CLIMATE CHANGE
INSTRUMENTAL CHANGES:
The Role of Finance in Climate Change The market for green bonds in the Middle East is growing quickly as retail and institutional, sovereign wealth funds, banks and portfolio managers are utilising ESG considerations to build and manage their portfolios
T
he oil-rich Gulf Arab countries made a seismic shift by unveiling a raft of measures to eliminate planet-warming emissions within their borders last year despite regional economies’ heavy reliance on oil and gas—which accounts for 70% of the six-nation bloc’s total goods exports and government revenues. The initiatives, which were unveiled ahead of COP26 last October, are part of the GCC states’ broader strategies to diversif y and open their economies with a strong focus on sustainability.
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While reacting to the Intergovernmental Panel on Climate Change (IPCC) report on climate change in August 2021, the UN Secretary-General António Guterres cautioned that global warming is dangerously close to spiraling out of control, saying it is “Code Red for Humanity”. Over the past two years, as the ongoing global health crisis morphed into an economic one, J.P Morgan said that investors are calling the COVID19 pandemic the 21st century’s first ‘sustainability’ crisis, one that is a wakeup call for decision-makers to prioritize a more sustainable investment approach.
Banking and Finance news in the MEA market
Meanwhile, “green” or ethical investing is attracting increasing attention from both investors and lawmakers alike across the region owing to the strategy’s promise of utilising a range of nonfinancial information to better align finance with long-term value and societal values. Sustainability, which incorporates environmental, social and governance (ESG) concerns, is increasingly topping the agendas of most financial institutions in the region. The pandemic is also expected to put the Islamic finance industry back on ESG investors’ radar. Fitch Ratings said that sustainable Islamic bond volumes soared 17.2% y-o-y to $15 billion, with the theme likely to remain prominent in 2022. However, S&P Global said that though the pandemic offered the possibility of more broad-based and transformative growth, Islamic finance has not yet fully increased its share of sustainable finance activity. ESGs are increasingly becoming an integral part of how the global financial services sector operates. “Investors representing more than $45 trillion in assets under management have already agreed to drive climate change action across their portfolios,” Karin Oertli, the COO, Personal and Corporate Banking and Switzerland, UBS said in a report published by the World Bank. Industr y exper ts believe that sustainable financing together with technological innovation and digitalisation in the financial services industry is
