Charcoal trading is one of the business activities that has been with us for many years. Charcoal sellers in many parts of the country rely on suppliers who produce it from harvested wood in the forest areas and parts of the savannah. Charcoal producers’ ability to supply it regularly to the retailers in commercial quantities is dependent upon the availability of lumber from those areas.
Indeed, the demand for charcoal for cooking or heat is still very high in Ghana; even though increasing numbers of people, especially urban dwellers, use the alternative sources of electricity and Liquefied Petroleum Gas (LPG) at both the domestic and commercial levels. Thus, charcoal continues to be a good partner to many households who have a natural preference for its use; and, as such, there is strong motivation for producers to remain in business for the financial returns.
Many charcoal producers who don’t own the wood (raw materials) themselves rely on loggers for supplies, and therefore seek financing from lenders to support their operations. In effect, due to high patronage of the product, financing it without careful considerations from the source of production will continue to sustain the value chain.
Again, charcoal production, like any other enterprise, does not operate in a vacuum; and is faced with external factors including the threat of regulation on illegal logging or indiscriminate tree-felling. Though there is no outright ban on charcoal production in the country, the devastating effects of deforestation on future survival of the natural environment have drawn authorities’ attention to measures for curbing the activity.
Apart from streamlining the operations through legislation, government saw the need to intervene by distributing Liquefied Petroleum Gas (LPG) cylinders to many households in some parts of the country – at no direct cost to the beneficiaries. It is believed that many of those households relied largely on charcoal or firewood because they were unable to afford the LPG cylinders by themselves.
Even though the economic importance of charcoal production cannot be over-estimated, the undercurrents of illegal tree-felling or logging continue to wither the forest-cover and natural beauty of the environment. The consequences are already dire and will get much worse if this situation is not matched with sustainable reforestation programmes.
With the clear understanding of the charcoal episode, we can equally appreciate the excesses of fossil-pollution from activities such as mining, manufacturing of industrial chemicals, production of oil and gas on the environment. It is commonplace to hear of or witness the destructive effects of galamsey (illegal small-scale gold mining) on the ecosystem. In fact, it poses threats to aquatic culture. Similar effects can be seen in pollution of the environment (land and marine) by oil-spills.
Over the years, environmentalists, lobbyists and civil society organisations (CSOs) with interest in the natural environment’s sanctity have had cause to champion activities to protect it from extinction. Friends of the earth International, for instance, has the mission “to halt and reverse environmental degradation and depletion of natural resources, nurture the earth’s ecological and cultural diversity, and secure sustainable livelihoods”. The Wilderness Society also engages in advocacy “to ensure that future generations will enjoy clean air and water, wildlife, beauty and opportunities for recreation and renewal that pristine forests, rivers, deserts and mountains provide”.
One of the major stakeholders that cannot be ignored in the scheme of things as far as environmental sustainability is concerned is banks. Banks have been at the forefront of financing major capital-intensive business activities in the areas of construction, mining, oil and gas, manufacturing and cannot afford to gloss over the inherent risks associated with them. This is because ignoring the obvious red flags in such projects and financing them blindly not only dents their reputation or attracts bad press when the outcomes backfire, but also affects their profits.
That is why by the standard practice in credit administration, bankers are required to take credit decisions within a framework of internal policies and relevant regulations and consider such elements bordering on TOWS (Threats, Opportunities, Weaknesses and Strengths). In this regard, a credit policy worth its salt will indicate an exclusion list of activities the bank should not venture into while taking cognisance of its risk appetite.
To help facilitate sound decisions on credit applications relating to each of these sectors, bankers therefore create special units and train personnel to handle them. Indeed, the time-honoured practice of identifying such environmental risks and recommending adequate measures to control them is not new to the banker.
At least we have lived with the equator principles since 2006, but banking activity has attracted different jargons over the years due to emerging issues. In the of light this, I would like us to explore the new concept of Sustainable Banking – which is very topical these days.
Basically, Sustainable Banking re-emphasises the need for banks to do due diligence by assessing the inherent environmental, economic and social risks in all credit decisions concerning projects and businesses presented to them; and, therefore, adopts such appropriate measures as needed to mitigate the risks. In effect, Sustainable Banking is understood within the background of Environmental and Social Risk Management (ESRM) framework which analyses such uncertainties from different sources with all-inclusive approach instead of silos.
We are in the era of Sustainable Development Goals (SDGs) which aim at a better and more sustainable future for all people of the world. Since the SDGs target challenges such as climate change, environmental degradation, we can by extension agree with the fact that Sustainable Banking is being espoused as the new version of risk management in banking that responds to the changing dynamics of the times.
To my mind, Sustainable Banking can also be described as people-centred banking – requiring that the bankers’ financing decisions do not harm the natural order of life. Banking is all about the people and communicated through the language of intermediation, and can only be sustained in a secure and friendly environment. God Bless!
This script was written by a Chartered Banker with a flair for feature writing. Apart from his work schedules, he edits or proof-reads corporate material for his colleagues, executive managers – including distinguished professionals working in various fields outside Banking. Through this column, his articles feature on third-party online media platforms in Ghana and outside.