Finance experts in Uganda have advised financial institution lenders to prioritize green financing in the country to manage climate change.
Green financing is a finance model aimed at ensuring that all money loaned out, either to the government or to the private sector, goes towards the protection of the environment or mitigation of the effects of climate change and biodiversity conservation.
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The model was created in line with the growing campaign for lenders and investors to have in place Environment and Social Governance (ESG) at all levels of investment decisions.
The experts have made the comments during a capacity building training by aBi Finance Limited in partnership with Uganda Institute of Bankers at Collin Hotel in Mukono district.
Musa Olwase, a trainer from the Uganda Institute of Bankers says climate change has affected the entire world and as a nation, a lot should be done to ensure that the environment does not get worse than it already is.
He says that sensitizing the loans officers throughout the country is being done so as to create awareness so they can add it to their credit lending portfolios as they carry out their business.
He says: “The intention of this training is to create awareness of climate finance throughout the country as financial institutions have been issuing out loans without paying attention to the change in climate which direct impact on the project portfolio.”
He says that as the country they want to get ahead of climate change before the situation worsens by tasking them on being cautious on which kinds of businesses they are financing and asking that they adapt to the changing environment and the need to prevent further losses.
“The climate is changing and we are trying to sensitize credit managers on global warming cause once it reaches the extreme, there will be no way an institution with an Agro credit portfolio will be able to recover the money even,” Olwase says
He adds that they have come up with a grant which they intend to give to those banks which want to do green financing as failure to do will affect other sectors like tourism which contribute to the economic growth of the nation.
Olwase says: “Financial institutions are key to green finance lending as they have direct access to different agro business customers. They can help advise their customers to be more responsible with their actions as they do business hence we promoting sustainability since the world is warming up.”
Moses Bwire the Investment Manager Green Growth at aBi Finance, a financial institution that focuses on leading money to any agriculture projects with an emphasis on environmental protection in all production processes, says the training is aimed at helping the lenders learn how to develop or improve their policies, design appropriate products, and also improve the monitoring and reporting on the loan disbursements.
He says: “We are meeting with loan officers to give them knowledge about green financing, which are those projects that qualify for green financing, how should they monitor, how should the report and hope that as they go back they try to implement these finances.
He explains that green financing will help them achieve a green tax onomy in the country and which kinds of businesses fall under green financing.
“There is what we call the green tax economy which helps financial institutions to differentiate out of these loans which loans are going to green financing and which ones are not. We also go ahead to divide those going to green financing are also divided into those going to climate change, climate mitigation and other conservation are helped.” He says
He also noted that most financial institutions are aware of ESG but have emphasis on the Spractices in various aspects of their operations, pertaining to; internal policies, frameworks and standards, structures, products, staffing, skilling, and reporting systems.
Meanwhile, Pastori Kamoga, the internal auditor for Development Microfinance, says that they are glad to be equipped with the knowledge which they intend to implement. He says that they have been doing green financing but on a small scale due to limited resources.
He says that while ESG is still optional in Uganda, there is a need for all lenders to have policies so that if or when it becomes compulsory, it will be easy for them to comply.
“They have come at the right time and through the institution we have been well equipped on green financing.” He says
Kamoga adds: “We have been doing green financing but on a small scale however, with aBi finance limited coming on board, with a very big boost to see that we can fully diversify into green financing by helping us overcome the risks associated with the initiative like taking up 70% of a loss and leaving 30% of the loss the institution which is fair compared to leaving it entirely to the Institution as it has always been.”
He notes that green finance encourages transparency and accountability through the integration of ESG factors into investment decisions, investors will also be able to make informed decisions that align with their values and contribute to sustainable development.
In December last year, aBi Finance Limited launched a 120-billion Shillings financing initiative through the local financial industry towards green financing, and currently, 26 billion Shillings has been loaned out.
