Sierra Leone’s commercial banking sector recently demonstrated its support for green growth and ethical business models, with discussions on voluntary sustainable lending principles for Sierra Leone – intended to incentivise business borrowers to improve their sustainability performance.
This encouraging move towards incorporating sustainability and environmental, social and governance (ESG) standards into financial decision-making, took place at a roundtable on 13 September 2024. Members of the Sierra Leone Association of Commercial Banks and the Sierra Leone Association of Microfinance Institutions, who represented the senior management and managers of 14 financial institutions, discussed the benefits of developing voluntary sustainable lending principles; different approaches; the priorities of member institutions and developments in other jurisdictions. The session concluded with both associations agreeing to formally consult with their members on the next steps.
The workshop was designed and facilitated by finance specialists Mike Coates and Tony Deary, on behalf of Invest Salone, a UK funded private sector development programme. It builds on Invest Salone’s earlier support to the Ministry of Finance and Bank of Sierra Leone, who are taking the lead in defining Sierra Leone’s sustainable finance roadmap.
Coates and Deary, who also supported the development of Rwanda’s Sustainable Finance Roadmap, explained that voluntary sustainable lending principles aim to integrate ESG considerations into lending practices, promoting responsible financing and sustainable development.
“Financial institutions are increasingly recognising the importance of assessing and mitigating environmental and social risks in their loan portfolios, while also seeking opportunities to finance projects that contribute positively to the Sustainable Development Goals,” Coates added. “This shift is driven by a combination of factors, including regulatory pressures, investor demands, reputational concerns and a growing awareness of the long-term benefits of sustainable finance.”
The workshop was opened by Chijioke Ejilemele, President, Sierra Leone Association of Commercial Banks, who said: “As commercial bankers, profit is always at the back of our minds. There are existing checks and balances to ensure that we conduct our business appropriately, but expectations are growing that banks and other financial institutions will play a leading role in addressing ESG issues. Recognising and addressing those expectations, will strengthen public trust, ensure that the banking industry remains ahead of regulatory expectations and help the banking industry play our part in a greener future.”
Raymond Koroma, on behalf of the Sierra Leone Association of Microfinance Institutions, said: “Microfinance Institutions provide loans to 90% of small and individual businesses – extending access to finance to businesses who would otherwise be excluded. We play an important role in Sierra Leone’s economic development. By introducing ESG aspects into our lending, we have the potential to have a profound impact on these issues and address the growing concern increasingly communicated by institutional investors when they issue funding.”
Chukwu-Emeka Chikezie, Team Leader of Invest Salone, said that Sierra Leone’s banking sector had made considerable progress towards incorporating ESG principles into their business practices over the last three years, and urged them to continue to play a leading role. He added that by seeing the opportunities as well as the risks, much more progress could be made. “Sierra Leone’s Nationally Determined Contribution requires something like US$2.8 billion. To meet the funding gap, the private sector will need to play its part and look at how climate risks create opportunities for supporting climate-friendly initiatives, such as renewable energy, more sustainable cooking methods and sustainable infrastructure,” he concluded.
