Apia, May 31, 2006 – Sustainable finance
provides financial institutions with significant opportunities to reduce
their exposure to risk, enhance their corporate image, and profit from
loans to companies responding to increasing consumer demands for sustainability.
The International Finance Corporation, the private sector arm of the World
Bank, brought together local consultants and bankers who are likely to
work together with the Samoa Venture Capital Fund at a two-day training
workshop this week to examine the business opportunities emerging in sustainable
finance in the Pacific region.
The workshop identified reducing financial,
legal, and reputational risk as a major incentive for financial institutions
to commit themselves to sustainable finance.
“Financial institutions that commit to sustainability
can create competitive advantage by offering clients the financial products
and services they need to achieve good environmental and social practices
and also finance businesses that support sustainability,” said the acting
governor of the Central Bank of Samoa, Mr. Philip Penn, who opened the
workshop. “Consumers worldwide are increasingly insisting that they want
to buy products from companies that have good labor standards and don’t
pollute the environment. Entrepreneurs may also be looking for financing
to start businesses that sell clean technology or support sustainability
in some other way,” he added.
The workshop addressed various risks and
opportunities for financial institutions. Borrowers that pollute the environment
and have to pay clean-up costs or suffer from a damaged reputation as a
result of causing pollution, mistreating employees, or negatively affecting
the community could see their profits harmed and thus their ability to
repay a loan. In several countries banks are held legally liable if they
finance a damaging project. Including sustainability criteria in loan and
investment assessments can also enhance a financial institution’s corporate
image, which in turn can help attract customers. In addition, financial
institutions that commit to sustainable finance can potentially profit
from loans to companies that improve efficiency and competitiveness as
they upgrade to cleaner technology or make other improvements to satisfy
government regulations or the demands of consumers.
The workshop also heard from the Samoa Venture
Capital Fund, managed by Pacific Venture Capital Managers, which outlined
its investment policies and procedures and environmental due diligence
Mr. Clive Mason of IFC’s Sustainable Financial
Markets Facility said the delegates responded very positively to the training,
indicating that IFC could develop future workshops in the region. “It’s
important for financial and banking institutions in the Pacific Islands
to keep themselves abreast of the innovative developments in sustainable
financing of businesses,” he said.
Mr. Robert Simms, acting general manager
of IFC-PEDF, based in Sydney, Australia, said the workshop was the first
opportunity in the Pacific Islands region for local financial analysts
and bankers to be updated on the latest developments on sustainable financing
techniques. “It is a further benefit derived from the establishment of
the Samoa Venture Capital Fund,” he said.
Samoa Venture Capital Fund
SVCF is a pilot venture capital fund set
up to invest primarily in existing promising enterprises that are
seeking financing for expansion of bankable business proposals but are
constrained from borrowing due to their inability to satisfy normal collateral
requirements of banks. The investors in SVCF include IFC, Asian Development
Bank, European Investment Bank, ANZ, Samoa National Provident Fund, National
Bank of Samoa, and the Samoa Life Assurance Corporation. In addition to
the investors, the governments of Samoa and Australia have provided grants
through a trust account with IFC to support the management of the SVCF
and training for improving venture capital fund operations.
International Finance Corporation
The mission of IFC is to promote sustainable
private sector investment in developing and transition countries, helping
to reduce poverty and improve people’s lives. IFC finances private sector
investments in the developing world, mobilizes capital in the international
financial markets, helps clients improve social and environmental sustainability,
and provides technical assistance and advice to governments and businesses.
From its founding in 1956 through FY05, IFC has committed more than $49
billion of its own funds and arranged $24 billion in syndications for 3,319
companies in 140 developing countries. IFC’s worldwide committed portfolio
as of FY05 was $19.3 billion for its own account and $5.3 billion held
for participants in loan syndications.
The Private Enterprise Development Facility
is a multidonor-funded initiative set up by IFC with its head office in
Sydney, Australia, to reduce poverty through sustainable private sector
development in the Pacific Islands. IFC-PEDF works to improve the
business environment, develop the financial sector, and increase the capacity
of local business through technical assistance. It also works in a coordinated
way at the micro and macro levels in selected sectors—tourism, agribusiness,
garments, and handicrafts—to help groups of small and medium enterprises
solve common problems and compete successfully in the global economy. IFC-PEDF's
donors are Australia, IFC, Japan, and New Zealand.
IFC's Sustainable Financial Markets Facility
is a donor-funded grant program that promotes environmentally and socially
sustainable lending and investment by financial institutions in developing
countries and economies in transition. The facility currently benefits
from the grant support of IFC and the governments of Italy, Luxembourg,
the Netherlands, Norway, and Switzerland.
For more information, visit www.ifc.org.