The Central Bank of Nigeria (CBN) has advised banks and other financial institutions under its supervision to work towards implementing the sustainable banking principles.

Deputy Governor (Operations), CBN, Dr. Kingsley Moghalu, who said this in an interview with journalists on the sidelines of the 2014 international sustainable banking forum in Lagos yesterday, however warned that banks that fail to comply with the principles would be sanctioned.

The sustainable banking principles cover areas such as environment and social risk management, human right, women economic empowerment, financial inclusion, environmental and social governance, capacity building and collaborative partnership.

However, the central bank deputy governor stressed that it had been made mandatory for all banks to apply the principles in their lending practices.

Responding to a question on the deadline that was given for banks to fully comply with the policy, Moghalu said: “You can’t set an immediate timeframe because it is new. But what we have done is to say we would be regulating and supervising banks in accordance to how effective they apply those principles and so it becomes part of the supervision of the banking and financial system. We would be doing that twice every year.

“Of course, if you don’t comply, we would apply sanctions. Sustainable banking agenda is a very concrete aspect of economic development and it is one of the major contributions we are making from the regulatory perspective.”

He stated that the policy became crucial after the global financial, when regulators and other stakeholders saw the shortsightedness of just focusing exclusively on profit.

To the Acting CBN Governor, Dr. Sarah Alade, sustainability being an emerging issue requires building internal competencies through capacity building and training of employees so as to develop the necessary skills and mindset for integration of the policy.

Alade said the CBN has gone into collaboration with the International Finance Corporation (IFC) to train and re-train staff members on environmental and social issues.

“Similarly, the board of directors and top management were also trained to set the tone at the top. Since the launch of the principles and accompanying guidelines, the CBN has developed, exposed and approved a reporting template to enable us measure performance on sustainability issues by the industry in order to show commitment and be transparent,” she added.

The Country Manager for Nigeria, IFC, Mr. Solomon Quaynor revealed that the corporation would commit funds to support the Independent Power Projects in Nigeria.

He also added that the IFC has gone into advanced discussion on modalities to support a gas project, saying that the corporation is “still on the drawing board in terms of potential investment in the distribution segment and that is really because the transition arrangement by the Bureau of Public Enterprises (BPE) and the Ministry of Power is still ongoing.”

All these, he pointed out would impact positively on the Nigerian economy. On his part, the CBN Deputy Governor, Corporate Services, Alhaji Suleiman Barau  explained that the shift to sustainable banking was because the industry realised that poor environmental and social performance on the part of their client represented a threat to their business success.