Stanbic Bank Kenya will screen clients borrowing more than Sh118 million to ensure that their projects do not bring up any environmental and social risks.
The bank said it has been undertaking rigorous screening of clients prior to extending loans which includes compliance with local sustainability regulations and adherence to local content on large projects.
This will mean they will not lend to companies that do not comply with environmental, social, and governance (ESG) issues.
Quarterly reports on the screening undertaken will be provided to the board.
Other banks such as StanChart and Equity have made similar moves to block financing to clients not undertaking environment-friendly ventures in an effort to counter climate change.
“Going forward all lending greater than $1 million (Sh118.4 million) will require the business or individual to automatically undertake an ESG screening exercise,” said Stanbic in their report to Report to Society 2021.
“The screening tool deployed will identify action items to close out by the client to qualify for the facility requested. These screening protocols were initiated in mid-2021.”
The move is expected to attract global investor funds and raise lending opportunities in the banking industry through activities aligned with net-zero. However, ESG experts say it is hard to determine if banks will be rejecting loan requests that do meet these guidelines.
“The key thing depends on criteria they use or the regulator could ask disclosures on the high cost funded projects apart from the climate risk guidelines they have issued before,” said Elias Omondi, chairman in charge of taskforce formed by The Actuarial Society of Kenya (Task) and Financial Sector Deepening (FSD) Africa.
“The other biggest issue is who will be taking care of that cost of assessment.”
Stanbic Bank is among other lenders that have also agreed to sustainable lending policies that severely restrict their participation in coal energy ventures.
Equity Group in May committed not to lend to any coal-related projects, a policy prompted by the International Finance Corporation (IFC) that has just acquired a 6.71 percent in the country’s largest bank.
The bank will also refrain from funding any utility company that generates more than 20 percent of energy or revenues from coal, or have an annual coal production of 10 million tonnes or more, or have an installed coal-fired capacity of 5,000 megawatts or more.
StanChart has previously said it has been conducting environmental assessments when lending to clients including client’s carbon footprint both at the time of lending and potential future activities.
It has also restricted loans to clients using thermal coal and promoted the use of renewable energy sources through discounts on costs.
ekivuva@ke.nationmedia.com
No comments :
Post a Comment