A Sustainable Banking Network (SBN) Task Force Report June 2020 Country Addendum to the SBN Report Necessary Ambition: How Low-Income Countries Are Adopting Sustainable Finance Profile to Address Poverty, Climate Change, and Other Urgent Challenges Ghana © International Finance Corporation [2020], as the Secretariat of the Sustainable Banking Network (SBN). All rights reserved. 2121 Pennsylvania Avenue, N.W. Washington, D.C. 20433 Internet: www.ifc.org The material in this work is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. IFC and SBN encourage dissemination of their work and will normally grant permission to reproduce portions of the work promptly, and when the reproduction is for educational and non-commercial purposes, without a fee, subject to such attributions and notices as we may reasonably require. 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Additionally, “International Finance Corpo- ration” and “IFC” are registered trademarks of IFC and are protected under international law. Ghana SBN Members: Climate Change, and Other Urgent Challenges. The report and country profiles for the first time capture ◻◻ Bank of Ghana (BOG) (member since 2016) in a systematic way how sustainable finance is being ◻◻ Ghana Association of Bankers (GAB) (member harnessed by low-income countries to address a since 2016) range of common environmental and social priorities SBN Working Group: IDA* Task Force and drive financial sector innovation despite market constraints. Key policy documents: Sustainable Banking Principles and Sector Guidance Notes (BOG, 2019) The report and profiles complement and build on the data collection and analysis for the SBN 2019 SBN Progression Matrix Stage (2020): Developing Global Progress Report, which covered 39 emerging – the country has formally launched a national markets. They delve deeper into the experiences of 8 sustainable banking roadmap, framework, policy, or low-income countries in the SBN network through an voluntary industry principles, and a formal task force, online survey, interviews, and desk research. working group, or institution has been tasked with implementation.1 This country profile has four sections: SBN and IFC role: IFC, through the Africa region ◻◻ The Drivers of Action – factors that spurred Environmental and Social Risk Management (ESRM) the country to develop sustainable banking Program for financial institutions, has provided policies or voluntary principles. technical support and advisory services to BOG in ◻◻ The country’s Experiences in Developing relation to policy development, implementation, and Sustainable Banking Frameworks and what capacity building. Through SBN, BOG has consistently was learned in the process. shared its experience with other SBN members and ◻◻ Future Priorities for the country as it benefited from the collective knowledge base. continues to develop its sustainable banking systems. About this Country Profile: ◻◻ How the country views linkages between This Country Profile is an addendum to the SBN report: sustainable banking policies and Broader Necessary Ambition: How Low-Income Countries Are Development of its Financial System. Adopting Sustainable Finance to Address Poverty, * IDA stands for the International Development Association (ida.worldbank. org), an international financial institution under the World Bank Group that offers concessional loans and grants to the world’s poorest developing countries. Country Profile - Ghana 1 1.1 Drivers of action banking regulators have taken the lead on sustainable banking, Ghana places greater emphasis on the Which factors spurred sustainable banking role of policymaker engagement and less emphasis in Ghana? on a voluntary industry approach. Ghana’s banks have actively supported the regulator-led efforts. The broad policy environment and specific In common with IDA peers, sustainable banking regulation have been key to driving sustainable has also been supported by Ghana’s broad national banking in Ghana. Figure 1 compares the drivers policy commitments to sustainable development and of sustainable banking in Ghana to other SBN IDA awareness of environmental and social risks. countries. In common with other SBN countries where Figure 1 National policymaker leadership has been key to sustainable finance banking in Ghana High Medium Low N/A Policy environment: NaƟonal commitments to the Sustainable Development Goals (SDGs), Paris Agreement on Climate Change, or a NaƟonal Sustainable Development Policy Policymaker and/or regulator engagement: NaƟonal guidelines or regulatory requirements to beƩer manage environmental and social (E&S) risks in the financial sector, improving financial stability Coordinated voluntary approach: IniƟaƟve taken by local financial insƟtuƟons to adopt internaƟonal good pracƟce in sustainable finance and level the playing field Market incentives: Opportunity to increase compeƟƟveness and resilience of the financial sector through innovaƟon in green and socially inclusive finance Environmental and social challenges: E&S risk exposure that fosters parƟcipaƟon of financial insƟtuƟons to address the E&S risks at the country level Peer experience: DemonstraƟon effect of countries that have adopted a sustainable finance roadmap Note: Large dots represent Ghana’s responses; small dots represent those of other countries. Source: SBN IDA Diagnostic Survey responses. 1.2 Developing a sustainable the banking industry, and international partners. The leading body of the policy development process, banking framework the Sustainable Banking Committee (SBC), is a national collaboration platform established by Bank What process did Ghana go through of Ghana (BOG) and includes representatives from the to develop a framework to promote Environmental Protection Agency (EPA) and the Ghana sustainable banking, and what have they Association of Bankers (GAB). BOG also worked closely learned on the way? with leading global organizations, such as IFC and SBN, to conduct capacity building and align its principles Ghana began its journey toward sustainable with international good practice. banking in 2015, and the process has been a collaborative effort among government regulators, 2 Necessary Ambition – An SBN Task Force Report Figure 2 Stages and steps for developing and implementing a sustainable finance banking framework in Ghana April 2015 – Bank of Ghana, in collaboraƟon with the InternaƟonal Finance CorporaƟon (IFC), iniƟated the creaƟon of a naƟonal plaƞorm to discuss the establishment of sustainable banking principles. 1. Trigger December 2015 – InauguraƟon of the Sustainable Banking CommiƩee (SBC), a naƟonal collaboraƟon plaƞorm with the mandate of draŌing sustainable banking principles for the banking sector, with representaƟves from BOG, the Environmental ProtecƟon Agency (EPA), and the Ghana AssociaƟon of 2. Engage Bankers (GAB), which was represented by six banks. 2016 – BOG and the GAB joined the SBN. 2017 – Sustainable Banking Principles and Sector Guidance Notes first draŌ produced. 3. DraŌ 2018 - DraŌ Principles was presented to pubic and private sectors stakeholder for consultaƟon. July 2019 – Local banks adopted the Principles at the CEO Round Table convened by the BOG. November 2019 – BOG formally launched the Ghana Sustainable Banking Principles & Sector Guidance 4. Launch Notes. 2020 – Capacity building, as well as monitor and supervise implementaƟon. Source: SBN Ghana Country Progress Report (2019) and speech by Governor of the Bank of Ghana (November 2019) In the process of developing and implementing the Participants provided feedback and further inputs sustainable banking framework, the key challenge for additional work that was done by the SBC was the limited capacity in the banking sector. subsequently. In July 2019, before the formal launch Local financial institutions initially lacked sufficient of the Sustainable Banking Principles, BOG hosted a understanding and operational experience with regard CEO Roundtable to obtain the views of bank CEOs on to sustainable banking and thus were unconvinced that the draft Principles and Sector Guidance Notes before it would be a priority for their businesses. To educate they were finalized. Although the process from the the key stakeholders and establish a consensus for first draft to the formal launch took over two years, the the proposed principles, the SBC organized multi- multi-stakeholder engagement process undertaken stakeholder engagements to enable a collaborative by the SBC improved the stakeholders’ understanding approach to the policy development process. In of the Principles and strengthened their buy-in. In 2018, the SBC organized a consultation forum with November 2019, the Principles and the guidance notes representatives of the banking industry, academia, were launched formally. the private sector, civil society, and other institutions. “ For banks to remain sustainable over the long term, it is important that their own internal operations and financing activities meet the present needs of economic agents today, while not compromising the ability of future generations to meet their own needs. ” - Bank of Ghana Country Profile - Ghana 3 1.3 Future priorities ◻◻ Develop green bond guidelines. Figure 3 compares Ghana’s ongoing challenges What are Ghana’s priorities as it continues in sustainable banking development with those to develop a sustainable financial system? faced by other SBN IDA countries. As with peer countries, ongoing progress in sustainable banking The next steps in Ghana’s sustainable finance development requires proactive strategies to develop journey are threefold: a supportive enabling environment, build capacity, and ◻◻ Develop and implement a roadmap for develop specific tools to support sustainable banking implementing the Sustainable Banking implementation. BOG emphasized that the steps Principles. above could be threatened by inadequate awareness, commitment, and capacity among banks, as well as ◻◻ Extend sustainable finance beyond banking, budgetary constraints at BOG to support and enforce to the insurance, capital markets, and pension implementation. sectors. Figure 3 Ongoing challenges to be met in developing and implementing sustainable banking for Ghana High Medium Low N/A Build the capacity of regulators and financial insƟtuƟons Enhance cooperaƟon among financial Enabling environment and capacity building insƟtuƟons Provide clear incenƟves for sustainable finance Develop and launch a sustainable finance roadmap Expand sustainable finance to other financial sectors Develop a taxonomy of green/socially Specific regulations inclusive projects or tools Promote publicly available environmental data Create green asset guidelines, incenƟves, and awareness Note: Large dots represent Ghana’s responses; small dots represent those of other IDA countries. Source: SBN IDA Diagnostic Survey response 4 Necessary Ambition – An SBN Task Force Report 1.4 Broader financial sector priorities, together with financial inclusion, fintech, and agricultural finance. This highlights the importance of development clarifying the links and complementarities with these related topics, and leveraging sustainable banking How does sustainable banking in Ghana strategies to accelerate progress in these areas. connect with broader ambitions? For example, Bank of Ghana prioritizes the In Ghana, a number of broader financial sector alignment of sustainable banking with the national priorities were listed alongside sustainable agenda for financial inclusion. Sustainable banking banking. Figure 4 compares Ghana’s concerns activities should support financial inclusion through related to financial sector development to those of capacity building, awareness creation, and the other IDA SBN countries. In Ghana, concerns about expansion of digital finance. Closely related, sustainable environmental and social (E&S) risk management banking should also support SME finance, which by financial institutions as well as increasing capital facilitates productive activities, employment creation, flows to climate and green finance are ranked as high and poverty reduction. Figure 4 Key areas of concern related to financial sector development for Ghana High Medium Low N/A Financial inclusion Cross-cutting issues FinTech/digital finance Long-term financing Environmental and social risk management Agricultural finance Sectoral financial areas SME finance Climate and green finance Disaster risk finance, disaster/weather insurance Note: Large dots represent Ghana’s responses; small dots represent those of other countries. Source: SBN IDA Diagnostic Survey response 1 Ghana was ranked at the “Preparation” stage in the SBN 2019 Global Progress Report. However, it has since issued the Ghana Sustainable Banking Principles, and thus its ranking in 2020 has been moved to the “Developing” stage. Country Profile - Ghana 5 Access SBN knowledge resources at: www.ifc.org/sbn Access the SBN Necessary Assessment Report and associated Country Profiles at: www.ifc.org/sbnnecessaryambition