Ugandan bankers bet on ESG for growth

Ugandan bankers bet on ESG for growth

From green bonds to women in business programs, banks are now betting on a new approach 

Kampala, Uganda | IAN KATUSIIME | The seventh annual bankers’ conference, held at the Kampala Serena Hotel, was abuzz with pitches and plans on Environmental Social and Governance (ESG), a new agenda sweeping through businesses worldwide.

Organized by the Uganda Bankers Association (UBA) on June.19, the conference was themed “Navigating the future of banking, ESG, Sustainability, and Digital Transformation.”

Julius Kakeeto, the chairperson of the association, said embracing ESG is now a strategic move to create a dynamic business environment.

Kakeeto, who doubles as the managing director of Post Bank, said, “The regulatory landscape is rapidly evolving to support the accelerated shift towards a sustainable future and manage the challenges this presents.”

Dr. Tumubweine Twinemanzi, the executive director of supervision at the Bank of Uganda (BOU), said the bankers made the right move on the conference saying that it was occurring a year after global climate reporting standards were adopted.

Twinemanzi noted BOU’s collaboration with UBA in establishing an ESG framework, emphasizing that the agenda has been industry-led, unlike in many other countries. He also reminded banks about the governance aspect of ESG, disclosing BOU’s recent closure of Mercantile Credit Bank due to undercapitalization.

However, it was the keynote speaker, Martin Oduor-Otieno, a Kenyan business leader who is Chairman and CEO of Leadership Group Limited, who drilled the ESG point home. “The weather changes, the flooding that has caused immense damage in East Africa and beyond shows you the importance of ESG.”

Oduor-Otieno, a former CEO of KCB, who also worked at Barclays (now ABSA), urged banks to connect the ESG agenda to an organisation’s purpose to drive sustainability.

He advocated for a holistic approach involving the board, executives, and staff for effective implementation, noting that ESG can also spur innovation and contribute to achieving Sustainable Development Goals (SDGs).

“The roles of the board, the executive, and staff must all be in sync for the ESG to be properly implemented. You must look at it holistically,” he said.

Oduor-Otieno also said that many pioneers of ESG implementation look at it in the context of risk management but added that ESG can be also a driver of innovation.

He told bankers that ESG is important in their operation because it is a way of achieving Sustainable Development Goals.

As an accountant and former Permanent Secretary in the Kenyan Ministry of Finance, he spoke about the progress of ESG and environmental awareness Kenyan banks are pushing.

“In Kenya, banks are required to report climate risks. Failure to report climate risks can be costly,” he said.

Bank’s climate efforts

Oduor-Otieno added that Kenya launched the Sustainability Financing Initiative—a comprehensive training program—where all banks enrolled right from the board, management and staff. He added that the Acorn Group, a Kenyan property developer issued a $43m green bond, structured by Standard Bank Group, in the first evergreen bond in East Africa in 2019.

Access Bank also issued a green bond meant to scale solar panels and flood mitigation; the latter a deadly problem that has ravaged the region particularly Kenya in recent months.

The banker turned business coach underscored the importance of ESG and banks being climate conscious as they also prioritise governance and social aspects.

Earlier, Ramathan Ggoobi, the Permanent Secretary in the Ministry of Finance, had told the conference that the government was in the advanced stages of the fourth National Development Plan and a climate-financing unit has been created in the ministry to attract climate financing.

Governance remains a big issue in banks

During a panel discussion, Twinemanzi the BOU boss, urged banks not to forget about the governance part. “Governance is how decisions are made and who provides the oversight of the ESG agenda.” He added, “E can’t happen when you don’t have a governance structure—how the banks conducts its business.”

As Twinemanzi spoke, the closure of the little known bank was still in the minds of the hundreds of bankers in attendance.

As speaker after speaker went on about ESG, Winnie Tarinyeba Kiryabwire, chair of the Board at dfcu bank, took the opportunity to highlight the bank’s pioneering ‘Women in Business’ program launched in 2007.

“Driven by the board, this program empowered 42,000 women through credit processes and financial inclusion,” Kiryabwire noted, displaying dfcu’s commitment to promoting women entrepreneurs.

She said the women were trained in credit processes, inducted in savings groups and in effect promoted financial inclusion.

This comes as the country’s largest banks including Stanbic Uganda Holdings Ltd, Centenary Bank, ABSA, Standard Chartered Bank, and Housing Finance Bank all achieved impressive double-digit profit growth for last year. These banks exceeded expectations and generated billions of dollars in profits for their shareholders.

However, a section of banks such as dfcu, Baroda, Bank of India and Tropical Bank, recorded a decline in profits during the same period under review citing increase in expenses.

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