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Banks faulted on slow adoption of green financing principles
Dr Tumubweine Twinemanzi signs on a cardboard during the launch of the green financing initiative in Kampala early this week. Photo / Michael Agaba
What you need to know:
- Green financing has become a key credit line at a time when the global economy is shifting to smart investments, enhanced by the worsening impact of climate change
Financial institutions are not doing enough to streamline financing of green agribusiness investments, stakeholders have said.
Ms Mona Muguma Ssebuliba, the aBi Finance chief executive officer, said this is affecting access and utilisation of the green finance fund, which seeks to drive environmentally responsible and socially inclusive investments.
“Much as there is willingness of financial institutions to finance green agribusiness evidenced by the growing demand for green lines of credit, there is lack of readiness to operationalise green finance,” she said at the launch of the Green Finance Capacity Building Initiative in Kampala on Tuesday.
The initiative, supported by chief executives officers from private finance institutions and development partners seeks to implement and institutionalise green financing.
Green financing has become a key credit line at a time when the global economy is shifting to smart investments, enhanced by the worsening impact of climate change.
Ms Ssebuliba said since the launch of the green finance fund last year, Shs27.2b worth of green lines of credit has been disbursed or are in the pipeline, but noted that many financial institutions are yet to align environmental, social and governance principles to go green financing. “This lack of readiness limits financial institutions’ access to aBi’s green finance products. Even for those that have met the minimum threshold, they have an abiding risk of green washing,” she said, noting that some institutions have presented an environmentally friendly image but fail to back up the claims with substantial evidence.
However, Mr Wilbrod Owor, the Uganda Bankers Association executive director, urged aBi to help beneficiary financial institutions to prepare well and design appropriate products, which would be attractive to the intended borrowers.
“The process of managing a green fund requires availability of adequate information, which will help, for example assess viability and eligibility of a project, tracing its application, and monitoring its performance, among others,” he said.
Dr Tumubweine Twinemanzi, the Bank of Uganda executive director supervision, said the effects of climate change on economic growth are real, urging stakeholders to take action.
“To transition to climate-resilient and low-carbon economy, we need to adopt business models that foster economic growth and development, while ensuring that we do no harm to the environment and communities where we operate,” he said.
Green financing, he said, which encompasses a range of financial products and services that support environmentally friendly and socially inclusive investments, provides a crucial mechanism to facilitate the transition.
