decision will at best be subjective. More so in an economy where credit is already very difficult to obtain, this will be another reason for our loan shy banks not to give loans" he said.

To him, he "will rather we strenghten our environmental regulatory agencies and leave out lending to be a strictly business decision made by the banks. After all, the US refused to sign the Kyoto convention."

But one thing is certain; the Nigeria financial space will never remain the same again with this new initiative.

Chris Agabi

Daily Trust/13/10/2011