Dr. Muhammad Saleem, State Bank of Pakistan

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1 Dr. Muhammad Saleem, State Bank of Pakistan

2 Conventional Role of Central Banks Regulation of Liquidity Ensuring the Soundness of Financial System Exchange Rate Management And Balance of Payments Managing Payment Systems Specialized Role: Priority sector financing

3 NEED TO CHANGE FOCUS Two major issues to be focused by Central banks; Financial Inclusion Climate Financing

4 %age adult population with an Account High income: OECD East Asia & Pacific Middle East South Asia Sub-Saharan Africa Pakistan World

5 ADVANCES TO DEPOSITS RATIO Banks World Wide China United States Japan Europe India Pakistan Source: Indian data Other Countries:

6 Green/ Sustainable Banking Green Banking promotes environmental friendly practices in banks in their operations & activities These activities in banks could include: lending to environment friendly projects, promoting resource conservation/efficiency, promoting paper-less environment operating green branches etc

7 Role of Central Bank in Promoting Climate Investment Enabling Regulatory Framework Market Development Green Banking Guidelines Prudential regulation for project financing Credit Guarantee Facility (Risk sharing ) Public Financing Mechanism Refinance/Credit Line for climate financing Awareness & Capacity Building Capacity building Workshops/Seminars/Conferences

8 How is banking sector relevant to Climate Change? Banking sector interacts with the environment in two ways: Direct Day to day operations such as use of paper, electricity, stationary, lighting, air conditioning, electronic equipment etc Indirect Through on-lending to business/ industries which include sectors like steel, paper, cement, chemicals, fertilizers, power, textiles etc

9 Green Banking for Development The motives for adoption of GB exists both for banks as well as regulator(s) i.e. Central Banks For Banks, going green means: Economic benefits, Avoidance of undesired negative publicity from societal groups Compliance with the regulations Corporate Social Responsibility

10 Enabling Regulatory Framework - Green Banking Guidelines Objectives of Green Banking Guidelines Reduce vulnerability of financial system from risks arising from the environment Facilitate banks/ DFIs to fulfill their responsibilities for protection of environment Encourage financing for transformation of economy into a resource efficient and climate resilient one Scope of Applicability Guidelines will be applicable to all banks and DFIs Guidelines intend to set minimum standards for a fair and competitive environment.

11 Green Banking Guidelines Key Components of Green Banking Guidelines Responsibilities, Management and Organization Environmental Risk Management Guidelines Guidelines on Green Business Facilitation Guidelines on Own Impact Reduction Responsibilities for Green Banking Board of Directors has overall responsibility including approval of green banking policies, strategies and budgets. The roles and responsibilities of management at all tiers to be aligned with green banking policies

12 Green Banking Guidelines Environmental Risk Management: EnvRM to be integrated with existing credit risk management policies and procedures EnvRM is applicable for all banking activities and clients EnvRM is for all new exposures & extensions of existing exposures EnvRM be designed to ensure compliance with applicable environmental laws EnvRM should be forward looking Banks/ DFIs to develop internal EnvRM systems, procedures and manuals

13 Green Banking Guidelines Green Business Facilitation: Green product development Green Financing Portfolio Earmarking of Funds for Green financing portfolio / investments Green advisory service Green Marketing Multilateral Resources for Environmental activities Green Climate Fund

14 Green Banking Guidelines Own Impact Reduction: Impact Reduction Targets Resource Efficiency Measures Waste Reduction Measures Green Branches/Offices Renewable Energy based ATMs / branches / offices Paperless Banking Operations Green IT Infrastructure

15 SBP Green Banking Initiatives Regulation of branchless banking SBP s Refinance Scheme for Renewable Energy Scheme for energy efficiency financing Refinance and risk sharing facilities for SME and Agriculture sector Financing for warehouse and solar tube wells for agriculture sector

16 Partnerships with bilateral & multilateral organizations Member of the Sustainable Banking Network (SBN) Facilitation in Accreditation to Green Climate Fund Awareness and capacity building on Green Banking and RE Scheme

17 Thank you

SECTOR ASSESSMENT (SUMMARY): FINANCE 1

Country Partnership Strategy: Pakistan, 2015 2019 SECTOR ASSESSMENT (SUMMARY): FINANCE 1 1. Sector Performance, Issues and Opportunities 1. Financial sector participants. Pakistan s financial sector is