Middle East banks embrace ESG as a key strategic element for going green, says Arthur D. Little report

 


The United Arab Emirates (UAE) has witnessed an impressive 32% year-on-year growth in its green and sustainable finance issuance in 2022, according to a recent report by Arthur D. Little, a leading consulting firm. This increase is part of a larger trend of rising environmental, social, and corporate governance (ESG) reporting across major public and private institutions in the UAE, such as the Dubai Financial Market, the Ministry of Climate Change and Environment, and publicly listed companies in the Securities and Commodities Authority (SCA).

Financial institutions in the Middle East and North Africa (MENA) region are increasingly adopting ESG as a key strategic element in their commitment to going green. The Arthur D. Little report highlights that as more reporting requirements become mandatory, these institutions are responding by shifting their focus from defining an ESG strategy to implementing it, with data governance playing a critical role.

In 2021, the MENA region generated an impressive US$24.55 billion in green and sustainable finance, achieving an extraordinary 532% year-on-year growth from the previous year. First Abu Dhabi Bank led the way, raising US$1.25 billion in 2022 as the credit facility linked to the company's ESG goals. Dubai Islamic Bank is currently finalizing its own reporting, which spans ethics and integrity, thriving workplace, positive community impact, environmental stewardship, and sustainable finance and investments.



Andreas Buelow, Partner at Arthur D. Little, highlighted that ESG has become the new normal for financial institutions. He also stressed that green issuances from countries in the Middle East and North Africa are outpacing global growth, which highlights the importance of kick-starting ESG strategies and executing concepts throughout their organizations.

Nael Amin, Senior Manager of Financial Services Practice at Arthur D. Little, added that 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. He also emphasized the importance of setting up a governance framework to ensure quality control in a scalable, structured approach.

In conclusion, the latest Arthur D. Little Viewpoint calls for a two-part scalable solution to enable banks to properly and efficiently manage ESG information. The first step involves creating an ESG data catalog to ensure transparency, while the second step involves setting up a governance framework to ensure quality control in a scalable, structured approach. The rising adoption of ESG by financial institutions in the MENA region is a positive sign of the growing momentum of ESG globally.

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