Over 500 participants from 40 countries and territories registered for the webinar on “Climate Transition: A Roadmap for Banks in Emerging Markets” organized by the Asian Bankers Association (ABA) and auctusESG on 3 September 2024.
Moderated by Cymroan Vikas, Sr. Manager at auctusESG, the 90-minute webinar focused on the Climate Transition Roadmap for Banks in Emerging Markets Report presented by Sourajit Aiyer, VP at auctusESG.
During his presentation, Mr. Aiyer indicated that Climate Change challenge is a new megatrend that comes with opportunities and risks to banks in emerging markets. He warned that although emerging markets score high in climate change vulnerabilities, banks in emerging markets are just starting to understand and address the implications of this new challenge.
The report, which involved the participation of 30 bankers from 15 countries and interviews with 10 respondents, issued practical guidelines and recommendations to banks since climate change issues are becoming a key business risk. Although the scientific reasoning behind climate change is easily found in the media, Mr. Aiyer just showed two key findings about changes in the global surface temperature and global atmospheric concentration of greenhouse gases.
Mr. Aiyer said that it is increasingly clear that the transition from high carbon to low carbon is also driven by mandatory commitments in many countries, spearheaded by investors, regulators and social players, thus he argued for the need to address the issue in a consistent manner.
Based on this current policy and global trend situation, the report recommends 5 key activities to address the climate change challenge. These are (1) Aspiration, (2) Initiatives, (3) Evaluation, (4) Responsibility, and (5) Engagement.
He explained that each activity is divided in sub tasks as follows:
(1) Aspiration includes contextualizing the landscape in which banks are operating, assessing the risk of delayed action, creating a business case, convincing the Board, setting the bank’s goals and setting a menu of available resources required to achieve the goals. The idea is to establish a long-term protection of net profit margin in line with changes in the bank’s portfolio.
(2) Initiatives includes setting internal policies, implementing exclusionary screening to modify portfolios, creating a baseline assessment and quantifying the climate risk. At this point, the quantification will allow Target setting based on time and priorities. Finally, at the Initiative stage, banks will need to integrate instruments of climate risk such as bonds.
(3) Evaluation is the quantifiable area of the strategy where setting the metrics and coverage of the new strategy will be established. At this stage, reviews of short-term and long-term progress are necessary for obvious reasons. The reviews need to be aligned with the bank’s current resources. The last step in this area is Setting the trade-off that refers for the short-term impact of implementing the new policies.
(4) Responsibility establishes the organization’s structures and accountability mechanism. At the internal level of the bank, Executive remuneration; and culture and capacity need to be aligned. KPI are set and new hierarchies inside the bank might be needed. The bank culture needs to be educated to include climate change in their modus operandi.
(5) Engagement is about communicating and cooperating with regulators, borrowers, capital market investors and other social players, including scientists.
To conclude his presentation, Mr. Aiyer presented 10 basic recommendations to banks in emerging markets. These recommendations ranged from whether climate goals and net zero are relevant to the bank up to what is the carbon footprint of the bank’s operations. Finally, he shared a Checklist that banks can use to start methodically a climate change implementation in their respective operations.
After Mr. Aiyer’a presentation, four distinguished experts joined the panel discussion. These included Adheesha Perera, Head of Sustainability, Union Bank of Colombo; Anjalee Tarapore, Executive Vice President, ESG, HDFC Bank; Manish Kumar, Head-ESG & CSR, ICICI Bank and Siloshini Naidoo, Head ESG, Development Bank of South Africa. They expressed their opinions and observations about the report, its operational implications, as well as the practical issues that they face in their bank’s operation vis-à-vis the new climate change policies.
A video recording of the webinar can be viewed at the ABA YouTube HERE.
Participants of the webinar had the opportunity to download the report directly.
