Tony Francis Ntore, CEO OF Rwanda Bankers Association dwelt on the subject of the Adoption of green finance in the East African community banking sector. Green finance is a paradigm shift in the way we think about finance and its relationship with the environment. The choices we make today have a profound effect on the planet.
“East Africa is home to a diverse range of ecosystems and is not immune to the global environmental challenges such as resource depletion, climate change, and biodiversity loss affecting our communities and economies in the East Africa region. Green finance has a compelling solution to these challenges and has a range of products and services that ensure environmental sustainability,” said Tony Francis Ntore, CEO OF Rwanda Bankers Association
He said projects can include renewable energy, energy-efficient buildings, sustainable agriculture, and more.
“Rwanda is known for its breath-taking landscape and vibrant culture It has also embraced green finance as part of its development journey. Rwanda’s banking sector has taken great strides to adopt green finance and has several products for those involved in green finance and projects,” Ntore
Banks in Rwanda and entrepreneurs have begun unlocking capital and finance that deal with projects that have less environmental impact. Green finance is not a trade-off between economic growth and the environment.
Rwanda has also launched the sustainable finance roadmap with UNDP to undertake ESG investments and projects. Its target is to drive the banking sector in the region towards sustainable green finance.
The development of Rwanda recently launched its inaugural sustainability-linked bonds with a 7-year tenor looking to raise US$ 25 Million, a huge milestone as far as green finance is concerned.
Banks are thrilled that they will soon unlock these funds and give loans to their clients.
What is happening with green finance in Rwanda can be replicated in other countries in the region. It is therefore a great moment for the banking industry in Rwanda which cannot wait to see the fruits that it can also bring in East Africa.
Ntore warns that a Bank can face financial risk if it fails to embed ESG in the decisions that it makes as well as its lending practices.
Without ESG, this can also affect the assets of a bank. These lenders can also have their customers affected by climate change. The affected clients may have difficulty in meeting the loan obligations. Banks are thus advised to be vigilant to ensure their clients are not affected or pay penalties for destroying the environment. Banks can also suffer from reputation risk and this can affect clients and investors.
Banks need to have a rigorous risk assessment procedure and with an ESG framework, banks are also able to attract sophisticated investors and more businesses.
“We have partnered with Kigali International Financial Centre, to attract investment in the financial sector. We are already implementing climate change guidelines and the ESG framework as RBA and also ensuring that our members also implement these guidelines, “said Ntore.
He said it will be difficult to attract a foreign investor to come to Rwanda if the country has not implemented ESG and climate change frameworks.
“These are part of offers to investors that are coming into Rwanda. We have regular meetings with Treasury and compliance officers, to assess where we are in the ESG climate change journey and the challenges that we face even before they occur. We are working closely with the Rwanda Development Bank to see how banks can access these loans. RBA is offering training to banks on climate and ESG,” said Ntore.
In Rwanda, when a developer is putting up a building, it must meet several standards, including how much energy the commercial building is using, how much solar energy is used, how much water is used in the building, and whether it is recycled.
Banks are also offering better rates on green finance. The key drivers are the offers from the bank as well as the environment as well as regulations that go with green finance.
However, Ntore cites several challenges that banks face in implementing ESG. He said there are too many regulations that touch on ESG, thus the need for policymakers to get rid of the confusion and ensure clear demarcations and the same interpretation of the regulations. He said policymakers need to streamline these regulations.
He said the field of green finance industry has very few experts, making it the next big thing in the financial sector.
Kenya and Rwanda have already adopted green finance while other countries are at different stages of adoption.
Ntore said by the end of 2024, all EAC countries will have adopted the ESG framework. He added that the ESG framework determines the financial health of the organization. Without ESG banks will raise interest rates or ask for more guarantees. Those who fail to adopt ESG will have an impact on their financials. He said banks in the region have already begun rolling out green finance products and are also developing a green finance portfolio.