The Sustainable Development Committee of the Federation of Egyptian Banks (FEB) called on all banks operating in the Egyptian market to adopt the Principles for Responsible Banking launched by the United Nations Environment Program (UNEP) Finance Initiative in November 2018 in Paris.
According to Dalia Abdel Kader, head of the Sustainable Development Committee of the FEB and head of the Sustainability, Marketing and Information Sector at the Arab African International Bank (AAIB), the committee is working, in coordination with the Central Bank of Egypt (CBE), to approve these principles and abide by them in light of the keenness of the FEB to support the efforts of the CBE towards financial inclusion, green financing, and the role of the banking sector in the implementation of the sustainable development strategy 2030.
On Wednesday, the FEB’s Sustainable Development Committee held a workshop for journalists to raise their awareness of these principles and their importance, as part of the committee’s interest to propagate the culture of responsible banking and sustainable development in the banking sector, and its clients from different sectors of society.
The workshop was also attended by Dalia Akmal Noureddine and Mostafa Mahmoud of the Sustainable Finance Unit of the AAIB, Adel Al Ashmawi, head of the Risk of Community Development Management at the Commercial International Bank (CIB), and Nouran Emad of the CIB’s Community Development Risk, as well as a number of the Sustainable Development Committee of FEB members, such as Gehan Aboul Hassan of the United Bank, Nadia Hossney of the CIB, Shahinaz Ramzy from the Arab International Bank, and Dalia El-Mahmoudy of QNB ALAHLI.
According to Abdel Kader, the committee is working to establish a culture of change within the banks to activate sustainable development and shift from within the culture to change the work systems to comply with them.
She pointed out that the committee will hold a meeting this week with the members of the Sustainable Development Committees in the banks, as a first step in preparation for the adoption of the principles by the boards of directors of those banks.
Furthermore, she expected the completion of adopting these principles by the end of the first quarter of this year, and the commitment by banks as of September 2019, stressing that the Egyptian banking sector is strong and capable of achieving Egypt’s leadership in sustainable development in the Middle East and Africa.
After obtaining the approval of the banks, the committee will begin to move and cooperate with the CBE, which has taken the lead in many initiatives that achieve the principle of sustainable financing, as well as communication with ministries in the government to disseminate the six principles, especially in the interest of achieving the State Plan for Sustainable Development 2030, she explained.
“Despite the importance of profits for banks, which is a good thing, we seek to liberalise the banking philosophy of narrow thought, which sees only the numbers and profits into thinking where a balance between profit and service of society is achieved,” Abdel Kader said.
“This comes within the framework of ensuring the role of the Egyptian banking sector, enhancing its leadership in the Middle East and Africa, and its ability to redefine the role of banking institutions in achieving balanced growth in its economic, environmental, and societal dimensions to achieve the Sustainable Development Goals (SDGs) signed by Egypt and 192 other countries at the United Nations General Assembly in 2015, as well as the Paris Climate Agreement.”
The Sustainable Development Committee of the FEB comprises of 11 banks, namely the AAIB, the CIB, QNB ALAHLI, the National Bank of Egypt, the Industrial Development Bank, Credit Agricole, Banque du Caire, the United Bank, Alexandria Bank, and the Arab International Bank.
According to Abdel Kader, the principles of responsible banking, in their entirety, aim to develop the concept of risk management to include environmental and community risks, and to encourage banks to finance projects that serve the environment and financial inclusion, as well as the provision of the application of government principles and transparency.
She noted that the importance of these principles is evident in determining the competitiveness and credibility of banking institutions in a global context that is rapidly changing towards sustainable development and financing, especially after the signing of the Paris Climate Agreement in 2015.
With the introduction of responsible banking principles, the financial sector’s entire responsibility system has been completed, where the United Nations Principles for Responsible Investment has been adopted in 2006 and the Principles for Sustainable Insurance in 2012.
“Responsible banking principles reflect a new direction for financial institutions in the wake of the 2008 financial crisis, a serious step toward reducing the gap between banking practices and environmental and societal objectives,” said Abdel Kader.
According to Dalia Akmal Noureddine, the initiative includes six principles: Alignment, where the banking institutions undertake to harmonize their strategies to contribute to the achievement of sustainable development goals.
The second principle is Impact, including the intensifying of the positive effects of banking institutions and reducing the negative impacts on the environment and society, as well as environmental and social risk management, resulting from their banking practices.
The third principle concerns Clients and Customers and the importance of working closely with customers, promoting sustainable practices, and enabling sustainable economic activities that will create opportunities for growth and prosperity for present and future generations.
The fourth principle is Stakeholders and is specialized in consultation and communication with all parties concerned to achieve the community goals, while the fifth principle is Governance and Target Setting in activating the policies of governance, and establishing the culture of responsible banking, which calls for setting goals related to the areas most influential to them, which will lead to the general trend towards sustainable development.
The sixth and final principle focuses on Transparency & Accountability, which requires review of the individual and collective implementation of these principles periodically, to ensure transparency and responsibility of financial institutions in the disclosure of business, and the positive and negative effects and contribute to the objectives of society.
The Arab African International Bank and the Commercial International Bank (CIB) have participated in this initiative, among 28 leading banking institutions from around the world.
Egypt is the only country in the Middle East and North Africa represented in this initiative.
The UNEP financial initiative has divided the world into five regions, each region has an official that follows the adoption and implementation of sustainable banking principles, and Dalia Abdel Kader was chosen to be responsible for following up and promoting the six principles in the Middle East and Africa.
According to Abdel Kader, the committee is keen to raise awareness of these principles. Egyptian banks, especially the most active banks in the field of social responsibility and sustainable financing, are at the forefront of the global trend towards the consolidation and adoption of the principles.
The FEB has joined the Sustainable Banking Network in November 2016.
She pointed out that the six principles constitute a positive shift in the global banking sectors and ensure the sustainability of banking systems and their association with society and the environment, pointing out that the interest has become increasing in these systems since the global financial crisis 2008, which showed the fragility of banking systems in the world.
She added that banking sectors have always been interested in tracking credit risk, market and exchange rate only, and now environmental and societal risks are a vital part of the risk management system and the banking sectors worldwide.
She pointed out that the Egyptian banking sector has an agreement on the general vision of the principles of sustainable financing, but more importantly is setting standards and regulations for achieving the six principles, including them within the strategy of each bank, and educating and training employees within banks with these principles.
According to Abdel Kader, there are 17 goals for sustainable development: eradicating poverty, eradicating hunger, good health and well-being, quality education, gender equality, clean water and sanitation, clean and affordable energy.
The targets also include decent work, economic growth, industry, innovation and infrastructure, reducing inequalities, sustainable cities and communities, responsible consumption and production, climate work, underwater life, life on land, peace and justice and strong institutions.
According to Noureddine, the AAIB has always respected environmental and societal standards in funding, and has had a dedicated management of these studies since 2006, explaining that any funding in excess of $10m must meet environmental and community feasibility studies.
Credit risk management at the bank is working on issuing reports to measure sustainable development management of projects, setting conditions for project financing, and training courses for credit officers in this regard.
She explained that credit risk management discussions take place with the client in order to guide them to reduce risks to the environment from projects.
According to Al Ashmawi, CIB has taken steps to implement sustainable financing and set specific policies to achieve this beginning in 2014, and always keeps itself updated, including environmental and community studies for each bank’s credit customer, as well as the credit study.
He added that the bank is keen to educate customers about environmental risks of the projects they are applying for financing.