The movement towards a more sustainable and human-centered future continues to gain momentum, and according to a new global report by Arthur D. Little, financial services institutions are not only at the epicenter of change, but also among its key drivers. There is also one.
In that report, the strategic consultancy explored how environmental, social, and corporate governance (ESG) have risen to the higher tiers of corporate agendas, and how banks, insurance companies, asset managers, and other financial It outlines how advances by service agencies are putting the sector at the forefront. of development.
The authors describe financial services as a ‘key player’ in the transition to a better world. One of the reasons is the willingness to adopt sustainable business models from within, but more importantly, to fund the massive journey required across the industry to achieve, and to reduce the risk. is to reduce Paris 2050 goals.
According to Arthur D. Little’s analysis, the financial services sector’s large and central position in every economic ecosystem makes its role unique.
In addition to driving broader action, ESG offers significant benefits to institutions themselves. Sustainable Value Driver Map by Arthur D. For example, there are few examples in the banking sector where ESG efforts have been found to pay off in different areas and impact both bottom line and bottom line.
But reaping the benefits is one of the toughest challenges. Arthur D. Little’s author describes this process as one that requires long-term commitment and is transformative across the organization and both internally and externally. “ESG transformation is a long road and we need to focus on translating ESG talk and commitments into concrete, positive actions.”
GCC highlight lens
A report highlighting progress in the Gulf Cooperation Council (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates) found progress in the region to be remarkable. At the same time, however, financial institutions come from far away, so there is “still considerable room to grow” to meet the world’s top performers in their ESG efforts.
Andreas Buerault, one of the report’s four co-authors, is based in the Gulf Cooperation Council and has been advising financial services institutions in the region for more than a decade (early in his career, he worked in insurance worked in the department).
Buelow walks through some of the most notable achievements and priorities at GCC.
Across the GCC region, adoption of ESG requirements is largely voluntary, but requirements are under continuous development. ESG high performers come from different countries and sectors, with every company achieving excellence in his ESG including Telecom, Logistics, Industrial (20%), Real Estate (10%) and Financial Services (30%). Proving that it can be done.
Other major regional public and private organizations are developing frameworks for engaging in ESG finance. Majid Al Futtaim, a leading retail conglomerate in the MENA region with over 40 shopping malls and other developments, has implemented a green finance framework to support ESG activities.
Saudi Arabia’s Public Investment Fund (PIF), a $430 billion sovereign wealth fund that has been actively involved in the country’s transformation, has partnered with BlackRock on ESG financing. HSBC and Saudi National Bank then created the Sustainable Finance Framework, making Saudi National Bank the largest banking group in the Kingdom and creating the first Sustainable Finance Framework.
Red Sea Development Company has been recognized as a global ESG leader in the real estate sector as sustainability has been a key guiding principle since the inception of its regenerative tourism project.
Leader evaluation
The Arab Federation of Exchanges currently references three ESG rating systems covering companies in the region. The Refinitiv ESG Score is widely used and most recommended as it directly measures a company’s ESG performance (versus risk). Out of 100 points.
Refinitiv assesses ESG performance, commitment and effectiveness across 10 key themes, taking into account industry and company size biases. Examples include Aramco (44), Zain (68) and Emirates NBD (35).
Another major ESG rating system used in the region is S&P, one of the world’s largest rating agencies. S&P recently expanded into his ESG ratings segment by combining his ESG profile of companies with his readiness of companies to address ESG topics. Meanwhile, MSCI has developed his ESG index that measures how prepared a company is for his ESG risks.
Main regulatory requirements
Much of the transition to a more ESG-friendly economic environment is being driven by plans, agreements and frameworks by global and local regulators and supervisors.
The United Arab Emirates is the first country in the region to commit to net-zero emissions targets, implementing large-scale sustainability projects under its Net-Zero 2050 initiative. We also need mandatory his ESG reporting from publicly traded companies. Market participants in the United Arab Emirates see opportunities in electric vehicles, charging and carbon capture.
Overall, 58% of UAE investors perceive barriers to ESG investing, and 91% of issuers plan to invest significant or no capital towards positive environmental and social outcomes over the next five years. We expect to redistribute to a noticeable extent. Both issuers and investors want transparent data and guidance on ESG principles.
The Kuwait Investment Authority, the world’s third largest sovereign wealth fund, recently announced that it will align its entire portfolio with ESG criteria. His ESG goals for Kuwait Vision 2035 are aligned with four of the seven pillars of Kuwait’s National Development Plan: Sustainable Living Environment, Sustainable Diversified Economy, Effective Civil Service and Creative Human Capital. Related.
Overall, Kuwait has developed state-level support for ESG and encourages listed companies to engage in voluntary ESG reporting.
In Saudi Arabia, the Ministry of Economic Planning is the leading organization in delivering on the KSA’s commitment to achieving the UN Sustainable Development Goals, Vision 2030 and the National Transformation Programme, overseeing the Kingdom’s major sustainability projects. doing. 2060.
Saudi Arabia is actively involved in regional sustainability initiatives, but has yet to develop ESG requirements for the private sector. The Saudi exchange has not developed her ESG metrics, but has endorsed several international initiatives such as the Global Reporting Initiative.
In Bahrain, on the other hand, ESG objectives are linked to three of the six pillars of the National Development Strategy. Maintain a safe and comfortable environment. Achieve sustainable quality growth. Improve the quality and accessibility of social services.
Government stakeholders oversee certain aspects of ESG compliance, but Bahrain encourages, but does not require, ESG reporting itself. Overall, the Bahrain Stock Exchange recommends companies report on 32 indicators: 10 environmental, 12 social and 10 governance indicators.
make an impact
Overall, financial services companies can have a significant impact on ESG progress. Achieving net zero in terms of operational footprint is possible and must be achieved, but true sustainability requires ensuring that clients and customers are also net zero. Rather than simply excluding certain industries or clients, this leverages client relationships to drive ESG impact by becoming an internal sparring partner that changes client behavior and drives change. means that
