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FEBRABAN and IFC to encourage sustainable finance

Signed by both entities to develop a Sustainable Finance Program

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FEBRABAN and IFC to encourage sustainable finance

The Brazilian Federation of Banks (FEBRABAN) and the International Finance Corporation (IFC), a member of the World Bank Group, will work together to promote sustainable finance and further align the banking sector with the commitments assumed by Brazil in the Paris Agreement. These are some of the pillars of the memorandum of understanding signed by both entities to develop a Sustainable Finance Program.

The partnership also stipulates the dissemination of good climate risk management practices in bank portfolios, in addition to training and fostering new businesses in energy efficiency, sustainable agriculture, distributed solar power, green buildings, and mobility, among other areas.

“We play a key role in channelling resources to projects and activities that contribute to sustainable development. We are engaged in the development and adoption of various measures to make economic activities more efficient, more resilient from the climate point of view, and aligned with the conservation of natural capital,” says Isaac Sidney, the president of Febraban. “Businesses that embrace the conservation of natural resources as a premise and that aim for greater social well-being provide major opportunities for the sector,” he adds.

“The partnership with FEBRABAN is a great opportunity to bring in knowledge about green finances, which are strategic for the country,” says Carlos Leiria Pinto, the IFC’s Country Manager in Brazil. “This joint work will allow the harmonizing of methodologies and sharing of tools that help banks increase their green portfolios, foster transparency in impact reports, and develop case studies that encourage the sector to move forward with green financing,” he adds.

An IFC study shows that to fulfil the countries’ commitments to fighting climate change, green businesses will invest more than $ 23 trillion globally by 2030. In Latin America, the estimate is $ 2.6 trillion, based on studying the region’s four leading economies (Argentina, Brazil, Colombia, and Mexico). The most important sectors will be transport, green buildings, renewable energy, and energy efficiency. In Brazil, investment is estimated at $ 1.3 trillion by 2030.

FEBRABAN is part of the Sustainable Banking Network (SBN) and has led the region’s roll-out of voluntary and compulsory measures to foster sustainability in the sector. According to their specific characteristics, interests, and national priorities, the SBN is a voluntary community, including regulators and banking associations from emerging countries interested in promoting the best international practices in sustainable finance. Brazil is in the ‘Advanced Implementation’ stage of the SBN Global Progress Matrix, behind China and Indonesia.

The collaboration between the two entities also stipulates the elaboration of joint researches and the implementation of projects with the potential to have a high impact and be replicable in the Brazilian market. These projects will focus on advancing sustainable finance and harmonizing bank practices with international trends, such as green taxonomy methodologies.

The green finance ecosystem will also be strengthened by events, seminars, and presentations on internal and external forums. The next steps for the partnership include creating a work plan outlining the efforts to be made and the schedule of activities.

Green Banking Academy

In its Green Finance in Latin America report published in 2017, IFC analyzed the status of green finance in the banking sector and pointed out that the lack of knowledge and awareness in the market are among the main barriers to foster and drive sustainable finance. To address these challenges, at the 2018 FELABAN Annual Meeting, IFC launched the Green Banking Academy program, an initiative to accelerate the transformation to a green economy, strengthen this business in banks and contribute to a more sustainable world. In this program, IFC supports financial entities to develop, among other things, their green economy vision, medium- and long-term strategy, and their green products and services, to strengthen their commitments to fighting climate change.

The team works with local and international academia to provide knowledge and training that support the transformation to a financial system in line with the green economy. The program caters to employees’ different levels and profiles in a financial institution, from the highest strategic level to implementation levels.

The banks’ sustainability agenda

This agreement is in addition to the Brazilian banking sector’s efforts in recent years in sustainability. Last December, the FEBRABAN Self-Regulation Council approved the review of self-regulatory commitments to manage social and environmental risks in financial institutions.

The update incorporated Environmental, Social and Corporate Governance (ESG) topics relevant to the banks’ performance, based on the sustainability agenda’s development since the date the Standard was published, in 2014. One of the highlights is the new requirement for managing and reporting the risks and opportunities of climate change in the institutions’ businesses.

FEBRABAN has been working for more than five years to measure financing by economic activity. The methodology was reviewed in 2020. Three profiling layers of credit flow analysis were implemented – the Green Economic, Exposure to Environmental Risk, and those with the greatest Exposure to Climate Change. Other FEBRABAN projects, publications, and initiatives in sustainability can be found athttps://portal.febraban.org.br/pagina/3059/37/pt-br/responsabilidade-socioambiental

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