Training Bangladeshi banks in E&S risk management
In line with local regulatory requirements, most financial institutions in Bangladesh are strengthening their environmental and social management system frameworks to manage key risks. Using its Technical Assistance facility, the Global Climate Partnership Fund has teamed up with prominent partners to provide targeted training to 250 banking officials to build local knowledge and capacity in the field.
Since the introduction of the Environmental Risk Management Guidelines for the banking and financial institutions of Bangladesh in 2011 by the Central Bank, the awareness of environmental and social (E&S) risk management has increased tremendously in the financial sector.
Banks as well as Non-banking Financial Institutions are taking proactive steps to address E&S risks within their business operations and are developing or strengthening their in-house environmental and social management systems frameworks to manage key risks.
E&S knowhow: a scarce commodity
As projects that require technical E&S expertise emerge, however, it becomes clear that locally qualified subject matter experts in sectors where financial institutions have significant exposures remain a scarce commodity in the market. Building local knowledge and capacity to address E&S risks and identify innovative business opportunities has therefore become a priority for the financial sector.
First training series 2015
With this in mind, GCPF investors FMO and OeEB together with three other development finance institutions and four local banking partners including GCPF partner City Bank Limited piloted the first ESROM training series project in 2015, where a total of 150 bankers were trained on E&S risk and opportunities management.
E&S training 2018: one step further
Encouraged by the success of ESROM-1, a similar initiative has been undertaken this year to further build the knowledge base of the bankers and shine the light on new areas of E & S risk management.
GCPF teaming up with development finance institutions
From the international side, FMO, in collaboration with GCPF, Oe-EB, DEG and Proparco, have spearheaded the endeavor. ESROM-2 has reached out to even a greater scope and partnered up with nine local banking and financial institutions.
The participating partner banks 2018
1. BRAC Bank Limited
2. Dutch-Bangla Bank Limited
3. City Bank Limited (GCPF banking partner)
4. Eastern Bank Limited
5. IDLC Finance Limited
6. Mutual Trust Bank Limited
7. One Bank Limited
8. Prime Bank Limited
9. United Commercial Bank Limited
The programme aims to deliver eight training sessions between February and April 2018, covering approximately 250 banking officials, especially the relationship and credit side.
“We are very happy about the collaborative training event for bank staff as well as clients. This initiative will surely impact the knowledge and skillset of this developing industry in the E&S space.”
Mohammad Jahangir Alam, The City Bank
The training programme: three focus areas
- E&S due diligence as per regulatory guidelines
- Critical E&S issues in high-risk sectors often highlighted in E&S Impact Assessment
- Applicability and scope of IFC’s Performance Standards.
Strong commitment from participating banks
With full support from the top managements of the participating financial institutions, ESROM-2 is a vivid testimony of how international financing partners and local financial institutions can team up to ensure adherence to the regulatory framework and further develop the E&S management capacity in the Bangladeshi financial sector.
“Via this collaborative effort, we aspire to contribute to attaining the United Nations’ Sustainable Development Goals.”
Eva Tschannen, GCPF TA facility
Speaking on behalf of GCPF’s Technical Assistance facility, Eva Tschannen commented: “This initiative will help the bankers as well as the entrepreneurs comprehend the true essence of environmental and social safeguards in a much broader manner. Via this collaborative effort, we aspire to contribute to attaining the United Nations’ Sustainable Development Goals.”
‘The trainings are a true sectorial initiative carried by the participants’
Dutch development bank FMO has supported E&S trainings in Bangladesh since 2011. We talked to Dave Smit, Senior Investment Officer for the Bangladesh portfolio about the latest workshop series and how the Bangladeshi financial sector has progressed in the field.
FMO has been involved in E&S trainings for years. What is new?
Dave Smit: The 2018 ESROM series of trainings clearly are the next stage in FMO’s E&S engagements with Bangladesh’ financial sector. It is impressive to note the tremendous progress that has been made since the Bangladesh Bank (BB) introduced the Environmental Risk Management Guidelines in 2011. FMO followed BB in its approach with a first series of trainings for our partner network in Bangladesh in 2016. And in our interactions with our partners, we experience daily how much awareness on the importance to invest time and allocate organisational capacities in E&S risk management has leaped forward.
What progress have you witnessed since?
It is impressive to experience that Bangladesh’s financial institutions have anchored E&S considerations into their core approval processes. And we also note that the approach is shifting from a focus on E&S risks, to a more opportunity driven approach where paying attention to E&S can also be a business opportunity for both financial institutions and entrepreneurs and is a way to make a positive development impact for Bangladesh and its people.
“The approach is shifting from a focus on E&S risks, to a more opportunity driven approach.”
Who is the driving force behind this initiative?
What we are in particularly fond of is that the trainings are a true sectorial initiative which is carried by the participants. It is unique that so many people from different institutions freely exchange views and share their best practices and lessons learned. We believe this sort of communication is key to make all institutions better and advance Bangladesh.
You said that this year’s training was different. How?
What made this years’ training truly unique is that end-clients are invited to share their experiences working with the financial sector, as a means to learn and advance the sector. We have not come across a similar initiative in any of the markets we have been working in.