Commercial banks are to incorporate mitigation measures into their development agenda and credit risk assessment criteria to address air, water, land and community pollution to ensure responsible environmental and social legacies for future generations.
Samuel Ashitey, Managing Director of Ecobank Ghana, who tasked banks at a workshop for members of the Ghana Association of Bankers (GAB) on environmental risk analysis yesterday in Accra, said the challenges posed by environmental and social issues in the financial industry require collective effort of actors in the financial industry and non-financial industry alike.
“We have learnt that the only way we can deal with issues of development in a sustainable way is first of all to recognise that businesses must be built on a sound financial profit framework.”
According to him, banks could bring about real development by leveraging on the environmental and social opportunities.
He said there was need for a strong commitment from the Bank of Ghana (BoG) with support from Environmental Protection Agency (EPA) to ensure compliance with the necessary environmental and social measures in credit financing.
Banks are to ensure that they do not fund activities that destroy the environment like chainsaw operations and illegal mining among others.
“For Ecobank, as the largest bank operating in Africa by geographic footprint with presence in 33 countries in Middle Africa, our commitment to financial and economic development will be incomplete without due cognizance of environmental sustainability.”
Millison Narh, Deputy Governor of the BoG, in a speech read on his behalf, said risk assessment and controls have a bearing on a bank’s solvency.
Risk in whatever form is expected to be analysed and appropriately provided for.
He added that the BoG’s capital adequacy framework designed to measure the solvency of banks was basically restricted to traditional risks of credit, market and operational risks.
Going forward, he said BoG will introduce the Internal Capital Adequacy Assessment Programme (ICAAP) to augment statutory capital adequacy.
“Banks will be expected to consider all quantifiable material risks including reputational risks in their risks assessments programmes and compute the impact on their respective capital. Thus, banks will be expected to raise capital commensurate with their calculated risk levels at any point in time based on their internal assessments.”
EPA has introduced a number of measures to ensure sustainable development in Ghana. For example, the Akoben initiative assesses the environmental performance of mining and manufacturing operations using a five colour rating – gold, green, blue, orange and red, which indicate environmental performance ranging from excellent to poor.
By Samuel Boadi