Bankers Association of Malawi (BAM) Chief Executive Officer, Lyness Tamandani Nkungula has said more investment in innovative activities will help the country mitigate the negative effects of climate change.
Nkungula made the remarks in Lilongwe during the 8th edition of Green Finance Conference held under the theme “the Contribution of Africa’s Private Sector to the Achievement of the 2015 Parts Climate Agreement”.
Over the years, this event has been aiming at analyzing the possible opportunities and also propose necessary solutions to meet the financing needs of Green SMEs, which is the main challenge.
Nkungula said from the look of things these challenges are inherent in the lack of financial and organizational resources devoted to climate change, limited capacity for innovation in the face of climate change, and lack of access to cleaner technologies.
“We need to invest incre in innovative activities which will help us mitigate the negative effects of dimate change: We need to see firms developing new products, services, and technologies that have lower carbon emissions and greater sustainability
“From the previous conferences, we have seen that SMEs have a critical role not just in job creation and economic development, but also in fighting climate change. It is estimated that Malawi has more than 1.6 million SMEs and more than 1.8 million people have found employment through them.
“Because of their big contribution to job creation and economic development, transitioning these SMEs into a green economy must also mean herping them go green. Nevertheless, we need also to remember that transitions do not happen overnight. They need more time to take shape, and also need exceptional expertise and substantial investment.
“The unfortunate thing is that most of our SMEs do not have all these But looking at the stakeholders that are in attendance, I am very confident that by the end of this conference, latent solutions to issues of capital wit be found and our SMES will easily go green and become more sustainable.
“So, the Issue of green finance is more critical for developing countries, Malawi being one of them. The low physical and financial capacity for most of the developing countries seems to have increased the cost of capital. This is why there is an urgent need for a deliberate action to cut the situation
“As a matter of fact, the effects of dimate change have seen the credit ratings of many developing countries detenarate due to the increased clarate risks that directly increase the cost of domestic and international capital, resulting in higher interest payments. This trend ought to be checked, and one of the ways in which this can be handled is by addressing the chatenges being faced by the SMES.
“But for us to achieve at this, it requires an active and collective participation of the private sector, particularly Small and Medium Enterprises (SMEs), African Guarantee Fund, The Nordic Development Fund, and our financial institutions. These are considered as key stakeholders that are very instrumental in achieving the desired goal,” she said
Group Chief Executive Officer for African Guarantee Fund (AGF), Jules Ngankam said as some stakeholders are willing to invest more into green transition, their efforts should be compensated with climate and social returns.
“The green transition is defining a new way of living, a new way of doing business, a new way of exchanging goods and services. At the core of this green transition, we have the commercial banks, we have the financial institutions. AGF is part of the financial institutions.
“One question come to our mind: Us in the financial sector, are we ready? When discussing about our readiness, there are 3 areas that are critical: Capital, regulation and business. An increasing number of investors are looking invest in new asset classes that are aligned to the green transition.
“These investors are even willing to take a lower financial return but it has to be compensated with climate return and social return. It is no longer just about maximizing the financial return but maximizing all returns together. Some research show that more 100 trillions of green capital will flow in the world economy by 2050.
“We are seeing more and more green bonds getting issued. In 2014, the total volume of green bonds issued worldwide was 15 billion USD. And in 2022, 600 billion USD. Are our financial institutions ready to tap into this huge growing capital market where they can raise long term capital at a lower cost?
“To mitigate the negative impacts of the climate change, central banks, financial regulators and policymakers have started undertaking various initiatives. They are analyzing the climate challenges from a financial risk and stability point of view.
“They are developing tools to monitor the Climate-related financial risks on the banking sector. And these Climate-related financial risks are becoming an important part of financial disclosures.
“In western countries, Central banks are discussing on ways to ease capital requirements for green lending because of the fact that commercial bank can participate in reducing the climate risk. So we expect to have in Africa, some regulatory changes related to climate risk,” she said
