On the final day (Thursday, 11 November 2021) of the recent COP26 climate summit, Sierra Leone’s banking sector came together at a roundtable in Freetown, Sierra Leone, to agree on a coordinated approach towards mainstreaming environmental, social and governance (ESG) standards in their operations. This will help Sierra Leone tackle the effects of climate change by paving the way to a slice of the private finance pledged to support the global transition to net zero carbon emissions.
Private sector climate finance was a major theme of COP26. This included a commitment from the Glasgow Financial Alliance for Net Zero – a global coalition of over 450 finance firms across 45 countries – to align their financing activities with global net zero goals.
The Sierra Leonean banking sector’s recommendations have been adopted in this year’s inclusive green recovery budget. In his budget speech, Dennis Vandi, Minister of Finance, assured parliament that his ministry will work with the Bank of Sierra Leone (BSL), the Sierra Leone Association of Commercial Banks (SLACB) and other stakeholders to ensure a coordinated approach to ESG compliance and accessing sustainable finance for green initiatives.
Dr P.K. Muana, Senior Adviser to President Maada Bio and Head of Strategic Communications, welcomed the banking sector’s declaration of action. He affirmed that it aligned with the president’s COP26 commitment to make Sierra Leone a more attractive destination for green investments. “Although Sierra Leone is highly vulnerable to the adverse effects of climate change, we lack the fiscal space to scale up investments in climate change actions. Mobilising private sector finance for climate change adaptation is therefore essential if we are to develop a climate resilient future for our nation. Today’s investors are increasingly allocating capital based on ESG considerations. By contributing to an enabling environment for green investment and innovation, this initiative from SLACB and BSL will send an important signal to the world about our intention to deliver green and inclusive economic growth.”
The British High Commissioner to Sierra Leone, Lisa Chesney MBE, said, “By sending such a range of delegates to COP26, Sierra Leone gave a clear signal that every part of the government has a role to play. I welcome the commitments made at COP26 and I am pleased to see early action to progress these. To help Sierra Leone tackle climate change sustainably, it is vital that all stakeholders get involved, including the private sector. It is paramount that these stakeholders come together to improve the investment climate – and do so in a predictable and transparent way – to help Sierra Leone become more competitive in accessing climate finance in the future.”
As well as supporting Sierra Leone’s green growth by unlocking sources of capital ringfenced for environment-related investments, Aina Moore, President of the SLACB and Managing Director of Ecobank Sierra Leone stated that ESG standards for the sector would also encourage a more competitive banking sector.
The roundtable was organised by Invest Salone, the UK Government-supported private sector development initiative, and SLACB to discuss the challenges and opportunities of ESG requirements in commercial banking.
Aina Moore opened by emphasising the need for Sierra Leone’s banking sector to act proactively to address the risks created by climate change. “Although Sierra Leone’s contribution to global emissions of greenhouse gases is negligible, we are also one of the most climate vulnerable territories,” she said. “The Sierra Leone banking sector must commence a dialogue on both the human causes of climate change and the concomitant effect on our core business especially lending. We must be part of the global dialogue as the world becomes more interconnected.”
In an overview of green and sustainable banking, participants heard how moving towards a low-carbon economy will necessitate changes in policies, progress and performance for the banking sector, and that there is growing recognition that embedding ESG factors required industry-wide collaboration. However, while there are challenges, there are also opportunities – particularly for banks in developing countries, who will be able to unlock sources of green capital.
The discussion that followed revealed that ESG management strategies already exist among several banks in Sierra Leone, but levels of integration vary widely. Kumba Ngongou, Head of Corporate Affairs at Standard Chartered, stated that her bank is regulated by the UK’s Financial Conduct Authority and follows strict ESG disclosure requirements, adding: “While we are exiting certain sectors because of the risks, other banks are not. An enabling ESG code that puts banks on an equal footing would be a compelling incentive for all banks to increase investment in sustainable sectors.”
Donald Macauley, Deputy Director of Stabilisation at BSL, agreed, saying that collaboration between BSL and SLACB was essential and committing to a joint working party to look at proposals for ESG banking guidelines and ascertain their appropriateness for Sierra Leone.
Wycliffe Ngwabe, the UN Capital Development Fund Country Representative, stressed the importance of increasing consumer awareness of the importance of ESG standards to the economy and green growth, as well as capacity building among bank staff to operationalise ESG standards. In her concluding remarks, Aina Moore said that the widespread introduction of ESG considerations in banking decision-making in Sierra Leone was inevitable. Nevertheless, it was equally important that such considerations should be appropriate to the needs of the Sierra Leonean economy. “To have an enabling effect on Sierra Leone’s development, the ESG principles incorporated into our banking and business environment must reflect Sierra Leone’s ambitions for its future. We are at the stage where we can design a framework that both works for our economy and attracts responsible investment, and we look forward to working with the Bank of Sierra Leone to take this forward.”