According to the 2022 PwC Ghana Banking Survey Report, 86% of bank executives admitted to talking about environmental, social, and governance (ESG) issues more frequently than once a year.
62% of bank executives acknowledged that there was an approved plan to adopt and integrate ESG into company operations in addition to holding board discussions.
The survey’s findings revealed a definite interest in ESG policies among banks, both at the board and senior management levels.
PwC said “we view the general willingness to have ESG strategies as partly due to the collaborative effort between the Bank of Ghana, Environmental Protection Agency (EPA) and the Ghana Association of Bankers (GAB) in drafting the Sustainable Banking Principles & Sector Guidance Notes. It is noteworthy that there seems to be a general willingness for the banks to embrace ESG principles into their operations”.
ESG Motivation
When asked about what motivated the banks in assenting to the Ghana Sustainable Banking Principles Commitment and Endorsement Statement, half of the surveyed banks expect adherence to these guidelines would enhance reputation and relationships with stakeholders and create long term value.
These motivating factors are based on the understanding that several investors presently prioritise ESG information in their investment decisions, much more than in the past.
Obviously, banks were motivated beyond regulatory compliance for ESG, the survey explained.
ESG Implementation
The report said despite the significant attention drawn to ESG, industry players suggest that incorporation of the related principles into the culture of the banks is still low.
63% of the respondents believe that the concept of ESG is in the incipient stages in the banking industry with most banks assessing their implementation needs and putting the necessary structures in place for full integration.
The survey revealed that the banks are, however, optimistic and willing to incorporate ESG factors into their practices with support from the regulator.
Also, 48% of the respondents propose that – for them – regulatory leadership and initiative are the main drivers of the implementation of ESG.
ESG & Risk Management
Insights from the survey reveal the industry’s understanding of how ESG issues impact banks’ lending decisions.
71% of the respondents recognise ESG as an integral part of the credit decisions made during the credit management process and, as such, the respective report and information are obtained as part of the credit analysis process.
Way forward
The report said industry players, international partners and regulators alike admit that there is still more to be done in capacity building, monitoring and implementation in sustainable banking practices. This was confirmed, as only 48% of banks had more than 50% of their management team trained on ESG-related issues in banking with many banks yet to have a comprehensive strategy and implementation plan in place beyond the current regulatory requirements.
The report said there is therefore the need for ESG consultants and other stakeholders with expertise to assist banks to improve on ESG strategy formulation and implementation, risk management, and disclosure and reporting.
In conclusion, PwC said ESG principles and practices may be largely new to the Ghanaian banking sector but same cannot be said of the benefits and opportunities thereof ranging from low cost of funds, improved risk management practices leading to lower non-performing loans and impairment to better internal and supply chain ESG adherence leading to not only investor acceptance but also the acceptability of other stakeholders such as customers and the larger society in which these banks operate.
It therefore shared the excitement expressed by the banking industry in these opportunities and look forward to more collaboration among the stakeholders for the exploitation and realisation of the associated benefits.
21 banks out of the registered 23 universal banks were surveyed.