To accelerate the transition to a net-zero economy, the Central Bank of Nigeria (CBN), says Nigerian signatories to several global initiatives as a commitment to unlock the financial solutions prescribed by the United Nations Environment Programme Financial Initiative (UNEP FI).
The apex bank added that being signatories to such initiatives are parts of the Nigerian Banking Sector’s recognition of the vital role of banks in supporting the global transition of the real economy to net-zero emissions.
The CBN’s explanation is in response to Sustainable Economy Nigeria (SEN’s) inquiry on why no local bank is part of the over $29 trillion Net-Zero Banking Alliance (NZBA), launched by UNEP FI.
Launched on April 21st with 43 founding banks and seven insurance companies, the Net-Zero Banking Alliance joins the UN Race to Zero, and is the banking element of the Glasgow Financial Alliance for Net-Zero.
It said: “The Nigerian Banking Sector, in recognition of the vital role of banks in supporting the global transition of the real economy to net-zero emissions are signatories to several global initiatives as a commitment to unlock financial solutions to accelerate the transition to a net-zero economy.”
It also noted that efforts to reach net-zero must be complemented with the mobilization of climate and sustainable finance, which “is why UNEP-FI launched a global alliance that brings together existing and new net-zero finance initiatives into one sector-wide strategic forum. The Net-Zero Banking Alliance was only launched in April 2021 with 43 founding World’s biggest banks.”
The sector regulator equally admitted that globally, many countries have made commitments to Net-Zero Emissions by pledging carbon neutrality by 2050.
Besides, it defended that efforts by the banking sector to integrate sustainability into its core business practices and operations through the Nigeria Sustainable Banking Principles (NSBP), an industry-led risk management framework, have gained a lot of traction and mileage since its adoption in 2012.
“With the evolution of new drivers for sustainable banking and finance in Nigeria, what started as a voluntary initiative to address Environmental and Social issues, is now co-evolving with business and investment strategies and has become a regulatory imperative. Sustainability is incorporated into the CBN supervisory activities to assess banks performance on ESG (environmental, social and governance) risks.”
It also told Sustainable Economy that “Following the NSBP adoption, banks have recorded progress on the 9 principles including the incorporation of Environmental and Social Risks into their Enterprise Risk Management Frameworks.
It is worthy to note that Nigerian banks have taken leadership in offering a range of different innovative products (such as Green Bonds, Renewable Energy, Energy Efficient) to enable them manage their exposure to climate risks, and thereby contribute to the acceleration of the transition to a low-carbon, sustainable and resilient Nigerian economy.
“Similarly, Financial Inclusion and Women Economic Empowerment have received greater attention and banks have continued to increase their efforts to the deployment of gender aligned products for women and women owned businesses.”
CBN said further that there is an industry collaboration on sustainability, “as banks have a number of fora where they meet periodically to share ideas, lessons and experiences on the implementation of the Principles.”
“It is worthy to note that Nigerian banks have taken leadership in offering a range of different innovative products (such as Green Bonds, Renewable Energy, Energy Efficient) to enable them manage their exposure to climate risks, and thereby contribute to the acceleration of the transition to a low-carbon, sustainable and resilient Nigerian economy.”
To crown their efforts, the apex ban concluded by revealing that it “has institutionalized an annual Sustainability Award to incentivize performing banks, details of which are also available in the public domain.”