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How banks wield power to grow green economy

Golden coins in soil with young plants. [Getty Images]

The finance sector plays a major role in the economic development of any country. It is also key in aligning economies’ existing and projected resources with climate imperatives, considering internal and external research on climate risks and opportunities. The sector also holds information from regulators such as the Central Bank.

As funders of various huge and small projects, the lenders and the regulator have a say in the quality of projects on the land resource we rely on for livelihood, movement, leisure and entire life.

They have a say and sizeable grip on the well-being of people and biodiversity now and in future.

The lenders are also key drivers of a greener leaning economy and can partner as well as contribute positively in improving policies that will help achieve the Sustainable Development Goal 13 (Climate Action), which will contribute to Zero Hunger (SDG2), hence No Poverty (SDG1) and guarantee comfort for all as stated in the remaining 14 SDGs by 2030.

The UN’s 1987 definition of sustainability is “meeting the needs of the present without compromising the ability of future generations to meet their own needs.”

Despite the pressure to make a profit, realities that every sector has a role to play in forestalling and minimising negative effects of climate change is undeniable. Greener leaning investments, technology or projects, though sustainable and with more rewards in the long-run, can be capital intensive, hence a discouragement for even the well-meaning. Lenders can be of help by being flexible enough to offer loans at more attractive rates for manageable periods.

They can also push the green economy forward by being aggressively marketing available grants and funding opportunities of cleaner, greener and more sustainable development projects to create awareness, especially away from the cities where financial muscle may exist, but relevant knowledge is inadequate.

A greener spectacle in the private finance sector will complement what the global green climate fund is doing in climate adaptation and mitigation.

There also comes a time when tough choices have to be made by the lenders. In 2019, for instance, the African Development Bank withdrew from funding the Lamu coal-powered project, which would have been detrimental to the land resource, caused biodiversity loss and air pollution plus messed the nearby aquatic life. The power project’s fate remains in the balance for several other reasons, but the good news is AfDB won’t invest in any other coal project in future.

The financial sector has a huge role in moving the green economy forward, backed by existing policies and conscious will to be on the right side of history on matters of climate change.

Since banks are not just living for the here and now, investing in a more sustainable greener economy will enable the achievement of food and other security as well as the use of less pollutant renewable energy. They will get to stay in business because their clients and the environment will be flourishing.