Position Paper #1
ESG – how the Boardroom can structure banks’ approach Not everything that can be counted counts, and not everything that counts can be counted. William Bruce Cameron
In short Financial institutions play a vital role in a country’s economic development by financing businesses in every sector and providing financial services to consumers. In doing so, they enable job creation, foster innovation and can help build better societies. Today, citizens, consumers, employees, and even capital providers expect the corporate world not only to be profitable, but also to have a clear purpose that enables them to create value that benefits shareholders and stakeholders alike. Furthermore, regulators across the world are enacting regulations that will transform how banks and the capital market should assess their risks and deploy capital to support and enable a transition towards greener and more inclusive societies. Banks are at the forefront of this movement, and their Boards should carefully enhance the way they consider, integrate, and monitor ESG components in their core business. They should define their strategy, focus on material issues, and monitor how the executive team implements its actions to deliver sound and sustainable performance. If risks related to the environment, society and governance (ESG) are becoming more material for financial institutions, those associated with climate change and nature-related risks are crucial. The extraction of natural resources, data, etc., is the fulcrum of most business models. Today, planetary boundaries, science-based targets used to set goals, and the fact that access to a healthy and living planet is becoming a human right and are redefining how businesses in general and banks, in particular, should approach ESG risks to deliver sustainable performance and value. Myanmar banks should carefully consider ESG risks, especially those related to climate change, as the country is among the most vulnerable to the consequences of global warming. According to reports published by Germanwatch, more than 7 million people died, and 1.5 billion USD were lost between 2010 and 2019 because of the consequences of climate change in the country. Likewise, building inclusive and respectful workplaces or fostering good corporate governance practices are critical not only to sustaining their own operations but also to mitigating the risks of their financing activities. When f inancial institutions integrate climate- and nature-related risks into their models, this has a positive impact, as it fosters the rise of a greener economy and enables more resilient societies.
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