According to Dr Michael Atingi-Ego, the deputy governor of the Bank of Uganda (BoU), commercial banks now must guarantee that they will act right away to connect their business strategies with global climate targets.
In an event on Tuesday to introduce the green taxonomy and fund, Dr Atini-Ego said that the BoU is pushing the banking industry to reevaluate its business strategies by introducing programmes that deal with economic issues in order to benefit the communities they serve.
By thoroughly integrating environmental sustainability into their main commercial strategy, this will be accomplished.
The neglected and vulnerable population groups, in particular, will require banks to make better use of emerging technology to channel resources toward producing good jobs and long-term economic possibilities.
The green taxonomy and fund, to which the Agriculture Business Initiative (aBi) has committed an additional Shs 120 billion agribusinesses are to aid in the battle against climate change.
The BoU deputy governor noted that although the agriculture sector employs more than 70% of Uganda’s labour force, it is one of the most severely impacted by climate change and that something should be done to prevent the problem.
He also said that the BoU will now urge the banking industry to reassess its business models by enhancing ties between environmental protection, especially green financing that helps agriculture, and risk-adjusted shareholder returns.
Implementing environmental sustainability into their business concepts will be accomplished comprehensively. They seek to include climate risk management into the framework for monetary policy, macroprudential regulation, and risk-based supervision.
This is because the fulfilment of their mandate is directly impacted by climate change. Extreme weather generates pricing volatility and exposes commercial banks’ balance sheets to risks such as debtor default in the agriculture industry.
He emphasised that the climatic change immediately affects the nation’s exports, which bring in foreign currency, which lowers its revenue and puts pressure on the exchange rate. To stop this, commercial banks must take specific action to join the battle against climate change.
The Shs120 billion fund, according to aBi CEO Mona Muguma-Ssebuliba, will support agribusinesses in becoming more sustainable, easing the consequences of climate change, and conserving biodiversity.
Muguma-Ssebuliba stated that they must generally take off the earth as they conduct their business. This green taxonomy and green finance go beyond farmers to cover manufacturing, building, transition, energy generation, ICT, and many other businesses for customers to find it beneficial and not just limited to the farming sector. The main products, including a credit line for Shs 120 billion, will be offered by the green financing fund.
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This was done to aid in the adaptation, mitigation, and conservation of biodiversity needed to combat climate change in the financial services and agribusiness sectors.
She clarified that the money was distributed through commercial banks and other financial organisations, such as SACCOs, where the agricultural enterprises could obtain financing to assist them to deal with the effects of climate change.
The green finance fund, according to the CEO of aBi Finance, intends to increase access to and uptake of adequate and sustainable financing services for green agribusiness projects made by SMEs and smallholder farmers in Uganda.
She pointed out that the agribusiness will each receive credit worth between Shs500 million and Shs 38 billion for a maximum of 10 years, with a grace period of up to 12 months.
To combat climate change, reduce emissions, encourage adaptation to its effects, and foster resilience-building, financial resources and smart investments are required. However, any initial expenditures are vastly outweighed by the advantages that result from these investments.
According to studies and research papers before the COVID-19 pandemic, a sustainable economy may be built with investments in climate action.