A New Movement
For Responsible Banking
What are the Principles for Responsible Banking? Why do you see them important?
As the world in witnessing the 10th anniversary of the global financial crisis, the banking industry is new witnessing a movement towards the development of Principles for Responsible Banking. The purpose of these principles is to define and affirm the banking industry’s roles and responsibilities in shaping and financing a sustainable future, in alignment with internationally agreed targets detailed in the Paris Agreement and the Sustainable Development Goals. The draft of the Principles will be launched during the United Nation Environmental Program Finance Initiative (UNEP FI) Global Roundtable 2018 and will then be open for a period of global consultation. The principles are similar to those of Principles for Responsible Investment and Principles for Insurance that were launched in 2006, and 2012 respectively. Unfortunately, the banking sector was late to respond to the sustainability issue and to acknowledge it as an important item on its agenda.
The principles are drafted by 28 UNEP FI member banks from 5 continents who are divided into four sub-groups- accountability framework, implementation guidance, civil society engagement and consultation and communications. AAIB currently co-leads the implementation guidance sub-group along with Piraeus bank.
What are the hurdles of implementing such principles? How do you think you can redress it?
The ultimate challenge in integrating sustainability into banking is changing the mindsets. Financiers have been taught that profit is the only indicator for success regardless of the social and environmental cost. All policies practices and accounting rules are mostly pinned around this notion. This formula is not conducive to sustainable growth. To redress this, we need capacity building and sound policies.
Consequently, in 2014, Arab African International Bank established MOSTADAM platform; the first platform in Egypt and the MENA region to enact and promote sustainable finance through capacity building, policy advocacy and promoting sustainable products and services.
AAIB has an extended experience in Sustainable Finance; can you tell us more about it?
Arab African International Bank’s experience in sustainable finance is rich with successes and challenges. The starting point was our commitment to achieve growth. It all started in 2003 when we realized that our success shouldn’t be based only on numbers and that we are part of a wider ecosystem At such an early point, we understood the inherent connection between economic growth and environmental, social and governance (ESG) concerns. Ever since, we have been targeting inclusive growth in a manner that creates value to all our stakeholders.
Our journey started as strategic philanthropy in 2003. Moving forward, we have constantly endeavored to ensure that our business integrates ESG considerations into its activities and operations. AAIB has been the first in Egypt to join the UN Global Compact in 2005 and the Equator Principles in 2009 to become the first bank to introduce social and environmental risk management in its credit operations. The bank also joined the UNEP FI in 2018. We have also been a forerunner in issuing our Sustainability Report based on the GRI guidelines. We are among founders of UN Global Compact Egypt Network that works to realize the SDGs in the local context.
The bank has been very much focused on advancing sustainable finance products and services. As such, AAIB has been a forerunner in funding clean energy and tapping into financial inclusion. In 2017, the bank funded Benban: the world’s largest solar photovoltaic generation park. In the same year, the bank launched its microfinance company Sandah that allows financing the micro enterprises, SMEs and entrepreneurs as well as the general lower income clientele in Egypt. Earlier in 2014, we launched MOSTADAM to achieve our ambition to go beyond the bank and to advance an industry movement banking sector towards sustainable finance.
Now we are celebrating the Euromoney 2018 “Middle East’s Best Bank for Sustainable Finance” award. It is redeeming to see our consistent efforts bearing fruit on the industry level. It feels good to witness the transformation of the Egyptian financial industry driven by all stakeholders.
AAIB is championing Sustainable Finance in the global scene; please share your experience in that. Sustainability is a rising megatrend that is on the agenda of governments, financial institutions and regulators worldwide. It represents an array of challenges and opportunities to the banking sector. In this essence, AAIB participated in the G20 Green Finance Study Group that issued its seminal “Synthesis Report for Green Finance” in 2016, along with sharing our experience and outlook in the field of sustainable finance in the COP22 in Marrakesh, the same year. We are determined to be part of a global movement towards sustainable finance. As mentioned earlier, the bank is participating in drafting the Principles for Responsible Banking in coordination with UNEP FI and 27 other banks.