Banks in Africa and Latin America can lead green growth and transition

Commercial banks in Africa and Latin America trail Asian counterparts in addressing critical environmental and social risks – particularly climate change and nature loss – but can lead green growth and transition, according to new WWF Sustainable Banking Assessment (SUSBA) reports.

The two new reports - which follow the SUSBA framework used by WWF to assess banks in Asia since 2017 - cover 47 banks across Latin America and Africa, and based on their public ESG disclosures, assess how well they integrate environmental and social issues into strategy, governance, risk, and financing.

“Latin American and African banks are at a crossroads. They can move regional economies from risk to resilience and drive inclusive green growth – but only if they align financial flows with global goals on climate, nature and development,” said Aaron Vermeulen, WWF Global Finance Practice Leader.

“Asian banks are showing what’s possible. Now Latin American and African banks must also rise to the challenge.”

Findings show that despite increasing awareness of environmental and social risks, and pockets of progress and innovation in developing policies to address them, both African and Latin American banks are failing to implement Environmental, Social and Governance (ESG) measures in their regions.

Very few banks have integrated ESG considerations into core business models, risk systems, or client engagement. Moreover,significant gaps exist in nature finance and disclosure. This could undermine long-term regional economic stability and access to capital and investment.

Africa’s inaugural SUSBA report evaluated 25 banks across Cameroon, Gabon, Kenya, Namibia, South Africa, Tanzania, the Democratic Republic of Congo, and Zambia. While banks in Kenya and South Africa lead sustainability efforts with stronger regulatory momentum, green product innovation, and reporting of sustainable finance, the region as a whole is in the early stages of embracing sustainable finance, integrating ESG and driving transition to a net-zero, nature-positive economy. Notably:
 

1. a majority of banks (72%) incorporate sustainability in their core strategies but nearly half (48%) lack commitments to sustainable finance practices;
2. 84% of African banks fail to disclose portfolio GHG emissions, none have science-based targets, and only 20% have net zero pledges;
3. only 12% acknowledge nature-related risks, and just one bank has reviewed these risks at the portfolio level;
4. few banks (8%) have tailored sector-specific environmental and social policies or require clients to align with deforestation or ecosystem protection standards;
5. regulatory frameworks and enabling policies such as disclosure requirements and green taxonomies vary although Kenya, Namibia, South Africa and Tanzania show promise.

“Africa’s financial sector holds the key to unlocking climate resilience, green growth and an inclusive green economy, but without urgent investment in ESG expertise, disclosure and risk systems, the opportunity will be lost,” said Jane Waiyaki, Sustainable Finance, Africa and Europe, WWF International.

“We urge all banks to strengthen nature-related risk assessment across operations and integrate ESG in decision-making.”

In Latin America, while banks acknowledge climate risks, around a quarter have some sort of transition strategy, and 96% offer at least one green product, few enforce ESG policies with clients or disclose nature or climate risks. Notably:
 

1. no banks require deforestation-free commitments from clients, and client monitoring is limited;
2. only 9% of banks have net-zero targets, and nature finance remains largely overlooked;
3. only 18% of banks have robust ESG implementation;
4. patchy disclosure frameworks and uneven regulatory approaches are also hindering progress, although Brazil is making notable strides with its regulatory frameworks.

“Latin American banks show promise with product innovation in green bonds and the development of Amazon-linked finance but there’s room for improvement in addressing nature-related risks in portfolios, accelerating net-zero uptake, and encouraging clients to strengthen ESG, particularly through making deforestation-free commitments,” said Jessica Villanueva, Sustainable Finance, Americas, WWF International.

In contrast, WWF’s 2024 SUSBA assessment of 49 banks across Asia showed significant progress and some advanced policy frameworks. Notably:
 

1. over 50% of banks score above 75% in ESG policy implementation;
2. 48% embed ESG in business decisions;
3. 37% have set science-based net-zero targets (vs. just 9% in Latin America and none in Africa);
4. 60% of banks acknowledge nature risks, and 41 have committed to the Taskforce on Nature-related Financial Disclosures (TNFD) reporting framework;
5. financial regulators are driving the integration of sustainable finance, with countries like Hong Kong, Malaysia, the Philippines, Singapore and Thailand setting examples through their evolving regulatory frameworks.

One area for development in Asia is SME financing and nature-based solutions.

For more info, visit the WWF Asia SUSBA site.

WWF’s SUSBA reports offer recommendations for banks in Latin America and Africa to strengthen efforts to safeguard biodiversity and address the global climate crisis, including by:
 

1. assessing climate- and nature-related impacts and dependencies in portfolios to enable more effective responses to sustainability challenges;
2. integrating ESG into credit risk and client onboarding;
3. requiring clients to enforce sustainability commitments, make nature-related risk disclosures, increase transparency, and develop nature and climate action plans;
4. adopting credible internationally aligned disclosure frameworks such as TNFD, the International Sustainability Standards Board (ISSB), and the Science Based Targets Initiative (SBTi);
5. enhancing reporting by aligning with SUSBA principles and indicators to enable better performance assessment, identify opportunities for improvement, and align strategies with global sustainability goals;
6. strengthening internal ESG governance, capacity and talent;
7. engaging proactively with regulators and peers to shape credible sustainable finance frameworks.

“This is a sustainability wake-up call for banks in Africa and Latin America. They need to work with financial regulators and supervisors to accelerate the transition to a global net-zero, nature-positive economy,” said Aaron Vermeulen.

“By adopting a precautionary approach, enhancing risk management frameworks and shifting capital toward activities that work with nature rather than against it, banks can play a leading role in safeguarding financial and environmental stability.”