60% of banks have approved ESG plans – PwC

More than half of banks in the country have approved plans to adopt and integrate Environmental, Social and Governance (ESG) strategies into their business operations, a recently-released study by PricewaterhouseCoopers (PwC) has shown. In its 2022 Ghana Banking Survey Report – wherein it surveyed 21 out of the 23 registered universal banks – the advisory notes that 62 percent of bank executives it surveyed confirmed the existence of such plans, with 86 percent indicating that the subject is discussed at board level, at least, once every year. “Insights from the survey show a clear-cut interest in embracing ESG strategies by banks, both at the board and senior management levels,” PwC’s Country Senior Partner, Vish Ashiagbor, noted in remarks accompanying the report. Additionally, 71 percent of the survey’s respondents believe ESG should be an integral part of their credit decision-making; 63 percent say the concept is at its nascent stage, and 48 percent of them describe regulatory leadership and initiative as the main drivers of implementing ESG. The top executives pointed to customer satisfaction and employee engagement as the top-two non-financial metrics they are prioritising – ostensibly because these have the most direct consequences on their bottom line. PwC attributes the growing ESG focus, in part, to the Sustainable Banking Principles & Sector Guidance Notes introduced as a consequence of sustained collaborative efforts from key industry stakeholders – including the Bank of Ghana (BoG), Environmental Protection Agency (EPA) and Ghana Bankers’ Association (GAB). “Even though some banks seem to have had some form of ESG strategies in place prior to the release of the principles and sector guidance notes on the subject matter by the regulator, many woke up to the issue only after the regulator’s publication – with only a very few having in place a clear strategy which goes beyond just satisfying the regulator compliance matters required as at now,” Mr. Ashiagbor elaborated. Despite gains made in awareness and adoption of self-initiated ESG frameworks by the banks, the Survey showed that only 48 percent of them have more than 50 percent of their management team with formal training on the subject. This prompted a call from PwC to accelerate training. “There is a need for banks to intensify training on ESG for their staff to advance the ESG agenda and harness its full potential… It may be difficult to achieve more in ESG if key decision-makers in the industry lack adequate knowledge on the subject,” PwC noted. This further prompted the advisory firm to advocate the development of a roadmap for implementing sustainable banking practices, with the conviction that “banks will show more commitment and be more accountable to the implementation process”. On his part, Chief Executive Officer (CEO) of the Ghana Association of Banks (GAB), John Awuah, said the growing interest in ESG is unsurprising, as banks had even before lessons from the pandemic begun shifting away from a narrow focus on shareholder investment maximisation to a broader scope that incorporates long-term sustainability, healthy financial systems and the transition to a green economy. “Banking institutions’ strict adherence to sustainable banking principles in prior and recent years has seen some demonstrable improvements. The adherence is a reflection of society’s desire to engage and transact business with banks characterised by strong ethical standards and values,” he said, noting that charting this course will see banks lower their costs, have stronger governance structures, attract environmentally-conscious capital and contribute to sustenance of the world. He is confident that the medium-term will see growth in the subject, as the approach adopted by local banks is not only consistent with global best practices but also fits into the country’s development needs. Tax Lead at PwC, Ayesha Bedwei Ibe, also believes that in addition to policies which incentivise sustainable finance and provide punitive measures for harmful practices, the pressure from investors will see more banks embrace sustainability and enhance their tax transparency. These developments come as concerns over sustainability of the planet have come into sharper focus, with a growing interest in ESG. Sources such as the ESG and Thematic Investing unit for Europe, the Middle East and Africa (EMEA) at Bloomberg Intelligence is forecasting that ESG assets will grow 10x between now and 2025, from US$530million to more than US$53billion.