Five countries— Brazil, Colombia, Ecuador,
Mexico and Peru—are paving the way for others in the region.
Washington, D.C., February, 26, 2017—Emerging
markets have become a major force in driving development and fighting climate
change as 34 countries have initiated banking reforms to expand sustainable
lending, according to the first comprehensive Global Progress Report of
the Sustainable Banking Network, an IFC-supported organization of banking
regulators and associations.
Those 34 countries account for $42.6 trillion
in bank assets—more than 85 percent of total bank assets in emerging markets.
Some are wealthier than others, but all of them have made progress in advancing
sustainable finance. Eight countries—Bangladesh, Brazil, China, Colombia,
Indonesia, Mongolia, Nigeria, and Vietnam—have reached an advanced stage,
having implemented large-scale reforms and put in place systems for results
measurement. These reforms require banks to assess and report on environmental
and social risks in their lendign operations and put market insentives
in place for banks to lend to green projects.
“This progress is an important step toward
achieving the Sustainable Development Goals by 2030,” said Ethiopis Tafara,
IFC’s Vice President for Legal, Compliance Risk and Sustainability. “It
shows that even the poorest countries can adopt sustainable finance reforms.
The Sustainable Banking Network has demonstrated in a short time how much
can be achieved when regulators, policymakers, trade associations and development
institutions collaborate to advance sustainable finance.”
The report provides practical indicators
and tools for countries to apply to their own domestic markets, regardless
of their size or stage of development. This is important because it facilitates
learning by all members and accelerates the pace of change. It is based
on an innovative results-measurement approach that has been agreed by all
34 member countries—a remarkable achievement that is breaking new ground
for measuring progress at the global level.
Latin America represents about a third of
SBN membership: 11 out of 34 countries. Five member countries— Brazil,
Colombia, Ecuador, Mexico and Peru—are paving the way for others in the
region, with established sustainable finance policies and principles in
For example, Central Bank of Brazill passed
a mandatory resolution that requires banks to develop and execute a Social
and Environmental Responsibility Policy, aimed at managing environmental
and social risks, preventing losses from both environmental damages and
social issues, and engaging with affected stakeholders. Colombia is considered
a model of stakeholder engagement, with the government and private sector
aligned in supporting the Green Protocol – a set of voluntary guidelines
on best practices in environmental and social risk management in the banking
Membership in SBN promotes learning from
peers and accelerated adoption of sustainable-finance policies. For example,
Mexico and Peru have learned from the experience of Brazil and Colombia
and are rapidly developing their own sustainable finance initiatives.
More details on the five member countries
that are taking the lead on sustainable finance policies and principles:
The report indicates that Brazil’s risk
management regulation is ambitious and requires financial institutions
to adapt their governance and processes to meet requirements. Brazil stands
out as among few countries where financial flows to green sectors are monitored
and have been publicly disclosed since 2013. The Central Bank Resolution
requires stakeholder consultations from financial institutions, a good
practice to reinforce transparency and accountability. The report
suggests that disclosure could be further improved by requiring financial
institutions to publicize flows to green sectors at a corporate level and
complementary guidance could clarify reporting requirements.
The report highlights Colombia’s multi-stakeholder
engagement to drive the development of the Green Protocol, a process involving
banking association Asobancaria as well as the President and the Ministry
of Sustainable Development. The report also recognizes the very detailed
guidance on E&S risk management issued by Asobancaria, which provides
banks with clear examples and tools for implementation. The report suggests
that the Green Protocol could be further extended to other financial activities,
including insurance and institutional investors. Asciación Bancaria (Asobancaria)
the country’s bank association, could also provide further guidance to
banks regarding international best practice.
In Ecuador, the journey toward sustainable
banking was initiated in November 2016, when the Association of Private
Ecuadorian Banks (Asociación de Bancos Privados del Ecuador, Asobanca)
issued the Sustainable Banking Protocol and set up a Sustainability Committee
to help with facilitating the implementation of the protocol together with
the financial sector and other key stakeholders such as the academics,
regulatory bodies and the stock exchange. Ten banks have signed the Protocol,
committing to complying with its requirements. These requirements include
the implementation of environmental and sustainable (E&S) risk management
systems, the development of green investments, and the management of their
own social and environmental footprints.
The Mexican Sustainability Protocol is a
voluntary, industry-led initiative endorsed by the Ministry of the Environment
(Semarnat) and other relevant government agencies which has been signed
by 97 percent of the Mexican financial sector. The Mexican Banking Association
created a Sustainability Committee with the protocol signatories in order
to deliver specific actions to meet the protocol objectives. The
Sustainability Committee has also represented the banking sector in a working
group defining Green Bond Principles for Mexico, led by the Stock Exchange.
Mexico was also one of the first developing countries to commit to a specific
carbon reduction target, through the use of clean technology, and has developed
a number of energy efficiency standards and regulations to meet these targets.
In 2015, The Banking Superintendency (SBS)
Peru of developed the Regulation for Social and Environmental Risk Management,
which outlines minimum environmental and social risk assessment requirements
for all financial institutions in the country. The regulation provides
very detailed instructions on how to create a questionnaire to evaluate
and manage E&S risks. The SBS also issued a document entitled Role
of Enhanced Due Diligence in the Regulation of Socio-environmental Risk
Management for Financial Firms, which clearly defines the scope of projects
for which minimum E&S risk management requirements have to be implemented.
IFC—a sister organization of the World Bank
and member of the World Bank Group—is the largest global development institution
focused on the private sector in emerging markets. We work with more than
2,000 businesses worldwide, using our capital, expertise, and influence
to create markets and opportunities in the toughest areas of the world.
In FY17, we delivered a record $19.3 billion in long-term financing for
developing countries, leveraging the power of the private sector to help
end poverty and boost shared prosperity. For more information, visit www.ifc.org
The Sustainable Banking Network (SBN) is
a knowledge and capacity-building platform of financial regulators, banking
associations, and environmental regulators from emerging markets committed
to developing sustainable finance frameworks based on national context
and priorities, as well as international good practices. IFC acts as the
Secretariat of the Network, playing the role of facilitator and technical
adviser to SBN. For more information on the Sustainable Banking Network,