In recent years, the intersection between the financial industry and environmental conservation has gained significant attention globally.
This is because banks wield power to ensure environmental safety. As a result, the industry has been a target of several campaigns, being at the centre of the tug-of-war between profits and morality.
For instance, while stakeholders of fossil fuel projects such as the East African Crude Oil Pipeline (EACOP) seek loans for the $5 billion project (as equity provided by the shareholders is inadequate) the push to stay away from the 1,443-kilometre heated crude oil pipeline with potential to emit up to 35 trillion tonnes of carbon yearly, has intensified among climate and human rights activists, targeting not only the project's stakeholders but banks and insurance companies.
There is always jubilation when a lender disassociates itself from EACOP or withdraws its services, even if only as an advisor. On the other, the stakeholders consistently look out for reliable lenders to walk with them through the entire journey or a substantial part of it.
Like banks, the four EACOP stakeholders - TotalEnergies, CNOOC, Uganda and Tanzanian National Oil Corporations - also aim to make profits.
Lenders therefore have to choose where to draw the line between morality and profit-making, with sustainability in mind. Specific banks are, rightly so, a target of climate activists for funding fossil fuel projects largely blamed for aiding global warming, whose resultant disasters have the worst effects on vulnerable communities in the Global South. This is because if they chose not to lend or finance such projects as extraction of oil, natural gas, or even coal, there would be a struggle and finally a decrease in global warming rates. This is how banks almost literally make the world go round.
Yet the extraction industry is not alone. Africa, with its diverse ecosystems and growing economies, is at a crucial juncture where sustainable practices need to be integrated into various sectors. One such sector is construction, where banks are crucial partners.
At the 2022 climate talks in Egypt, the Global Alliance for Buildings and Construction unveiled a report indicating that the construction industry contributed to almost 37 per cent of energy and process-related CO2 emissions in 2021.
With opportunities such as green financing, banks can guide the local construction industry towards sustainable profits while minimising their emissions. This will spur adoption of eco-friendly practices in the sector.
A bank could, for instance, collaborate with a construction firm, and provide them with a green loan at preferential rates for building eco-friendly structures using locally sourced, sustainable materials. This as the government also ensures minimum tax on solar and other green and renewable energy, even for older constructions.
Kudos to the banks that have established dedicated funds or investment portfolios for sustainable construction projects and are directing capital toward the same. Having these included in lending policies will encourage banks to evaluate environmental impacts of construction projects before granting loans. This way the banks will help mitigate environmental harm and push construction firms to align their practices with sustainable principles.
All said, the political will that affects market and currency behaviours is crucial for banks to aid conservation and shape the trajectory of the construction industry in Africa for the sake of the environment, humans, and biodiversity, while at the same time positioning the construction industry for long-term success in a world increasingly focused on sustainable development.
The writer advocates climate justice. lynnno16@gmail.com
