Uptake of Sustainable Banking in Emerging Markets.


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Clive Mason, Program Manager - IFC - United States

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  • Uptake of Sustainable Banking in Emerging Markets.

    1. 1. Uptake of Sustainable Banking in Emerging Markets Clive Mason Senior Advisor, IFC, and World Bank Asia Alternative Energy Program (ASTAE) Bangkok, Thailand
    2. 2. <ul><li>Is sustainable banking confined to the Equator Principle banks (EPFIs)? </li></ul><ul><li>How have emerging market banks responded ? </li></ul>
    3. 3. EPFIs <ul><li>EP – June 2003 – 10 Banks </li></ul><ul><li>EP2 Agreed July 2006 – based on the new IFC E&S Performance Standards (ten) </li></ul><ul><li>Now, more than 40 EPFIs </li></ul><ul><li>In 2006, 88% of underwritten project finance debt approved in accordance with EP2* </li></ul><ul><li>In Asia, 99% of deals (by volume) reported to be include at least 1 EPFI* </li></ul><ul><li>*Analysis of Infrastructure Journal, February 2007 </li></ul>
    4. 4. <ul><li>What is Sustainable Finance? </li></ul><ul><li>The idea that financial institutions manage their business in such a way that transactions are: </li></ul><ul><li>Financially sound </li></ul><ul><li>Environmentally sustainable </li></ul><ul><li>Socially sustainable </li></ul>
    5. 5. IFC <ul><li>Private sector arm of World Bank </li></ul><ul><li>Largest IFI investor in emerging markets </li></ul><ul><li>40% of portfolio invested in Financial </li></ul><ul><li>Intermediaries </li></ul><ul><li>Support and TA </li></ul>
    6. 6. IFC Support to Emerging Market FIs GLOBAL “ CBA” Training Program Network of Regional Sustainable Finance Service Providers Environmental and Social Assessment Reference Tool for FIs (ESAT) On-line training program development Womens Banking Alliance Young Banker Internship Program <ul><li>61 Projects Funded - 48 Projects Completed </li></ul><ul><ul><ul><ul><li>US$6.5 million in total project cost </li></ul></ul></ul></ul><ul><ul><ul><ul><li>US$5.1 million in net funding </li></ul></ul></ul></ul>Fully and partially implemented Under development
    7. 7. Review of FI Clients <ul><li>“ Beyond Risk” (2003) </li></ul><ul><li>“ Banking on Sustainability” (2007) </li></ul>
    8. 8. Sustainability Market Survey of FIs <ul><li>Workshop participants from October 2002 </li></ul><ul><li>Over 120 FIs surveyed in 43 Emerging Market countries </li></ul><ul><ul><li>40 % commercial banks, </li></ul></ul><ul><ul><li>20% private equity institutions, </li></ul></ul><ul><ul><li>under 10 % development banks, leasing, microfinance </li></ul></ul><ul><li>Main questions asked: </li></ul><ul><ul><li>what they consider the key sources of environmental and social risks and opportunities; </li></ul></ul><ul><ul><li>motivation and constraints to consider E&S issues; </li></ul></ul><ul><ul><li>business impact of integrating sustainability in their business </li></ul></ul>
    9. 9. E&S Risks and Opportunities <ul><li>Main sources of E&S risks identified by FIs are reputational risk, credit risk and non-performing loans </li></ul><ul><li>Key sustainability opportunities are developing business in new areas, access to new markets, and providing loans for environmental projects </li></ul>E&S Risks Sustainability Opportunities
    10. 10. Demonstrated Impact <ul><li>Do you consider E&S issues in your business? </li></ul><ul><ul><li>97% of FIs answered “ yes ” </li></ul></ul><ul><li>Following IFC training, has your business changed as a result of considering E&S issues? </li></ul><ul><ul><li>81% of FIs reported a positive change </li></ul></ul><ul><ul><li>68% of FIs developed a Sustainability Management System </li></ul></ul>TYPES OF BUSINESS IMPACT
    11. 11. <ul><li>Main motivating factors: increased credibility and reputation; increased value to stakeholders, perceived lower risk and better returns </li></ul><ul><li>81 % of FIs reported that they saw a positive change when started to consider sustainability (e.g. positive business impact) </li></ul><ul><li>Main types of positive change they had: </li></ul><ul><ul><li>reduced risk (59 %) </li></ul></ul><ul><ul><li>improved brand value and reputation (50 %) </li></ul></ul><ul><ul><li>developed new business (40 %) </li></ul></ul><ul><li>12 % of surveyed FIs developed sustainability financial products </li></ul><ul><ul><li>Leading products: environmental loans for SMEs; investments in cleaner production technology, green investment funds </li></ul></ul>Motivation and Business Impact
    12. 12. <ul><li>Key Sustainability Opportunities: </li></ul><ul><li>developing business in new areas , e.g. energy efficiency, renewable energy, eco-tourism, organic farming, biodiversity, carbon finance), access to new markets, and providing loans for environmental projects . </li></ul>
    13. 13. Sustainable Finance Opportunities
    14. 14. Case Studies – some examples Cleaner production and energy efficiency UralTransBank, Russia SME lending for energy efficiency Center-Invest, Russia Renewable energy financing ACBA Leasing, Armenia Strong environmental management BCR, Romania Sustainable Microfinanace ACLEDA, Cambodia Opportunity Bank
    15. 15. Case Studies – some examples Sustainable development Afriland First Bank, Cameroon Sustainable energy projects Ceska Sporitelna, Czech Republic Innovative financial products Banco Cuscatlan, El Salvador Community involvement Nedbank, South Africa Opportunity Bank
    16. 16. Thank you ! Contact: cmason@ifc.org