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Introduction: This being the speech by Arshad Rab, CEO, European Organisation for Sustainable Development (EOSD) and Chairman, International Council of Sustainability Standards, during the Executing Session for central banks and commercial banks implementing the EOSD’s Sustainability Standards and Certification Initiative (SSCI), on 22 January 2025.

Thank you, Patricia, for organising this session and congratulations on successfully completing the Sustainability Certification under the Standards’ Version 2.0.

Let me also recognise the presence of the Deputy Governors, Dr. Chipika and Dr. Atingi-Ego, which demonstrates their understanding of the critical importance of central banks in mainstreaming sustainability across the financial sector and creating the macroeconomic environment that enables sustainable development.

Regulators have come a long way, from being an observer in the initial days of sustainability movement, to becoming facilitators of it. This has been the case in most jurisdictions.

But as you can witness today, the regulators – i.e., the central banks – are making sustainability their business, by embracing the Sustainability Standards to fulfil their mandate of maintaining price stability.

They aim to achieve this through a two-fold approach:

The first is applying the approach of the Sustainability Standards and Certification Initiative (SSCI) of a pro-sustainable-growth monetary policy and aligning other policy interventions with the Standards to create a sustainable economy.

The second approach is through sustainability-certified financial institutions, as they are equipped to mobilise, lend, and invest capital to address the supply-side constraints, which in most countries are among the biggest root causes, perhaps even the biggest root cause, of high inflation.

And I would like to emphasise that no sustainable development can be achieved without low, stable, and predictable inflation. The poor suffers the most if their cash loses value. Therefore, sustainable development efforts and high, unstable, and unpredictable inflation cannot co-exist.

The Central Banks are implementing Sustainability Standards across the sector also to ensure foreign exchange stability by addressing one of the major root causes of foreign exchange crisis, which is the lack of investments in export-oriented and import-substituting industries that are internationally competitive.

To this end, the central banks through the sustainability-certified financial institutions will ensure purpose-led raising and deployment of funds. By embracing sustainability standards, the regulated institutions are equipped to mobilise funds at scale through depositors, investors, and lenders to profitably deploy those funds in sustainable industries. These are the industries that produce and export high-value and environmentally-friendly products and reduce imports of critical goods and services.

The collective focus of the central banks and certified financial institution will be on sustainable economic growth. It is the growth that is inclusive, so that no one is left behind, and growth that is resource efficient to make the economy competitive in the international markets without which jobs cannot be created or maintained, and without which exports decline, and imports increase, leading to high inflation, low employment rates, and currency depreciations. Such a development leads to serious and multiple social and economic challenges and put environmental protection on the back burner.

Sustainable economic growth also requires high resource efficiency to ensure intergenerational justice, so that we leave behind enough stock of raw materials for the next generation.  

Such a growth also keeps our natural environment healthy and reduces carbon emissions as it is necessary for climate protection.

Central Banks are aiming to become Sustainability Certified to modernise financial stability measures so that the regulated institutions are crisis-ready and crisis-resilient, which is one of the key purposes of the Sustainability Standards.

SSCI enables the financial institution to turn risks into business opportunities and equip them to not only identify, assess, and mitigate the conventional risks, but also the present-day risks – the risks that are related to emerging technologies, business model disruptions, societal changes, economic shifts, and last but not least the risks arising from environmental and climate exposures. Addressing these risks is indispensable for ensuring financial stability in today’s world and turning them into business opportunities is necessary for the healthy growth of the balance sheets of financial institutions and for creating a sustainable economy.

As you notice, Sustainability under the SSCI is about the core business of central banks and regulated institutions and it is high time we said farewell to sustainability as once-a-year reporting activity or a voluntary undertaking. It is time to say goodbye to spreadsheet sustainability.

With this, let me quickly come to some of the key success factors for becoming a Sustainability Certified Financial Institution.

First and foremost, sustainability shall not be detached from the main business of financial institutions.

Doing so is the biggest and widespread danger. But understandably, this practice of sustainability as an add-on or a separate spreadsheet business is prevalent, primarily because financial institutions have lacked a framework to mainstream sustainability.

But today you are equipped with holistic and state-of-the-art Sustainability Standards enabling you to practice true sustainability.

It is necessary under SSCI that every decision you make, every action you perform and every cent you mobilise, lend, or invest make your institution strong and profitable, which is necessary for your shareholders and financial stability.

Under SSCI, the profits need to be sustainable profits. They need to bring high value to the customers and the wider society. They must positively impact the economy, and instead of harming, they shall protect the environment.

This is true sustainability, and all the rest is everything else but sustainability.

Sustainable profits, under SSCI, come from all financial and non-financial services, and not just one product such as climate-resilient fund or other marketing and nice sounding terms.

As you know, in such cases only a fraction of portfolio is somewhat climate friendly (if at all) and the major portfolio goes exactly in the opposite direction and keeps growing in size. The net result is not reduction but increase in carbon emissions. It causes more and not less harm to the environment.  

To ensure that financial institutions benefit from sustainability in terms of their profitability, competitiveness, and growth of the organisations, the CEOs need to lead the Sustainability Certification process. The leadership vision and ambitions shall be reflected in the impact goals and sustainability targets and across all the modules of Sustainability Standards.

The tasks required to be completed to achieve Sustainability Certification need to be led by the relevant members of the top management.

For example, the task related to board governance can be led by the Company Secretary or Chief Compliance Officer; crisis and risk management can be led by the Chief Risk Officer; and the digitalisation under the Technology Module of SSCI can be led by the Chief Information or Technology Officer. Likewise, Chief Operations Officer can lead the Operations Module, and the Chief Human Resource Officer can head the Human Capital Module.

Under SSCI, each task leader is supported by the task members who are from different units or departments. The diversity of views, expertise, and experience through those cross-functional teams will help foster innovation. It will lead to competitive advantage, creation of better customer experiences, higher efficiency and new income streams, among others.

It will accelerate sustainability certification process. And through making certification the tasks of all the departments, sustainability is sure to become the business of everyone in the organisation.

Time does not allow to share further success factors but let me underscore that it is necessary for financial institutions to ensure that each impact goal that you establish contributes to strengthening your corporate performance – your profitability, your return on assets.

You need to ensure that all your revenue and income streams are covered through achieving the impact goals that you establish. This approach will sustain your commitment to sustainability, and we will be happy to arrange a session to this end for those of you who need any clarity or assistance.

In conclusion, let us resolve to implement the Sustainability Standards in letter and spirit given the important roles of central banks and financial institutions as the drivers in creating a new economy – an economy that works for all. Let us make terminologies like poverty reduction and foreign exchange crisis history and put prosperity for all, technologically advanced economic development, and planetary well-being at the centre of what we do.

Let us create the destiny we deserve, and we deserve better!

Thank you.

For information about becoming a sustainability certified financial institution, contact jide@financialnigeria.com or +234 802 343 9098.