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Budget limitation, bane of sustainable banking – Report

Budget

By Ayobami Adedinni

Budget limitation has been described as the biggest challenge to implementing sustainable banking in Nigeria, a report by Deloitte West Africa has disclosed.

Deloitte in its, ‘Sustainable Banking as a Driver for Growth — A survey of Nigerian Banks’ said this suggests that organizations’ budgetary allocations for sustainable banking activities are still largely inadequate even though adoption is increasing.

Sustainable banking is widely believed to bring about several benefits for implementing banks. In particular, regulators increasingly see it as an avenue to promote the sustainable development of Nigeria. As such, these regulators are establishing frameworks, guidelines and regulations mandating banks to implement sustainability in their business operations and activities.

It said, “Competing internal priorities (between sustainability and business-as-usual initiatives) was reported as the second biggest challenge. This is linked to limited budgets given that resources have to be allocated among competing priorities. It was also noted that prioritizing between different sustainability initiatives also presents challenges.

“Behind financial limitations were personnel and capacity gaps (38.9per cent).Although increased capacity for sustainability is being acknowledged, knowledge gaps and inability to retain trained sustainability staff within organizations is widely acknowledged as a key challenge,” it stated.

The report said that with the growing knowledge around sustainability concerns, banks are gaining improved brand value as a result of their participation in sustainable banking efforts.

It disclosed further that reduced cost is also a common improvement from sustainability which is mainly in line with the banks’ initiatives in energy, climate change and green facilities.

However, it disclosed that 18 Nigeria banks have not appointed a Chief Sustainability Officer in order to increase the profile of sustainability issues as global standardized industry-wide structure required.

According to the report, the banking sector, as represented by the members of the Bankers Committee, adopted the Nigerian Sustainable Banking Principles (NSBP) in 2012 in recognition of the banking sector’s responsibility to the positive and sustainable development of Nigeria.

The report noted that the Central Bank of Nigeria (CBN) and the bankers who have committed to the NSBP believe that the NSBP is ‘good for business’ and as such, expect several benefits.

It also revealed that Retail banking services had the highest revenue growth as a result of sustainable banking efforts.

It said, “About 83 per cent of the respondents reported revenue growth from their sustainable banking efforts. These banks attributed the growth to new products/services and cost savings from sustainability initiatives. However, about 17 per cent did not experience any revenue growth which they could directly link to their sustainable banking efforts.

“Respondents reported that their retail banking services have had the most growth due to the banks’ sustainable banking efforts.

“This is likely due to the products/services introduced by the banks (e.g. on women economic empowerment and financial inclusion) which have been targeted at individual consumers rather than companies and corporations.

“Banks have also seen some revenue growth from other parts of their businesses such as corporate banking and loans/credit and investment banking.

 ”Although sustainable banking initiatives have the potential to increase revenue in all parts of the banks’ business, the greatest potential lies in retail banking, it stated.

Speaking on the development, Leader, Deloitte Global Sustainability Services, Eric Dugelay said sustainable banking integrates environmental, social and governance (ESG) criteria into traditional banking, and sets ESG benefits as a key objective.

He said, “In emerging markets, voluntary coalitions and guidelines are being established to guide financial institutions towards sustainable banking.

Given the unique position financial institutions are in to fund sustainable development in emerging economies in particular, increased focus on sustainability by multilateral organizations such as International Finance Corporation, World Bank, and the United Nations is expected.

“In fact, sustainable banking brings several business benefits. Research by Global Alliance for Banking on Values (a network of sustainable banks) has shown that sustainable banks have higher and more stable profits, as well as stronger growth than other banks,” he added.

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