By KT Reporter
The Governor of the Bank of Uganda, Dr Michael Atingi-Ego, has called on Tier 4 financial institutions, including savings and credit cooperatives (SACCOs), to integrate environmental, social, and governance (ESG) principles into their operations for a sustainable and responsible financial sector.
Speaking at the launch of the International Financial Reporting Standards, Sustainability 1 and Sustainability 2 (IFRS S1 and S2), the Governor said financial institutions must move beyond traditional banking and embed climate and social considerations into their core systems, decision-making, and risk management frameworks.
Spearheaded by aBi Finance in partnership with the Uganda Bankers Association (UBA) and the Association of Microfinance Institutions of Uganda(AMFIU), IFRS S1 and S2 are capacity-building program and for the development of an ESG framework tailored for Tier 4 institutions.
According to Atingi-Ego, the initiatives represent a major shift in how Uganda’s financial sector measures and manages sustainability.
“Financial institutions are not just intermediaries. They are stewards of capital, and with stewardship comes responsibility,” he said.
“Climate and sustainability risks are financial risks and must be integrated into governance, risk management, and capital allocation decisions.”
He explained that the introduction of IFRS S1 and S2 will require institutions to disclose how environmental and social risks affect their business models and long-term strategies, enhancing transparency and attracting global investment.
“These standards are not just about compliance. They translate environmental and social impact into financial decision-making, allowing investors and regulators to clearly assess how institutions are navigating the transition to a climate-resilient economy,” he said.
He revealed that BOU has already issued guidelines requiring supervised financial institutions to adopt the standards starting January 2028, alongside earlier directives on managing climate-related financial risks.
He noted that progress has been made within the banking sector, and the next frontier is Tier 4 institutions, whose services extend to the last mile Ugandan, especially among low-income households, women, and smallholder farmers.
Since June 2023, some SACCOs and other Tier 4 entities have been under the supervision of the central bank, requiring them to formalize operations and obtain licenses by September 2026. Dr Atingi-Ego said this transition must go hand-in-hand with the adoption of ESG principles.
“Inclusion without sustainability is incomplete. As global investors and regulators demand more transparency, SACCOs must embrace ESG as a core operational practice,” he said.
The program, supported by aBi Finance with funding of about 500 million shillings, will train bank executives and technical staff, followed by hands-on support to ensure practical implementation.
“We want to build a sustainable pool of experts who can drive ESG implementation across the sector,” said Signe Winding Albjerg, Danish Ambassador to Uganda.
The ambassador stated that long-term partnerships and coordinated action are powerful in addressing interconnected challenges such as climate change, financial inclusion, and sustainable growth, emphasizing that Denmark is committed to supporting Uganda through institutions like aBi Finance.
“No single institution or partner can address today’s interconnected challenges alone. Through long-term partnerships, we have demonstrated that patient and well-structured finance can unlock investment, expand inclusion, and improve livelihoods, and these new initiatives are an important step in strengthening a more sustainable and resilient financial system,” she said.
Through the signing of memoranda of understanding, the partners reaffirmed a shared commitment to collaboration, with a common goal of promoting sustainability and mainstreaming ESG practices across Uganda’s financial sector.
“At aBi Finance, we remain committed to being a partner to the sector, supporting innovation, building capacity, and driving inclusive growth and sustainability,” said Mona Muguma Ssebuliba, Chief Executive Officer of aBi Finance.
Jackline Mbabazi, the AMFIU Executive Director, said that although many Tier 4 institutions already collect social data, they lack structured systems to turn it into meaningful insights.
“What has been missing is a clear framework to guide how this data can be used to improve decision-making and better serve customers,” she said.
She revealed that while many institutions are able to report on social indicators, very few can track environmental and governance metrics, highlighting a major gap that the new framework aims to close.
The initiative will develop a practical, user-friendly ESG toolkit tailored to the realities of microfinance institutions, alongside training, mentorship, and nationwide stakeholder engagement.
“We don’t want this to be a box-ticking exercise. We want ESG to improve the quality of life of our customers and strengthen responsible lending,” Mbabazi said.
Ronald Ocheng, a senior research officer from U.B.A, said the capacity-building program will address weaknesses in ESG implementation across financial institutions.
He noted that while governance structures have improved, many institutions still struggle with environmental and social reporting, and in some cases lack evidence to support their ESG claims.
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