IFC – a member of the World Bank Group – and bankers engaged in a
stimulating dialogue today towards developing an environmental and social risk
management framework that will assist the financial sector assess environmental
risks and develop mitigation strategies when taking credit decisions.
The IFC-hosted workshop was part of the first multi-stakeholder
consultation towards streamlining and integrating environmental and social risk
management processes across the sector. Participants also discussed monitoring
and evaluation tools, and the need for training and capacity building to equip
bank staff to make these assessments.
Supported by the central bank, the event brought together
officials from the central bank, commercial banks, bank and trade associations,
National Banking Institute, relevant government ministries, and development
partners.
"Business growth and development objectives have to be met
while minimising adverse environmental and social impacts," central bank
governor Dr Yuba Raj Khatiwada said, adding that the leadership role of central
banks is key. "Nepal Rastra Bank will give top priority to environmental
and social risk performance improvements in banks and financial institutions."
A robust environmental and social risk management framework helps
banks evaluate projects by identifying, managing and mitigating social and
environmental risks before confirming to lend. It also helps banks protect
themselves from litigation and heavy fines for supporting projects that may
have environmentally detrimental outcomes or unethical labor practices.
In Nepal, the initiative will build on experiences and lessons
learned from similar interventions in other markets, especially Asia. In the
past, IFC and Bangladesh Bank co-developed a national environmental risk
management policy and strategy framework, which is now mandatory for
Bangladesh’s financial institutions.
"Good environmental and social risk management is good
business," IFC resident representative for Nepal Val Bagatsing said, adding
that IFC has played an important role in other emerging markets in ensuring
sustainability by working closely with central banks in developing guidelines
for better risk management in this space and instituting training modules to
build capacity.
Globally, IFC sets
standards in bringing sustainability to the forefront of the development debate
within the financial sector. IFC’s performance standards have evolved into a
global environment and social risk management framework for development and
private sector banks.
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