Be deliberate about financing renewable energy, sustainability-focused projects – KPMG Ghana to banks

Kenneth Agyei-Duah, a manager in the Governance, Risk, and Compliance (GRC) Services at KPMG Ghana, has urged banks and other financial institutions to be intentional about financing projects that consider environmental, social, and governance factors.

Speaking during the UK-Ghana Chamber of Commerce and KPMG Ghana Environmental, Social, and Governance (ESG) webinar series on “Financing the Sustainable Future,” Mr. Agyei-Duah remarked that, “If we are to finance a sustainable future, a lot depends on the actions of financial institutions, and it requires a significant effort.”

According to him, the Government of Ghana, Bank of Ghana, Ghana Stock Exchange, and the Securities and Exchange Commission have provided clear guidelines and regulations to guide financial institutions and other businesses on sustainable financing in Ghana.

“Therefore, with the support of the regulators, it is now essential for our banks to take deliberate actions towards financing projects within the renewable energy space,” he remarked.

Mr. Agyei-Duah highlighted some of the strategies banks could adopt, such as enhancing CSR initiatives by funding environmental programs that promote sustainable living, supporting research and innovation, and collaborating with governments and non-governmental organizations (NGOs).

“It is crucial that collaboration exists between financial institutions, government, and NGOs so that we can implement various initiatives. This will greatly improve Ghana’s ESG ratings and build trust with lenders.”

Financing the Sustainable Future

Sustainable Financing encompasses any financial activity aimed at promoting investments that will help enhance the environment, social, and governance structures within which we operate.

Sustainable Finance differs from traditional financing by focusing on balancing profits with purpose. For example, while traditional financing investments are assessed based on financial performance indicators like revenue growth, profitability, and return on investment, sustainable financing investments are evaluated based on both financial performance and ESG factors.

The Drivers and Barriers of Sustainable Finance

Investments in ESG projects are projected to reach USD 53 trillion by 2025. According to KPMG Ghana, this increase in sustainable finance is driven by businesses' focus on renewable energy and other sustainable business practices, as well as the growing belief that traditional business models may not be sustainable or competitive, among other factors.

However, certain obstacles exist that hinder Sustainable Financing, particularly in Ghana. These include a lack of domestic green investors, limited risk assessment capabilities, restricted access to green finance facilities, and limited risk assessment capabilities of banks.

Kenneth Agyei-Duah believes that it is up to accounting and finance professionals to address, embrace, and lead ESG integration and reporting, or risk falling behind.

He urged businesses to continue learning and stay informed about emerging ESG standards, regulations, and directives; ensure top management support; ensure sustainability strategies are appropriate; create sustainability roadmaps; ensure the availability of quality data; and be open to seeking expert opinions to support the ESG journey.

He also encouraged financial institutions to promote Green bonds and sustainable investment funding, educate customers and investors, and enhance transparency through impact reporting.

The webinar, moderated by Osei-Asenso Antwi, a Senior Manager in KPMG Ghana’s GRC and ESG line of service, also covered a wide range of related topics such as the impact of climate risk, factors affecting ESG ratings, and sustainable finance options.