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Banks and Sustainability Principles Reporting [analysis]
[October 22, 2014]

Banks and Sustainability Principles Reporting [analysis]


(AllAfrica Via Acquire Media NewsEdge) Obinna Chima examines efforts by banks to comply with the reporting guidelines of the Nigerian Sustainable Banking Principles.

As part of efforts to ensure that the ecosystem was preserved, the Central Bank of Nigeria (CBN) about two years ago rolled out guidelines on the Nigerian Sustainable Banking Principles (NSBP).

The NSBP guidelines are aimed at integrating environmental and social policies into decision-making processes in commercial banks, discount houses and development finance institutions.

The guidelines were also aimed at minimising or mitigating negative impacts of financial institutions' operations on the environment and local communities where they operate.

The NSBP consists of nine over-arching principles for managing environmental and social risk in business decisions; managing the banks' own environmental and social footprint; safeguarding human rights; promoting women's economic participation/empowerment; promoting financial inclusion of communities and groups with limited or no access to formal financial sector; meeting the imperatives for good governance, transparency and accountability; supporting capacity building in the sector; promoting collaborative partnerships to accelerate sector progress; and reporting to take stock of sector progress and attendant needs. The central bank had in a circular, directed that sustainability reporting would commence in June 2014 with the submission of the one-off report (first quarter) not later than July 7, 2014.



The CBN also instrcted that the second quarter one-off report should be submitted to it, not later than October 7, 2014, while the third quarter report should reach the CBN not later than January 7, 2015.

Nonetheless, there are indications that some banks are having challenge complying with the reporting template. According to the regulator, for the successful implementation of the principles, financial institutions would be required to develop a management approach that balances the environments and social (E&S) risks identified with the opportunities to be exploited through their business activities.


According to the apex bank, the adoption of the principles will not only help banks in mitigating the E & S risks associated with their business operation and those of their clients, but also help them to achieve greater efficiencies and better position them to take advantage of opportunities in the global market place where environmental and social issues are becoming increasingly important. Besides, the central bank said the banks will also enjoy higher productivity, higher staff morale, lower turnover and absenteeism due to strong employee relations and workplace practices.

The CBN would need to provide the structural mechanism to encourage consistent and widespread implementation of the principles and develop its institutional capacity to support the banks in their implementation of the principles.

While noting that the process of developing the sustainable banking principles and guidelines has so far been driven by the banks, the apex bank assured financial institutions that it would create the enabling environment for banks to succeed in their implementation of the principles.

Implementing the NSBP Recently, the CBN had advised banks and other financial institutions under its supervision to work towards implementing the sustainable banking principles.

Deputy Governor, Financial System Stability, CBN, Dr. Kingsley Moghalu warned that banks that fail to comply with the principles would be sanctioned.

However, the central bank deputy governor stressed that it had been made mandatory for all banks to apply the principles in their lending practices.

Moghalu said: "What we have done is to say we would be regulating and supervising banks in accordance to how effective they apply those principles and so it becomes part of the supervision of the banking and financial system. We would be doing that twice every year.

"Of course, if you don't comply, we would apply sanctions. Sustainable banking agenda is a very concrete aspect of economic development and it is one of the major contributions we are making from the regulatory perspective." He stated that the policy became crucial after the global financial, when regulators and other stakeholders saw the shortsightedness of just focusing exclusively on profit.

Also, the CBN Deputy Governor, Economic Policy, Dr. Sarah Alade noted that sustainability being an emerging issue requires building internal competencies through capacity building and training of employees so as to develop the necessary skills and mindset for integration of the policy. Alade said the CBN has gone into collaboration with the International Finance Corporation (IFC) to train and re-train staff members on environmental and social issues.

"Similarly, the board of directors and top management were also trained to set the tone at the top. Since the launch of the principles and accompanying guidelines, the CBN has developed, exposed and approved a reporting template to enable us measure performance on sustainability issues by the industry in order to show commitment and be transparent," she added.

On his part, the CBN Deputy Governor, Operations, Alhaji Suleiman Barau explained that the shift to sustainable banking was because the industry realised that poor environmental and social performance on the part of their client represented a threat to their business success.

Effective Reporting To ensure compliance with the reporting template, the Chief Risk Officer, Access Bank Plc, Mr. Greg Jobome stressed the need for reporting institutions to have an implementation plan with realistic timelines in order to successfully implement the NSBP guidelines. According to him, it is important for banks to report and implement sustainability principles because their services have impact that cuts across various sectors.

On his part, Deputy Director, CBN Mr. Frankline Ahonkhai pointed out that the NSBP lays emphasis on funding transactions that have developmental impact on the economy. "The purpose of the reporting template is to provide reporting institutions with a uniform format for reporting their implementation efforts," Ahonkhai stated.

Similarly, an international sustainability consultant, Carey Bohjanem urged banks to take environmental issues seriously so as to boost their risk management profile.

According to her, Nigerian banks that are yet to implement the banking principles should collaborate with those that have implemented theirs and seek ways to assess and manage the environmental and social risks associated with such investment activities.

In the same vein, sustainability expert at DiiGEM Consulting, Kaidi Eddie-Obiakor noted that most banks in Nigeria that started sustainability reporting years back, have discovered that there is nothing to fear about openness in business transactions and corporate social responsibility reporting.

She urged banks to note that what is important to stakeholders should also be important to them. Eddie-Obiakor added: "People don't understand what they would be reporting on. Basically when starting the sustainability journey, banks need motivation, materiality and metrics.

"What is your motivation for reporting? What value do you see in it? What is material to your business and how do you think it can impact on your business and how do you think you can measure it? Those are the types of information you should be providing to your stakeholders." She commended banks that had been proactive in reporting their sustainability activities, saying it would go a long way it positively contributing to their growth.

"The NSBP reporting is pushed by the CBN, but some banks were so proactive than others. Some of the banks that have gone ahead to report are finding value in the fact that sustainability isn't bad at all.

"Many of the banks came up with the fact that improving internal efficiency and accounting for their sustainability activities were significant motivations. Even bank have identified that there is value addition to their businesses.

"You have to find out what would be valuable and how the reporting can be used to engage their stakeholders. Metrics is also very important to everyone, especially the CBN that would be regulating.

"At the end of the day, what is important is to know how what you have done has impacted your business and the community. Even in the emerging markets, so many of the reports I have seen have not been able to define their metrics," she advised. There is therefore the need for the CBN to collaborate with environment experts and other stakeholders in order to ensure effective means of measuring the reporting procedure.

Copyright This Day. Distributed by AllAfrica Global Media (allAfrica.com).

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