When financial institutions incorporate environmental and social considerations into their day-to-day activities, they can have a big impact on their clients' behavior—and on their own bottom line.
On June 7, IFC and the Financial Times presented the second annual awards to banks that focus on sustainability, both by including it in their operations and by offering innovative environmental and social financial products. The jury made eight awards, including Sustainable Bank of the Year, which went to ABN Amro, Netherlands.
Sustainable Banking
As providers of financing for private sector companies, banks can affect the environment and their local communities. Sustainable banking means providing capital to projects and businesses that mitigate their environmental and social footprint to the extent possible—as well as those that seek to protect the environment and enhance social development.
Sustainable banking is both a risk management tool—helping banks protect their capital and reputation—and a business opportunity, because it encourages banks to develop innovative financial products and to seek new clients.
Women are a prime example. In almost every developing country, they are underserved, or not served at all by the financial sector. But they in fact run most of the world's small and medium enterprises. And their economic activity is particularly beneficial to their families, as research finds women are more likely than men to spend their income for food, children's health, and education. Women entrepreneurs are also more likely to repay their loans. Hence extending financial services to women is good for the banking industry, good for women themselves, and good for development.
Benefits for Emerging Market Financial Institutions
Far from imposing a burden on emerging market financial institutions, sustainable banking provides an extra tool to compete with international banks and to take an active role in their country's sustainable economic development, including through responsible use of natural resources.
Asked in an IFC survey about sustainable banking, Grigory Chorayan, Head of Treasury at Bank Center-Invest, Russia, responded, "Market differentiation and expansion of our services into segments with high potential are key factors to increase our competitiveness and sustain revenue growth. That is why areas such as lending to SMEs and energy efficiency projects are among our highest strategic priorities."
Emerging market banks are shifting their focus, from trying to avoid risks to seeking new and better ways to tap the business opportunities offered by sustainable development. The resulting benefits for banks range from higher profitability and market value to a stronger reputation and better image in the community.
Sustainable finance offers the financial sector an opportunity to sustain growth and profits by opening up new markets that will serve poor people and value natural resources.
The FT Awards—and This Year's Winners
IFC and the Financial Times launched the Sustainable Banking Awards in 2006. The aim is to recognize banks that have shown leadership and innovation in integrating social, environmental, and corporate governance objectives into their operations. The awards are now an annual event.
In 2007, the response has surpassed last year's inaugural awards, with 151 entries from more than 100 banks in 51 countries. The 2007 awards also highlight regional leadership for the first time, under the new Emerging Markets category.
IFC/FT Sustainable Banking Awards – 2007 Winners |
Sustainable Bank of the Year
ABN Amro, Netherlands
Emerging Markets Sustainable Bank of the Year
ABN Amro Bank India
Regional Emerging Markets Awards
- Asia – ABN Amro Bank India
- Eastern Europe – Dexia Banka Slovensko, Slovak Republic
- Latin America – Banco do Brasil
- Middle East & Africa – Nedbank, South Africa
Sustainable Bankers of the Year
Compartamos/Banamex, Mexico
Sustainable Deal of the Year
Deutsche Bank/Goldman Sachs:
International Finance Facility for Immunisation
Achievement in Carbon Finance
Raiffeisen, Zentralbank, Austria:
Nitrous oxide emission reduction project
Learn more about the awards categories and criteria...
|
"These awards send an important signal to the banking sector. Sustainable finance, especially in emerging markets, is a proven strategy for creating value and opportunity for clients, shareholders, and poor people," said Lars Thunell, IFC Executive Vice President and CEO.
A Priority for IFC
For a number of years, IFC has been training banks in emerging markets to recognize environmental and social risks in their investments and to develop financial models that allow them to invest in environmental and social projects or businesses.
IFC has also created a Community of Learning with financial institutions, including those that have signed on to the Equator Principles, environmental and social conditions for project finance that are based on IFC's Performance Standards. The community is a space where banks can share experience and lessons learned in sustainable banking, and it also allows IFC to communicate
good practices.
A year ago, IFC revamped the environmental and social conditions it applies to its own financing. The new environmental and social
Performance Standards have become the benchmark in project financing and have been adopted by the Equator Banks.
The Future of Sustainable Banking
Great challenges and opportunities remain for sustainable banking. Four billion people still live in poverty worldwide, at "the bottom of the pyramid." But IFC and the World Resources Institute have calculated that these people, despite their poverty, represent
$5 trillion in purchasing power. They need access to financial services, such as business loans, life insurance, and health insurance. They represent a huge business opportunity for the banks that will develop financial products to serve them.
Investing in natural resources and giving them a financial value also represents an important opportunity for banks. Rachel Kyte, IFC Director of Environment and Social Development, notes, "This means finding the financial products that will value natural resources in situ and let communities sustainably harvest or protect them. These will be, for example, forest bonds, commercial ecosystem payment schemes, and water pricing instruments. We are very close—but the world's natural infrastructure needs the same kinds of investment innovation as the world's built infrastructure. IFC is committed to helping make this happen."
For more information contact:
Lucie Giraud
Communications Officer
Phone: 202-458-4662
E-mail:
Lgiraud@ifc.org
Published June 8, 2007
