Tribune News Network
Financial institutions in the Middle East and North Africa (MENA) have adopted environmental, social, and governance (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. 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 Qatar. The Viewpoint reviews the impacts of recent and expected disruptions, and explores options for banks to strengthen and grow their ESG strategies.
An impressive $24.55 billion in green and sustainable finance was generated by the MENA region in 2021, an increase from $3.8 billion in 2020, achieving an extraordinary 532% year-over-year (YoY) growth. In 2022, Qatar recorded increasing ESG reporting across the board, reaching a record USD 5 billion in sustainable loans. Having witnessed such remarkable growth, it also grounded the country as a major player in the field, now responsible for a total 17.4% of ESG growth MENA wide.
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 organizations.
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 emphasize 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 multiple stakeholders who add to the complexity. Thus, there is no standard “one size fits all” in regard to ESG data.”
Putting ESG strategies into action. the latest ADL 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. During the first step, an ESG data catalog is created to ensure transparency through a nondisruptive and easy-to-incorporate layer. Setting up a governance framework to ensure quality control in a scalable, structured approach is the second step.
As such, banks encounter unique challenges as they put their ESG strategies into action. A comprehensive ESG strategy covers a range of external and internal applications and can help financial institutions move toward the sustainable future they seek.