Apia, May 31, 2006
– Sustainable finance provides financial institutions with significant opportunities to reduce their exposure to risk, enhance their corporate image, and profit from loans to companies responding to increasing consumer demands for sustainability. The International Finance Corporation, the private sector arm of the World Bank, brought together local consultants and bankers who are likely to work together with the Samoa Venture Capital Fund at a two-day training workshop this week to examine the business opportunities emerging in sustainable finance in the Pacific region.
The workshop identified reducing financial, legal, and reputational risk as a major incentive for financial institutions to commit themselves to sustainable finance.
“Financial institutions that commit to sustainability can create competitive advantage by offering clients the financial products and services they need to achieve good environmental and social practices and also finance businesses that support sustainability,” said the acting governor of the Central Bank of Samoa, Mr. Philip Penn, who opened the workshop. “Consumers worldwide are increasingly insisting that they want to buy products from companies that have good labor standards and don’t pollute the environment. Entrepreneurs may also be looking for financing to start businesses that sell clean technology or support sustainability in some other way,” he added.
The workshop addressed various risks and opportunities for financial institutions. Borrowers that pollute the environment and have to pay clean-up costs or suffer from a damaged reputation as a result of causing pollution, mistreating employees, or negatively affecting the community could see their profits harmed and thus their ability to repay a loan. In several countries banks are held legally liable if they finance a damaging project. Including sustainability criteria in loan and investment assessments can also enhance a financial institution’s corporate image, which in turn can help attract customers. In addition, financial institutions that commit to sustainable finance can potentially profit from loans to companies that improve efficiency and competitiveness as they upgrade to cleaner technology or make other improvements to satisfy government regulations or the demands of consumers.
The workshop also heard from the Samoa Venture Capital Fund, managed by Pacific Venture Capital Managers, which outlined its investment policies and procedures and environmental due diligence practices.
Mr. Clive Mason of IFC’s Sustainable Financial Markets Facility said the delegates responded very positively to the training, indicating that IFC could develop future workshops in the region. “It’s important for financial and banking institutions in the Pacific Islands to keep themselves abreast of the innovative developments in sustainable financing of businesses,” he said.
Mr. Robert Simms, acting general manager of IFC-PEDF, based in Sydney, Australia, said the workshop was the first opportunity in the Pacific Islands region for local financial analysts and bankers to be updated on the latest developments on sustainable financing techniques. “It is a further benefit derived from the establishment of the Samoa Venture Capital Fund,” he said.
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Samoa Venture Capital Fund
SVCF is a pilot venture capital fund set up to invest primarily in existing promising enterprises that are seeking financing for expansion of bankable business proposals but are constrained from borrowing due to their inability to satisfy normal collateral requirements of banks. The investors in SVCF include IFC, Asian Development Bank, European Investment Bank, ANZ, Samoa National Provident Fund, National Bank of Samoa, and the Samoa Life Assurance Corporation. In addition to the investors, the governments of Samoa and Australia have provided grants through a trust account with IFC to support the management of the SVCF and training for improving venture capital fund operations.
International Finance Corporation
The mission of IFC is to promote sustainable private sector investment in developing and transition countries, helping to reduce poverty and improve people’s lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses. From its founding in 1956 through FY05, IFC has committed more than $49 billion of its own funds and arranged $24 billion in syndications for 3,319 companies in 140 developing countries. IFC’s worldwide committed portfolio as of FY05 was $19.3 billion for its own account and $5.3 billion held for participants in loan syndications.
The Private Enterprise Development Facility is a multidonor-funded initiative set up by IFC with its head office in Sydney, Australia, to reduce poverty through sustainable private sector development in the Pacific Islands. IFC-PEDF works to improve the business environment, develop the financial sector, and increase the capacity of local business through technical assistance. It also works in a coordinated way at the micro and macro levels in selected sectors—tourism, agribusiness, garments, and handicrafts—to help groups of small and medium enterprises solve common problems and compete successfully in the global economy. IFC-PEDF's donors are Australia, IFC, Japan, and New Zealand.
IFC's Sustainable Financial Markets Facility is a donor-funded grant program that promotes environmentally and socially sustainable lending and investment by financial institutions in developing countries and economies in transition. The facility currently benefits from the grant support of IFC and the governments of Italy, Luxembourg, the Netherlands, Norway, and Switzerland.
