Energy

KPMG to banks: Be deliberate about financing renewable energy and sustainability-focused projects 

KPMG says it has become imperative for banks in the country to take deliberate actions towards financing projects within the renewable energy space

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 deliberate about financing projects which factor environmental, social, and governance considerations.

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

But, according to him, the Government of Ghana, The Bank of Ghana, The 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.

“So, with the backing of the regulators, it now becomes imperative for our banks to take deliberate actions towards financing projects within the renewable energy space”, he remarked.

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

“It is imperative that that level of collaboration exists between financial institutions, government, and the NGOs so that we will be able to get a lot of initiatives going on. That will go a long way to improve Ghana’s ESG ratings and build trust with its lenders”.

Financing the Sustainable Future

Sustainable Financing covers any financial activity geared towards promoting investment that will help improve the environment, social, and governance structures within which we operate.

Sustainable Finance differs from traditional financing with its focus on balancing profits with purpose. For instance, where traditional financing investments are evaluated based on financial performance indicators such as 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 into ESG projects are expected to hit USD 53 trillion in 2025. According to KPMG Ghana, this surge in sustainable finance is being driven by businesses’ focus on renewable energy and other sustainable business practices, in addition to the growing perception that traditional business models are likely to be unsustainable and uncompetitive, among others.

However, certain factors exist that impede Sustainable Financing, especially in Ghana. These include lack of domestic green investors, limited risk assessment capabilities, limited access to green finance facilities, and limited risk assessment capabilities of banks.

Sustainability: a call to action

Kenneth Agyei-Duah opined that the onus lies on “accounting and finance professionals to address, embrace, and lead ESG integration and reporting or risk being left behind”.

He, therefore, urged businesses to keep learning and stay abreast with emerging ESG standards, regulations and directives; ensure top management buy-in; ensure sustainability strategies are fit for purpose; create sustainability roadmaps; ensure availability of quality data; and be open to seek expert opinions to support the ESG journey.

He also urged financial institutions to, among others, promote Green bonds and sustainable investment funding, educate customers and investors, as well as 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 discussed a wide range of related topics such as the impact of climate risk, the factors that impact ESG ratings, and sustainable finance options.

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