Banks and financial institutions should check environmental risks in sanctioning loans to industries to protect their money from loss arising from environmental impacts,
experts and bankers said on Saturday.
At a workshop on environment and social risk management for the financial sector, they said banks and FIs should not depend on environmental clearance certificates issued by the Department of Environment only in financing entrepreneurs, but they should also consider technical aspects of factories and attitude of owners.
Adopting environmental risk management practices can also prevent increasing environmental degradation in the country and ensure sustainable economic growth, they said.
At the workshop, bankers suggested the Bangladesh Bank for developing sector-wise specific guidelines and developing training manuals on environment and social risks.
Bangladesh Bank and International Finance Corporation jointly organised the workshop at the Westin Hotel in the city. Representatives from 47 banks and 28 FIs attended.
‘Banks should carefully analyse environmental risks along with credit risks to save their finance,’ said Khondkar Morshed Millat, deputy general manager of the Bangladesh Bank.
Banks should not be satisfied only with documents provided by the clients received from the DoE. They should see whether the industry is compliant and should be careful about environment management, he said.
‘The DoE ensures that a factory has effluent treatment plant but the ETP may not be in operation in the factory,’ he said adding that there might be multiple fire exits in a factory but those might be remained closed during accidents.
He, however, emphasised on coordination among the government agencies such as DoE, banks and other organisations concerned with the environmental issues.
Afifa Raihana, consultant for sustainable energy finance of the IFC, made a presentation on ESRM for financial sector and said failing to consider the environmental risks would lead to an increase in non-performing loans in FIs if their clients are impacted by shutdown of business, fines, loss of market share due to environmental reasons.
‘Banks will keep on writing off loans if environmental and social risks are not managed properly,’ she said.
Revealing findings of the baseline study, she said that 94 per cent of the FIs followed the environmental risk management guideline of the central bank in some form or the other while 80 per cent of the banks felt that lack of sector specific guidelines and internal capacity to deal with environmental risks were the major obstacles to implementation of the guideline.
BB deputy governor SK Sur Chowdhury, executive director M Mahfuzur Rahman, general manager Md Khurshid Alam, IFC country manager Kyle Kelhofer and senior environmental specialist Atiyah Curmally spoke, among others, at the programme.
-With New Age input
