AFRICAN Sustainability Consultants chief consultant Tawanda Collins Muzamwese says financial institutions in the country are practicing greenwashing, a situation where organisations lie about their sustainability performance to stakeholders.
They do this in order to be perceived as environmentally and socially conscious.
“There is a proliferating undesirable practice amongst financial institutions and other organisations at large – which is the practice of greenwashing,” Muzamwese said in a speech presented at the Banks & Banking Survey 2023 in Harare last Thursday.
The survey is run by the Zimbabwe Independent in partnership with First Capital Bank.
“This practice of greenwashing must come to an end,” he said.
He urged the central bank to continue providing leadership in the banking sector and to develop mechanisms to prevent greenwashing and fraudulent environmental social and corporate governance (ESG) claims.
“The central bank is recommended to consider setting requirements for the independent assurance of sustainability information produced by Banks in Zimbabwe. At board level, we encourage capacity building of board members and implementation of ESG," Muzamwese said.
“Most international investors today are risk averse and any bank that requires international support needs to tighten up on ESG.”
With respect to corporate governance, the consultant said banks must continue to improve their processes, structures and mechanisms that determine the direction of their organisations.
Greater emphasis at regulatory level and best practice remain rooted in weeding out corruption, unethical practices and bribery, Muzamwese said.
“These antics have no place in our banking sector. Corporate governance remains a key pillar of ESG and is a key determinant of business continuity and public trust,” he said.
“If we need to attract foreign direct investment into Zimbabwe, implementing ESG could be one of the strategic moves to attract financing. A couple of banks in Zimbabwe are making headway with international green financing opportunities such as green climate fund, adaptation fund and other climate investment funds.”
According to Muzamwese, the benefits of implementing ESG for financing institutions include better relations with regulators, cost savings on resource costs, improved corporate image, access to international investors and access to stock markets.
“The train has already departed. Lagging behind as a financial institution is dangerous. The cost of doing nothing is greater than the cost of acting on ESG. It is now or never. Action must be now and not tomorrow. For we do not have time to waste,” he said.
Muzamwese said the practice of ESG reporting should be adopted across the banking sector in Zimbabwe.
“Without ESG, capital will be difficult to raise, worldwide. No investor wants to be associated with risk and poor reputation,” he said.
He recommended financial institutions to consider including ESG in their corporate strategies. He said boards of financial institutions must have capacity of oversight on ESG and be able to make ESG a board agenda
At operational level, bank CEOs and management should ensure that in bank processes – borrowing, recruitment, supplier engagement and other activities are in tandem with ESG standards.
“Financial institutions must report on their ESG performance using recognised international standards. Financial institutions must ensure that ESG information is reliable, traceable and truthful,” he said.
With regards to the central bank and in line with international best practices, it is imperative to require banks to report their ESG performance on a regular basis
“There is a dire need to set requirements for assurance of sustainability information from banks, in order to prevent greenwashing. There is a need for capacity building of the whole financial service sector on emerging issues such as ESG, climate risk etc, in order to facilitate a high level of implementation,” he said.