Financial institutions are now forced to sit up and pay attention to how their activities affect the environment, said Credit Guarantee Corp Malaysia Bhd (CGC) managing director Datuk Wan Azhar Wan Ahmad.
Speaking in his capacity as the chairman of the Association of Development Financing Institutions in Asia and the Pacific (ADFIAP) and World Federation of Development Finance Institutions (WFDFI), Wan Azhar told participants of the Global Sustainable Finance Conference in Karlsruhe, Germany that the banking and finance industries in most countries had previously remained unscathed by the “green movement”.
“When it comes to issues affecting the environment, the financial sector has been spared from the controversies and the protests. But the environment has changed and they are now confronted with global climate change issues,” he said.
“Some financial institutions that previously found nothing wrong in underwriting millions of dollars for irresponsible mining, illegal logging and other commercial operations that rapidly deplete the ozone layer, denude forests, deplete water resources, or pollute rivers, have now started paying attention to environmental issues.
“Along with governments, civil society and business organisations, banks and financial institutions have realised that protecting the environment should also be part of the business.”
Under its Asia Pro-Eco Programme, ADFIAP has commissioned two research studies: one on environmental performance monitoring by Germany’s Wuppertal Institute for Climate Change, Environment and Energy and on environmental rating standards by the UK’s Sustainability Research Institute, School of Earth & Environment at the University of Leeds.
The Wuppertal study focused on the internal environmental management policies and practices of financial institutions while the Leeds’ study looked into the environmental risk scan development financial institutions (DFI) can use in their lending decisions.
The project’s ultimate goal is to support the “greening” of the banking and finance sector in Asia-Pacific through the development and implementation of environmental governance standards for ADFIAP member-DFIs and other participating financial institutions.