Banks urged to assess environmental risks before lending

Ghanaian banks and other financial institutions have been urged to assess the environmental impact of businesses before granting loans, as biodiversity loss threatens the country’s natural assets valued at US$1.5 billion.

The institutions have also been asked to direct more investments towards businesses that protect forests, water bodies and other natural resources to safeguard the economy and reduce financial risks.

The call was made at a Biodiversity Finance Plan workshop in Accra yesterday, organised by the United Nations Development Programme (UNDP) and the Government to mobilise private sector investment for biodiversity conservation.

The workshop brought together stakeholders to discuss how financial institutions could support sustainable economic activities while helping Ghana address the growing threats to its natural resources.

The Cluster Lead for Environment and Climate at the UNDP Ghana Country Office, Mr Abdul-Razak Saeed, said Ghana’s economic development efforts were not sufficiently aligned with the protection of nature, despite the country’s dependence on natural resources.

“There is a disconnect between our economic pathway and how we fold nature into this,” he said.

He said the UNDP was working with the ministries responsible for environment and finance to develop Ghana’s first Biodiversity Finance Plan under the Biodiversity Finance Initiative, launched in April 2025.

The plan, he said, would identify funding gaps for biodiversity conservation and explore financing options, including green bonds, biodiversity credits and debt-for-nature swaps, to attract private investment.

Mr Saeed said financial institutions had an important role to play in assessing nature-related risks and mobilising resources to support the country’s biodiversity targets.

The Biodiversity Finance Manager, Mr Enoch Appiah, said banks needed to move beyond conventional lending practices by considering the environmental and social impact of projects before financing them.

He urged financial institutions to make sustainability a regular item at board and management meetings and measure their performance not only by the volume of loans disbursed but also by their environmental outcomes.

He said public funding alone could not meet the country’s biodiversity conservation needs, making private sector investment essential.

A Sustainable Finance Specialist, Mr Nurokinan Chimbar, said more than half of Ghana’s Gross Domestic Product (GDP) depended directly on nature, making environmental protection critical to economic stability.

He said financial assets estimated at GH¢647 billion, representing about 45 per cent of GDP, exposed the financial sector to risks associated with the destruction of natural resources.

Mr Chimbar explained that the degradation of forests, water bodies and marine ecosystems could reduce agricultural production, disrupt businesses and weaken borrowers’ ability to repay loans.

He therefore, urged banks to scrutinise the environmental practices of businesses, particularly in mining, agriculture and manufacturing, before extending credit.

An Environmental Policy Analyst, Ms Pamela Quaye, said Ghana had lost about 80 per cent of its original forest cover, leaving only 21 per cent, largely due to illegal mining, deforestation and pollution.

She said the continued destruction of natural ecosystems required urgent action from both public and private sector institutions.