Following the Paris Agreement, 147 countries around the world submitted their Intended Nationally Determined Contributions (INDCs) with pledges to reduce greenhouse gas (GHG) emissions under the United Nations Framework Convention on Climate Change. To achieve these climate targets, many countries have created policy packages to green their economies. Green financing needs however remain unmet, indicating a significant untapped potential for banks to grow their green financing products and services. The green financing gaps will only be bridged if commercial banks adopt strategies and targets to develop green finance products and services to support the real economy in the green transition.
The Alliance for Green Commercial Banks is a new global initiative that brings together financial institutions, banking industry associations, research institutions, and innovative technology providers to work together to develop a community of green commercial banks across emerging markets and finance the infrastructure and business solutions needed to urgently address climate change. Starting in Asia, in partnership with the Hong Kong Monetary Authority (HKMA), IFC will work to support financial institutions on their journey to become leading green banks.
WHY GREEN BANKING?
To achieve global climate targets and respond to the policy packages needed to green national economies, tremendous financing is required that cannot be met by the public sector alone. Private sector financing is crucial to a green transition. The financial sector, and commercial banks in particular, therefore have an important role to play, especially in emerging markets where government budgets are limited. This need also offers tremendous investment opportunity. IFC research estimates more than $29 trillion in climate investment opportunities in cities in emerging markets over the next decade. Sectors include green buildings, public transportation, electric vehicles, waste, water, and renewable energy.
Meanwhile, adopting green practices offers banks, especially small and medium banks in emerging markets a powerful means to differentiate themselves and grow by attracting international capital and customers seeking sustainable finance options. By reducing risk and unlocking new lending opportunities, green banking can help these financial institutions outperform and reposition themselves against other market competitors, gain market share, and increase profitability.
A Roundtable for Green Finance
In April 2021, IFC and the the Hong Kong Monetary Authority (HKMA) co-hosted the first Alliance roundtable, “CEO Talk: Opportunities for Green Bank Transformation”, virtually on 27 April, 2021. The roundtable attracted over 1,100 participants globally from Asia Pacific, Europe, the Middle East, Africa, and the Americas. Learn more
Alliance Launch Event
Launched in November 2020 IFC signed a new partnership with the Hong Kong Monetary Authority (HKMA) that would encourage commercial banks in Asia to adopt strategies and targets to become greener. The signing of the agreement makes the HKMA the first partner to work with IFC on the initiative. As the founding member and first regional anchor for the Asia Chapter of the Alliance for Green Commercial Banks– a new initiative launched by IFC to help develop green commercial banks and encourage more green finance in order to address climate change– the HKMA will serve as the hub for green finance among commercial banks in Asia. Learn more
Edmond Lau, Senior Executive Director of the HKMA (left), and Vivek Pathak, IFC Regional Director for East Asia and the Pacific (right) sign the cooperation agreement to establish the Alliance for Green Commercial Banks.
