Bank of Uganda has told commercial banks that urgent action is needed to invest in green financing to help the country mitigate the effects of climate change.
“As we continue to witness the effects of climate change with increasing frequency and severity evidenced by rising temperatures, extreme weather events, and business disruptions, urgent action is required. To transition to climate-resilient and low-carbon economy we need to adopt business models that foster economic growth and development, while ensuring that we do no harm to the environment and communities where we operate,” said Dr. Michael Atingi-Ego, the BoU Deputy Governor.
“Green finance, which encompasses a range of financial products and services that support environmentally friendly and socially inclusive investments, provides a crucial mechanism to facilitate this transition.”
Dr.Atingi- Ego was on Tuesday speaking during a stakeholder engagement and green finance capacity building initiative launch organized by aBi Finance at Kampala Serena Hotel.
The BoU deputy governor said the benefits of green finance are multifold since it allows the country redirect capital towards sustainable industries and projects, fostering innovation and job creation in crucial sectors such as agriculture, energy, manufacturing, construction, and water and waste management, forestry and biodiversity and ICT.
“By financing these projects, we not only drive economic growth but also reduce our reliance on carbon-intensive industries, thereby reducing greenhouse gas emissions and promoting a cleaner and healthier environment,” he said.
“Furthermore, green finance encourages transparency and accountability. Through the integration of environmental, social, and governance (ESG) factors into investment decisions, investors can make informed choices that align with their values and contribute to sustainable development. This integration enables the identification and mitigation of environmental risks, ensuring the long-term stability and resilience of financial markets.”
He urged financial institutions to embrace sustainable banking practices, incorporating ESG considerations into our lending and investment decisions, offer green financial products, such as green loans, green bonds, and adopt sustainability-linked instruments.
“Education and awareness are equally vital components of driving the green finance agenda forward. We must empower individuals and businesses with the knowledge and tools to understand the impact of their financial decisions and encourage sustainable behaviour. Financial literacy programs can equip individuals with the skills to make environmentally conscious choices, while awareness campaigns can highlight the importance of green finance in addressing climate change.”
The deputy governor commended aBi Finance for the green finance fund and green agribusiness taxonomy launched last year in December 2022 and the follow-on green finance capacity building interventions for financial institutions.
“ These interventions will enable financial institutions to green their operations and products thereby offering more financing to agribusinesses and small holder farmers for climate-proof investments leading to a resilient and sustainable agribusiness sector.”
The aBi Finance CEO Mona Muguma Ssebuliba said the world is living in a time of unprecedented environmental challenges and that Uganda is among the most vulnerable and at the same time least prepared countries globally to deal with vagaries climate change.
She said climate resilient and low carbon investments are the way to go.
“There is therefore need for dedicated investments in climate change adaptation, mitigation and biodiversity conservation,” Muguma said.
“Managing climate change requires that those tasked with governance of our institutions appreciate the climate change threats to business and start to act immediately. Once governance is aligned, then commit resources to develop and institutionalise clear environmental and socially inclusive policies, frameworks, products, build capacity for staff, systems and infrastructure and pursue partnerships to enable climate adaptation, mitigation and biodiversity conservation investments.”
She noted that in December 2022, aBi Finance launched the green agribusiness taxonomy and green finance fund.
Whereas the agribusiness taxonomy is a classification system, list or manual that highlights environmentally sustainable agribusiness investment options, for climate change adaptation, mitigation and biodiversity conservation, the green finance fund is a blend of three green finance instruments including green lines of credit worth shs120 billion, green agribusiness guarantees at a risk share of 70:30 (aBiF:FI), and capacity building worth shs4billion.
“Therefore, as we embark on this greening journey, I call upon each and every one of you to embrace the possibilities that lie before us. Let us be agents of change within our organizations and our communities. Let us be ambassadors for sustainable finance, advocating for its adoption and mainstreaming. Let us lead by example, demonstrating that financial success and environmental responsibility can go hand in hand.”
The aBi Finance board chairperson, Felix Okoboi applauded development partners for their commitment and investments to the advancement of green finance in Uganda.