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MENA financial sector embraces sustainability with new ESG reporting standards, research reveals

By Puja Sharma

June 18, 2024

  • banks in UAE
  • digital banking channel
  • ESG

The financial sector in the MENA region is increasingly focusing on sustainability, driven by regulatory frameworks, market demand, and technological advancements. Initiatives such as the Unified ESG Metrics for GCC Listed Companies and national sustainability agendas in the UAE and Saudi Arabia are setting standards for transparency and comparability.

Consumer and investor pressure for sustainable financial products is pushing banks to integrate ESG principles into their strategies. The rise of green bonds, sustainable loans, and FinTech solutions is further advancing the sector’s commitment to environmentally and socially beneficial projects. Moreover, partnerships with educational institutions like the London Institute of Banking & Finance (LIBF) are enhancing the knowledge and capacity of financial professionals in ESG practices.

Financial institutions are also strengthening corporate governance and ethical leadership to support sustainability goals. Leadership commitment and enhanced governance structures are crucial for driving the sustainability agenda. Regional partnerships and the adoption of global benchmarks are promoting best practices and improving local sustainability efforts. Additionally, there is a growing emphasis on comprehensive and transparent ESG reporting, financial inclusion, and social impact investments. By diversifying investment portfolios towards sustainable assets and regularly assessing their environmental and social impacts, the financial sector in MENA aims to achieve long-term risk management and positive social outcomes.

Until recently, mentions of sustainability in company reports often felt like mere gestures, lacking real business focus. But things have changed—now, sustainability reporting is becoming a must for both banks and financial institutions.

In its latest whitepaper, titled “Sustainability reporting for banks: the climb starts here,” The London Institute of Banking & Finance (LIBF) aims to provide a comprehensive overview of sustainability reporting in the MENA region, offering valuable knowledge and practical guidance for financial institutions navigating the evolving landscape of Environmental, Social, and Governance (ESG) reporting.

The whitepaper highlights the significance of ESG reporting since the establishment of the Financial Stability Board’s (FSB) Task-Force on Climate-Related Financial Disclosures (TCFD) in 2017. Despite TCFD guidelines being mostly voluntary, the paper stresses that institutions should not become complacent. The evolution of ESG regulation in Europe, particularly through the EU’s Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD), sets a global precedent, making ESG reporting mandatory for many large companies.

The document also examines how these European standards impact global practices and encourages financial institutions to adopt these benchmarks. Additionally, it discusses the regulatory focus on sustainability in the MENA region, including the introduction of ESG strategies by banks and the Unified ESG Metrics for GCC Listed Companies.

“We are thrilled to release this comprehensive whitepaper, which underscores our commitment to providing valuable insights and fostering knowledge within the financial community in the MENA region,” said Ehsan Razavizadeh, Managing Director MENA and Asia at LIBF. “Sustainability reporting is becoming increasingly crucial for financial institutions, and our whitepaper aims to equip them with the necessary tools and understanding to navigate this complex landscape successfully”,

He added “The launch of “Sustainability reporting for banks: The climb starts here” marks a significant milestone for LIBF, reaffirming its dedication to supporting the financial sector’s advancement towards sustainable practices and fostering educational growth in the MENA region.”

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