The Green Shift: How Abiola Uwadia helps banks navigate ESG compliance

By Ihesiulo Grace

19 May 2023

News

As global investments surge toward sustainability, banks are feeling the pressure to embrace Environmental, Social, and Governance (ESG) principles. Global sustainable investments topped $35 trillion, according to the Global Sustainable Investment Review 2020, underlining the urgency for banks to integrate these principles into their operations.

More so, ESG compliance is no longer just a regulatory requirement but also a business imperative. For banks, aligning with ESG standards is key to attracting socially conscious investors, earning customer trust, and securing a sustainable future.

A report from RFI Global highlights that consumers expect businesses to take a stand on social and environmental issues. This growing demand is reshaping the financial landscape, pushing banks to reimagine their role in society.

Abiola Uwadia, the CEO and Lead Business Analyst, OLUP Limited, is at the forefront of this shift, guiding banks toward effective ESG integration. In a sector where consumers are increasingly demanding responsible practices, Uwadia’s expertise is helping financial institutions not only meet regulatory standards but also take the lead in sustainable banking.

The concept of ESG began to gain traction in the early 2000s, with the UN’s “Who Cares Wins” report urging financial markets to consider environmental and social factors.

By the late 2010s, ESG was fully integrated into investment decisions, and today it’s a vital metric for assessing corporate performance and risk. As institutional investors increasingly view ESG criteria as critical to decision-making—83% of them, according to a survey by Federated Hermes—banks are under pressure to adapt.

Uwadia’s approach to ESG compliance involves a structured strategy. Speaking on the best compliance practices in an interview, she emphasized aligning ESG goals with regulations, incorporating ESG into risk management frameworks, and educating employees on ESG-related compliance.

Banks first conduct a baseline assessment of their current practices, identify areas for improvement, and set SMART goals—Specific, Measurable, Achievable, Relevant, and Time-bound. Governance structures are then established to create accountability, and data systems are implemented to track ESG metrics accurately.

Through these steps, banks are not just complying; they are setting themselves up for long-term success in a rapidly evolving market.

Uwadia also highlighted the importance of stakeholder engagement, urging banks to maintain transparent dialogue with regulators, investors, and customers. “Clear policies, measurable targets, and active collaboration with stakeholders are critical for success,” she said.

“By proactively integrating ESG into their operations, banks can mitigate risks, enhance reputations, and support sustainability”

Several high-profile banks are already reaping the benefits of robust ESG strategies. HSBC, for example, has committed to achieving net-zero emissions by 2050 and pledged to provide $100 billion in sustainable financing and investment by 2025.

Similarly, Bank of America has financed over $200 billion in low-carbon and sustainable projects since 2007, demonstrating how ESG can drive profitability while supporting global sustainability goals. These banks are leading by example, showing that ESG is good for both the planet and business.

Despite progress, many banks still face challenges. Resistance often comes from entrenched operational models, and the integration of complex ESG metrics remains a hurdle. There is also the issue of navigating a constantly shifting regulatory landscape. For instance, regulations like the EU’s Sustainable Finance Disclosure Regulation (SFDR) require banks to disclose their ESG practices, adding complexity to compliance.

“Regular ESG reporting is essential for building trust,” said the business analyst.

“Annual reports should highlight progress, challenges, and future plans.”

Transparency is also critical. “Banks must provide clear, comparable, and accessible data on sustainability metrics,” Uwadia added. Engaging stakeholders is equally vital. “Open dialogue with customers, investors, and regulators ensures concerns are addressed effectively.”

Technological tools can ease the process. Blockchain, for instance, can enhance traceability in transactions, ensuring ESG commitments are met. Artificial intelligence also offers real-time ESG performance tracking, streamlining compliance efforts.

“Financial institutions must integrate ESG risks into credit assessments and scenario planning,” Uwadia noted. “This will help assess long-term portfolio impacts and align investments with sustainable goals.”

Offering eco-friendly products like green savings accounts and sustainable investment funds is also encouraged.

As global attention shifts toward sustainability, experts stress that transparency and innovation are no longer optional but imperative for long-term growth and trust in banking.

However, those that successfully adapt will find themselves better positioned in an increasingly competitive market.

Furthermore, the financial benefits of adopting ESG practices are clear. A study by MSCI found that companies with high ESG ratings outperformed their lower-rated counterparts by 2.5% annually between 2015 and 2020.

This performance boost is linked to lower capital costs and greater operational efficiency.

Additionally, adherence to ESG standards significantly enhances a bank’s public image. PwC’s survey revealed that 76% of consumers are more likely to trust companies committed to sustainability—trust that translates into customer loyalty and long-term profitability.

The future of ESG in banking appears promising. Emerging technologies like blockchain are expected to enhance transparency and accountability, particularly in supply chains. Automation in ESG data collection and reporting is also on the rise, helping banks streamline their compliance efforts.

As stakeholders increasingly demand more from financial institutions, banks must go beyond compliance. ESG will need to become embedded in their core business strategy, driving cultural transformation from the inside out.

For Uwadia, the journey is just beginning. As banks continue to evolve under the pressures of climate change and social responsibility, it is clear that embracing ESG is not just about surviving but thriving.

By adopting comprehensive frameworks, addressing challenges head-on, and staying ahead of emerging trends, banks can set themselves up for long-term success in a world where sustainability is no longer optional.

Adding to that, Uwadia recommends prioritizing green lending and issuing green bonds for projects like renewable energy and eco-friendly infrastructure to promote sustainability. Restricting financing for harmful activities, such as deforestation, is another key step.