CBK issues directives to local banks on sustainable financing guidelines

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Directives includes defining three sustainability criteria

KUWAIT CITY, Nov 20: In light of the increasing interest in sustainable financing, and within the framework of the Central Bank of Kuwait’s direction to support the concept of sustainable development, and to take steps to promote and implement sustainable financing in the banking sector in light of the New Kuwait 2035 vision on achieving sustainable development, the Central Bank of Kuwait issued its directives to local banks on guidelines on sustainable financing, reports Al- Qabas daily. The directives included defining the importance of sustainable financing, defining the three sustainability criteria, which are environmental, social, and governance standards, and finally the most important principles and basic directives that banks should take into account with regard to sustainable financing and sustainability factors.

Important principles
The most important principles and basic directives that local banks should take into account with regard to sustainable financing and sustainability factors focus on the following:

■ Include environmental, social and corporate governance (ESG) factors in the bank’s governance and risk management strategy, so that it includes elements of sustainable financing, taking into consideration setting clear objectives for the bank under the umbrella of sustainable financing.

■ Include elements of sustainability in what can be considered sustainable products and tools according to what is issued or issued from approved standards that can be used to determine the character of sustainability.

■ Paying attention to issuing financing products and tools that are compatible with green financing activities and other projects that have benefits for both the environment and the climate.

■ Supporting financial inclusion in general and facilitating access to financial services.

■ Enhancing the bank’s environmental, social and corporate governance performance by providing new and innovative financial solutions and banking products, and supporting sustainability in all of the bank’s activities.

■ Laying down the necessary basics for defining the risks of climate change, and encouraging the financing of projects that contribute to positive participation in issues related to aspects of climate change.

■ Raising awareness and developing the capabilities of the Bank’s employees and training them in order to deepen their knowledge of the means of applying sustainable financing.

■ Applying the principle of sustainability to the bank’s operations and internal activities by measuring the carbon footprint resulting from buildings and branches, improving waste management, adopting water and energy efficiency standards, and adopting environmentally friendly buildings that reduce electricity consumption.

■ In cases where lending and investment decisions have a substantial impact on environmental, social and corporate governance, banks take into account the necessary considerations when studying and analyzing these cases and taking the appropriate decisions in their regard.

■ To emphasize the importance of financial stability within the framework of directives related to sustainable financing, banks take into account the essential impact of environmental, social and corporate governance (ESC) standards on banks’ performance and financial stability; governance failures and poor risk management were key factors that, in combination with other factors, contributed to the global financial crisis in 2008.

■ Emphasizing the importance of transparency with regard to the guiding principles of sustainable financing, banks issue annual reports on sustainability (the “sustainability report”), or include in their annual reports that are published on their websites a special section on sustainability, which explains the bank’s activities in matters of environmental impact and social and economic, in a way that enables stakeholders to assess the level of sustainability of the bank during the reporting period.

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