Banks in Uganda move to integrate sustainable practices in their operations

The Uganda Bankers Association (UBA) together with the Bank of Uganda and other stakeholders have launched the Environment, Social, and Governance (ESG) Framework for Uganda’s Banking Sector.

ESG represents a set of criteria evaluating a company’s impact on the environment, its relationships with employees and communities, and its internal management practices.

The framework aims to integrate sustainable practices into banking operations, guiding financial institutions towards responsible investments, risk mitigation, and regulatory compliance.

Speaking at the launch in Kampala on Tuesday, BoU Deputy Governor Dr Michael Atingi-Ego hailed the banks and other financial institutions for embracing the ESG practices.

“The Ugandan banking sector is uniquely positioned to catalyze sustainable economic activities and foster responsible business practices. Through lending decisions, investment strategies, and operational practices, you wield the power to redirect capital towards renewable energy, clean technologies, green infrastructure, and social impact initiatives,” he said.

“To achieve measurable progress and assess the industry’s impact, a unified approach with policy guidance and capacity building is crucial. The Industry ESG Framework directly addresses this need. It promotes a holistic and harmonized approach, ensuring measurable benefits for the sector and, ultimately, economic transformation,” he added.

Julius Kakeeto, the UBA chairman, said this initiative reflects the industry’s commitment to contributing positively to society and the environment while ensuring long-term business sustainability.

“Whereas in the past, investors, shareholders, and potential investors focused solely on the financial performance of the companies in which they invest, hold stakes in, or anticipate investing in, and the return on investment earned, recent trends have revealed a change in expectations,” he said.

“Stakeholders, employees, regulators, and the wider communities are becoming aware that non-financial factors such as the impact of the company’s activities on the environment, equitable treatment of employees, the ethical culture of the business, and its stance on matters such as bribery and tax evasion have an effect on the longevity of the company’s business,” he added.

Kakeeto said the banking sector regulator,  Bank of Uganda,  has been championing the process of integrating ESG principles and sustainability into the operations of supervised financial institutions.

In March 2023, BoU officially launched its sustainability certification process under the Sustainability Standards and Certification Initiative (SSCI) by the European Organization for Sustainable Development.

Subsequently, Kakeeto said, a meeting was held between the Uganda Bankers’ Association (UBA) and BOU later in the year and a roadmap was adopted that among others included developing an industry framework to support and guide member financial institutions through the process.

“The industry needed to have a common appreciation and understanding of what ESG meant and be able to link it to the core of the business and benefits, the standard definitions or taxonomy, the whole process of embedding it from governance to operations point of view, right from the top to bottom including dimensioning the risk appetite, policies to products, to measuring, to reporting and to communicating and the standards required,” he said

“The standards aim to provide a consistent framework for reporting metrics, thereby enhancing the comparability and reliability of ESG information,” he added.

Kakeeto said on 19th January 2024, the ESG framework was presented to the UBA member CEOs who adopted it.

The same was subsequently shared with BoU for additional review and input was received leading to its formal launch today.

“The purpose of this framework we are going to launch today will help guide UBA members through the process including, getting buy-in across all institutional levels and securing and allocating resources (human, financial, technical etc),” he said.