ESG
Turning the tide Conscious investing is attracting growing attention from investors and policymakers alike in the GCC due to the strategy’s promise of utilizing a range of non-financial information to better align finance with long-term value and societal values
T
he pandemic crisis did not only bring the greatest recession since World War II, but investors are calling it the 21st century’s first ‘sustainability’ crisis, one that is acting as a wake-up call for decisionmakers to prioritize a more sustainable investment approach, said J.P Morgan. Sustainability, which incorporates environmental, social and governance (ESG) concerns, is increasingly topping the agendas of most companies globally. While reacting to the Intergovernmental Panel on Climate Change (IPCC) report on climate change in August, the UN SecretaryGeneral António Guterres cautioned that global warming is dangerously close to spiraling out of control, saying it is “Code Red for Humanity”. Deloitte said that although sustainability might not be the first boardroom topic one
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may think of, it is central to corporate competitiveness and is vital for a company’s continued ability to operate. Though ESG practices appear to be in the initial stages of implementation across the GCC region, with teething troubles around consistency and financial materiality, the six-nation bloc of oil-rich Gulf countries is spearheading economic diversification away from heavy reliance on oil revenues to advance sustainable growth. Meanwhile, conscious investing is attracting growing attention from investors and policymakers alike across the Gulf region owing to the strategy’s promise of utilizing a range of non-financial information to better align finance with long-term value and societal values. The pandemic crisis is expected to put the Islamic finance industry back on
Banking and Finance news in the MEA market
ESG investors’ radar. In its report, Islamic Finance Outlook 2021 Edition, S&P Global said that the twin shocks of COVID-19 and low oil prices have created opportunities to accelerate and unlock the long-term potential of the Islamic finance sector. “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. Hence, ESGs are increasingly becoming an integral part of how the global financial services sector operates. Analysts believe that sustainable financing together with technological innovation and digitalization in the financial services sector is instrumental to sustainable innovation and growth and the transition to a less carbonintensive economy. “The alarm bells are deafening, and the evidence is irrefutable: greenhousegas emissions from fossil-fuel burning and deforestation are choking our planet and putting billions of people at immediate risk,” Secretary-General Guterres said earlier in August.
Towards sustainability Though green bonds have been a rare sight in the Mideast, many corporates and sovereigns borrowers have been issuing fixed-term securities to raise funds for projects with environmental benefits such as renewable energy projects.
