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UAE To Witness 32% Growth In Green & Sustainable Finance | |
| Sumita Pawar |
According to the new report by leading consulting firm Arthur D. Little, the UAE witnessed a 32 percent year-on-year (YoY) growth in its 2022 green and sustainable finance issuance.
Between 2019 and 2022, the UAE recorded increasing environmental, social, and corporate governance (ESG) reporting across major public and private institutions such as the Dubai Financial Market, the Ministry of Climate Change and Environment, and publicly listed companies in the Securities and Commodities Authority (SCA).
As further mentioned in the report, published under the title "Middle East Banks drive growth in ESG finance, face calls for ESG strategy," Arthur D. Little offers a two-part tailored and scalable solution for complex data to enable banks to efficiently manage ESG information in the UAE.
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The Viewpoint reviews the impacts of recent and expected disruptions and explores options for banks to strengthen and grow their ESG strategies.
According to the report, financial institutions in the Middle East and North Africa (MENA) have adopted ESG as a key strategic element in their commitment to going green. As more reporting requirements become mandatory and stakeholders determine the need for a comprehensive approach to ESG, these institutions have responded by shifting their focus from defining an ESG strategy to implementing it, with data governance playing a key role.
An impressive US$24.55 billion in green and sustainable finance was generated by the MENA region in 2021, an increase from US$3.8 billion in 2020, achieving an extraordinary 532 percent YoY growth, the report added.
Majid Al Futtaim's fundraiser, led by First Abu Dhabi Bank, raised US$1.25 billion in 2022 as the credit facility linked to the company's ESG goals.Further, Dubai Islamic Bank is currently in the process of concluding its own reporting, spanning ethics and integrity, a thriving workplace, positive community impact, environmental stewardship, and sustainable finance and investments.
Andreas Buelow, Partner, Arthur D. Little, said, "ESG has become the new normal for financial institutions." Perhaps the most significant sign of this remains in the products and services being offered by banks, which reflect their sustainable ambitions. Green issuances from countries in the Middle East and North Africa are not standing still but are in fact outpacing global growth. With new reporting requirements taking effect, banks are facing an urgent need to kick-start their strategies and execute concepts throughout their organisations. "In implementing their ESG strategies, banks are finding that the complexity of ESG data has not been entirely captured and addressed by current data governance frameworks, leaving these banks to resort to ad hoc solutions for collecting, managing, and governing ESG data."
Nael Amin, Senior Manager, Financial Services Practice, Arthur D. Little, added, "Many financial institutions in the Middle East have designed comprehensive ESG strategies that open the door to new pathways to top-line growth, business opportunities, cost reductions, regulatory compliance, and employee satisfaction." This growing trend demonstrates the momentum that ESG is gathering in financial institutions, as the world’s banks increasingly emphasise ESG and infuse it into their business models. Banks in the Middle East have embraced the importance of a well-defined ESG strategy. During the next step, implementation, frameworks such as data governance are vitally necessary. The shift from strategy to implementation is complex and detail-oriented. Different use cases of ESG have different data requirements, and there are multiple stakeholders who add to the complexity. Thus, there is no standard "one size fits all" with regard to ESG data.
The latest Arthur D. Little Viewpoint calls for a two-part, scalable solution to resolve the difficulties of complex data and enable banks to properly and efficiently manage ESG information, said the report.
During the first step, an ESG data catalogue is created to ensure transparency through a non-disruptive and easy-to-incorporate layer. Setting up a governance framework to ensure quality control in a scalable, structured manner is the second step.
So far, financial institutions in the UAE are still embracing ESG, which is becoming more popular and is being accepted by more and more people.The report came to the conclusion that future success can be set up with a well-thought-out plan that takes into account the framework outlined in ADL's latest Viewpoint.