IFC Sustainable Banking Network
| IFC Sustainable Banking Network | |
| Source: | International Finance Corporation (IFC) Sustainable Banking Network |
| Sector: | Finance |
| Prerequisites: | none |
| Classification | Systemic/structural |
| Potential Impact: | High |
| Resource Impact: | Moderate |
| Timing Implications: | Immediate |
| Country/Region | Global (41-member countries representing USD 43 trillion or 85% of the total banking assets in emerging markets) |
| Application to Armenia |
Joining the SBN would enable Armenia to further benefit from its IFC membership by using tailor made advisory services to launch and improve frameworks setting out national policies, voluntary industry principles, and guidelines for sustainable finance. It would also enable Armenian regulators to benefit from SBN Members’ Peer-to-Peer Learning (see case study below). The Armenian Central Bank, Bank Association, National Securities, Stock Market Commission and any associations or regulatory bodies related to green or sustainable finance in the country should join SBN to be part of the international community committed to advancing sustainable finance in line with international good practice. Membership would also allow the Armenian Central Bank and other regulatory entities to issue new national sustainable finance policies, guidelines, or voluntary principles in line with best available practices. Additional benefits may include creating new entities focused on promoting sustainable finance, usually cross-sector, inter-agency, and public-private, where necessary, adding sustainable finance to high-level national development plans, publishing technical reports and case studies on topics related to sustainable finance, formalizing top-level government officials’ commitment to sustainable finance, and organizing awareness raising and capacity building events. |
The Sustainable Banking Network (SBN) is a knowledge and capacity- building platform of financial regulators, banking associations, and environmental regulators from emerging markets committed to developing sustainable finance frameworks based on national context and priorities, as well as international best practices.
SBN’s main objectives are to: (a) provide technical assistance to support members in creating an enabling environment through developing and implementing national sustainable finance frameworks; (b) convene a global platform for practitioners to benefit from best practices and deepen collective learning; and (c) provide capacity building and knowledge sharing, with a focus on peer-to-peer exchanges among members.
As the private sector arm of the World Bank Group, IFC provides technical assistance to SBN members based on its practical experience gained from Environmental, Social and Governance (ESG) sustainability standards setting and application, as well as from investing and advising the private sector in emerging markets on green/climate finance innovation. IFC also acts as Secretariat and knowledge partner for the Network and connects SBN with its global network of development partners.
SBN member countries have taken different approaches toward sustainable finance. So far 25 countries have developed national frameworks on sustainable finance with IFC/SBN support.
SBN has four thematic and member-led working groups (one of the groups is focused exclusively on International Development Association (IDA) members, the world’s 74 poorest countries, and is therefore ineligible to Armenia):
- The Measurement Working Group responds to SBN member demand for a systematic approach to assess and benchmark country progress in developing national sustainable finance frameworks. The WG developed and refined a Measurement Framework that was approved by all members and continues to evolve to keep pace with country-level and global developments.
- The Sustainable Finance Instruments Working Group responds to members’ interest in the global green bond trend and associated market opportunities. In addition to the 2018 “Creating Green Bond Markets” report, which mapped green bond market developments in over 22 emerging markets and included a practical toolkit for SBN members, the WG focuses on reflecting new developments in social and sustainability bonds and loans and other financial instruments with green, social, and sustainability benefits.
- The Data & Disclosure Working Group responds to the current global need for improved data and disclosure by the financial sector to support national sustainable finance ecosystems and enable regulators and supervisory agencies to better assess ESG risks at the market level and incentivize the transition to green economies. This WG reflects the growing need for climate-related data, driven by initiatives such as the Task Force on Climate-related Financial Disclosures (TCFD). The WG maps the latest country-level developments in sustainable finance data and disclosure across the SBN community as well as international initiatives to facilitate the continued development of tools and practical guidance for SBN members.
Since SBN’s inception in 2012, 26 member countries have launched 96 frameworks setting out national policies, voluntary industry principles, or guidelines for sustainable finance. Amid the global pandemic, SBN member countries not only maintained this momentum, but in many cases accelerated work, to promote sustainable finance as a tool for growth and resilience. In 2020 alone, over a quarter of SBN’s 41 member countries issued new sustainable finance framework documents.
Notable SBN achievements include the creation of a progress measurement framework and the publication of a Global Progress Report that details member progress and is supported by individual country progress reports and case studies. SBN members have identified three essential components to implementing a sustainable finance framework. Each contributes in practical ways to financial stability and improved competitiveness of local financial sectors:
- Strategic Alignment: members find that national policies that are aligned with global good practices and international frameworks are more likely to be effective and to attract international investment.
- Climate & Green Finance: new financial products that address climate, environmental, and social objectives are becoming increasingly popular as a way to achieve national sustainability goals while unlocking financial sector innovation.
- ESG Integration: better management of ESG risks by banks is also leading to reduced credit risk, while contributing to financial stability.
Box 1: Georgia and Ukraine Knowledge Exchange
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In December 2020, National Bank of Georgia (NBG) and National Bank of Ukraine (NBU), facilitated by SBN and IFC, held a knowledge exchange session to discuss the importance of sustainable finance and the critical role of central banks' in helping the finance sector manage ESG risks and unlock new investment and lending opportunities through a focus on sustainability. Both countries’ central banks are working to further the development of sustainable finance nationally. For more details, visit the media spaces of the NBG and the NBU. The NBG, an SBN member since 2017, has been playing a proactive role in strengthening the country's sustainable finance effort. Its ESG Reporting and Disclosure Principles, launched in 2020 with OECD and IFC support, require commercial banks to conduct ESG reporting and disclosure that is aligned with international good practices. NBG is also working on development of SF Taxonomy that covers both green and social aspects. The NBU, a new SBN member since November 2020, is committed to achieving progress in promoting sustainable finance in the banking sector of Ukraine within the next two years, targeting both sound ESG practices by financial institutions as well as introduction of the new sustainable finance products. IFC implements its Environmental, Social, and Governance Advisory Services Program in Europe and Central Asia in partnership with the Swiss State Secretariat for Economic Affairs SECO. |