Banking on Sustainability

[Music] so our panel is about uh sustainability in relation to our customers businesses and our banks um you're looking at three people who back in the day were a police officer a tugboat pilot and a stow away on a container ship but today we're all Bankers yes uh they didn't know I was saying that uh and Jennifer from the corporate bank at HSBC and fisel from mashrek now both have very interesting careers Jennifer let me let me just jump in and start with you um so we know there's a growing focus on sustainable banking here in the region in the UAE what are some of the factors behind that is it a government push is is it a competitive thing is it from customers is it from your own staff in your bank what are the factors here well first of all thank you for having me uh we're now at a time in the UAE where we've had really good strategic drivers and a combination of strategic drivers that have drived sustainability in the UAE first we have momentum and a vision from the top with the last two cops being held in the region cup 27 Egypt and cup 28 here last year as well as the tone from the top with his His Highness she Muhammad declaring this year the Year of sustainability we've had a vision and momentum to to go off of but second of all it wasn't just talk for talk and show for show we've had government-led initiatives that have been announced in the UAE that have spurred the need for Capital things initiatives around Renewable Energy electric vehicles and many others green buildings and so on and so forth this these types of initiatives this momentum has also cascaded down to the corporate world where we've had corporates announce their Net Zero targets many of which uh have done so in the last few years and are then now cascading those targets down to their supply chain not only we've had Regional momentum obviously the global momentum and the global regulations have have helped you know accelerate the ambition of the UAE and amongst uh the drivers is also obviously the banking driver banks have stepped up their sustainability Ambitions in the region HSBC has announced uh you know its Net Zero Targets in its financed emissions by 2050 as well as our sustainable Finance targets as well um the regional banks have followed as well and have definitely stepped up their commitments this doesn't just help put capital in the right places it also helps the corporate world and the private sector understand the importance of sustainability good not thank you very much for that could you could you follow that on then with um saying something about the types of products and services are they new are they different are you just you know changing what you have absolutely so the types of products and services are very much now embedded in the industry um they're no longer sort of differentiated much between Banks obviously Banks continue to compete and differentiate in their specific offerings but sustainable Finance is very well embedded within the bank in sector we've have three types largely of sustainable Finance products at a high level there's a use of proceeds products where Capital goes to either green or social initiatives we have sustainability linked products where we tie Capital to sustainability Ambitions of corporates and we have sustainable supply chain products that help corporates Drive uh their suppliers sustainability Ambitions all of these types of products can be used across the corporate the corporates need or the borrowers need and in particular for climate and for sustainability Venture debt and climate Tech Finance is necessary HSBC has committed 1 billion of early stage Finance to climate tech companies um so climate Tech is definitely a need that we have to continue to drive but in addition to that it would be infrastructure Finance project Finance for long-term you know large scale projects and that's also also a commitments that HSBC is is making but beyond Financial products and and banking banking services corporates have a need that start before the their lending or borrowing requirements and that's a need to understand sustainability and embed that in their business models so banks have a wider role to play we have a role to play in partnering uh and helping our customers on their sustainability Journey at hspc we've been working with a partner called diginex on a program called the sustainable business business sustainable business accelerator program and I'm pleased to say that through that program we're able to engage with corporates that haven't started yet on their sustainability Journey for them to do a materiality assessment a carbon footprinting assessment and really sort of get them going as understanding what the requirements are and and the need that they have Jenifer thank you very much for that let me let me take that thread then a bit further fisel and turn to yourself we know that a lot of companies um and a lot of clients want to bring sustainability into their businesses indeed into their lives uh but there and if we're really honest there are a lot that aren't there yet they're just not convinced they're worried um they are natural Skeptics they think their business is too small um they uh they they just don't have the feel they have the the knowledge the training they don't know where to turn what do you do about that how do you address that that group of people how do you help them move um it's a transformational journey we need to acknowledge that the UAE Visionary leadership uh highlighted the necessity of sustainable practices and uh moving away from fossil fuel economy based economy since early days in 2015 during the world government Summit His Highness she Muhammad bin Zed publicly stated that we need to celebrate the last barrel of oil that statement set the trajectory and the road map for a future Journey where the government created the first government Retreat on discussing the move forward toward non- based oil economy and diversifying the economy if we look at the sustainable investment products in 2023 they exceeded $7 trillion an increase of more than 20% from the year before and if we look at the sustain ability broader approach it's not the way forward or addressing well-being and prosperity but it is also a value creation opportunity clean technology as mentioned earlier um requires approximately 4.5 uh trillion dollar in investment every year tribbling from the current state if we look at the average $ 4.84 trillion per year between 24 and 23 that that's the global energy transition cost and if we look at also the sustainable development goals we need another $4 trillion so we are talking roughly at least with a necessity to address Finance sustainable Finance requirement averaging between 13 to 14 trillion that kind of number would not come from a government it requires a financial partner redefining public and private sector and it will bve the the way for a futuristic sustainable uh prosperous future for generations to come if we would wouldn't have those numbers handy and we don't create an ecosystem an effective ecosystem that function and enable they have a reason for being skeptic but with current subsidies evolving in an evolution towards a future engaging government private partnership what we call PPP 2.0 I believe we have um a better uh mature journey to achieve together okay thank you so just a very quick followup and then I have another more general question do you think the concern that this is that that moving into a sustainable business model will eat into profits is it a profitability concern and do people even hesitate to say that and then I'll follow with my other more general question well definitely it's a profet whether by aarat or stick yeah and the stick is low number 11 for uh mitigating climate yeah change effects in the UAE signed by the president himself yeah with penalties ranging from 50,000 dham to 2 million possibly doubling if the same violation will reoccur and the enforcement date is 30th May 2025 yeah that's the stick the carrot is well the subsidies around energy and other methods uh will start reducing government cannot in any country in the world cannot keep paying for the expenses of operation our operational emissions must be addressed and reduced it will be profitable definitely if we look at the value of energy let's take aside the war in Ukraine but the cost of energy globally is increasing and if we will move towards sustainability sustainable energy options the cost is red in and at the same time the ROI is increasing yeah so that's a very good example of why we need to have sustainable energy for example as a model when we address sustainability requirement thank you very much and you you started out I think sort of saying something around um the rules side of this so you know we have lots of Standards we have lots of things developing internationally and locally but something that not everyone knows about or may have heard about is called law 11 if I have that right and that's from this region or from the from the Emirates specifically um can you say something about what that means and what it means for banks and who's part of that who's involved well it will address all the uh companies in the UA the law was signed on the 28th of August the awareness on it requires further development and capacity building as a bank I see it as an opportunity for us to evolve into a knowledge house where we will conduct and host several awareness campaigns with reputable organizations whether government semi-government or International to build capacity into the obligate current or futuristic because disclosing such requirement and preventing greenwashing among other ESG washing uh scenarios and risk mitigation requires capacity building specifically in the sector and that's why we partnered with reputable organizations such as the United Nation Global combat chapter in the UAE hosting some events and we are planning to conduct more the definition of sustainab uh the definition of Finance products and services will evolve to expand and extend to address such requirement okay thank you do you want to add anything to that uh point I completely agree I mean I think capacity building awareness and understanding is absolutely necessary completely Echo the point on smmes and small medium Enterprises that need the help to get on this journey uh and this is why we you know we're here to support ultimately as Banks we're here to support uh an education and the transformation process again not through just banking services but through collaborations and Partnerships that's the only way that systemic real change can happen yes so you're both talking about Partnerships uh Sabrine from from HSBC majored on partnership in her session earlier today as well uh and I think that that's right that's what I hear from other institutions um and when you go back to the finance that some of your customers need it's the equivalent which is often hybrid Finance isn't it it's it's it's not just a straightforward product or offer um this is a new space to uh to operate in um let me ask you then a different question uh altogether or bring in a different Focus I know that both of you are and your institutions are focused on sustainability in its fullest sense not just about carbon it's not just about the latest app it's sustainability fully um and that means encompassing people and Society I mean the world it's just what happens you you provide Finance but what what is the impact uh you can't just do it from uh from inside out um and most of us will talk about what are our banks doing as we look out but it would be very interesting to hear have from each of you a comment on the perspective from Society back in why do you need to think holistically when you offer these products and services and capacity building sure absolutely so first completely agree so we look at sustainability and its fullest sense and we believe in a just and fair transition and what we mean by that is not just looking at the environmental aspects but also definitely the social and governance aspects on the pH social perspective that's both looking at the risk side as well as the opportunities in the space right so from a risk perspective looking at Human Rights and who we bank and how do they embed human rights within their supply chains and from an opportunities perspective particularly in this regions as Government are stepping up their socials initiative how do we help support the capital that's required into those spaces so I think social Finance you know is now uh getting a bit more room in the space of sustainability um now that environmental Finance or or green Finance is a bit more embedded within institutions and uh we've had a lot of dialogue this year across industry on how do we embed further social Finance what's the crossover of social finance and Islamic finance and I think more is to come on this space but we've already seen the deal flow that address um either the use of proceeds social social aspects of a deal or even in sustainability linked loans embedding social kpis in in the structure thank you fisel um today we are here in Abu Dhabi the capital of capital as UAE why is that because when it's not the building or the Urban Development it's human centricity it's the leadership visioning that the human factor is the pillar of development and at the same time Prosperity towards a sustainable future if we look at this and we address that UAE is having five cities among the safest five 10 cities worldwide safety Public Safety and acknowledgement and open dialogue with the government and the leadership is a model to other countries and cities preventing crime and addressing underprivileged families requirement is a key for a sustainable future the human centricity in the UAE is a model to be copied elsewhere otherwise the rich will be richer and the poor will be poorer and the crime rates will increase being as a police officer as you mentioned earlier being a police officer officers you mentioned earlier reflect that the necessity of well-being and addressing crime rate is a very important pillar in the UAE to prosper and develop further and I believe the7 trillion growing 20% from 2022 to 2023 is a Cornerstone in the Falcon economy accelerator to attract more sustainable funds and finance to the UAE thank you obviously a lot of passion in that in that response so thank you very much for that um you're both really bus busy your institutions are are in there you you really distinguished institutions with great track records um Jennifer what's your biggest achievement in in the space for 2024 quickly because I'm going to ask a follow yes absolutely we' had so many achievements this year very proud of our team and our institution but I think what stands out this year for us is the number of Firsts we have first sustainable improvement loan that's in partnership with ecovadis for mid-market clients we've had our first sustainable finance loan in Algeria we've had our first receivable Finance sustainability link transaction we've had our first sustainable Finance crossb structure so the number of Firsts has just increased and that just shows the momentum that we're on that's brilliant what's the big challenge in front of you right now for 2025 the challenge is we really want to see the momentum continue we've had the last two cups we've had this year as being the sustainability year what comes next right we're about to see regulation as was mentioned uh coming into play in the UAE but we really want to make sure that that momentum stays we don't we there's a fear of momentum dropping because we've been on such a high in the last few years so my fear is that we that gets taken away but I think I don't think that will happen I think we have the right momentum good thank you same two questions to you Fel 2024 sure we are one of a few National Banks committed to invest one one trillion Duram in sustainable Finance by 2030 and also we initiated a CSR campaign with an impact globally climb to change collecting waste plastic waste from the highest peaks of mountain and climbing uh camps worldwide starting from uh Nepal India Pakistan and moving towards Egypt and other countries I'll give one example in Pakistan alone with higher than 12,000 ft we managed to collect more than 1.78 tons of plastic was encouraging micro micro smes to be initiated under a privileged family to be engaged showing that sustainability can work and will become profitable in addition our our initiative UAE ESG and sustainable Finance ecosystem accelerator where we are building capacity and engaging with government entities like mocha and others in accelerating the journey toward a sustainable future in the UAE is something that I'm proud of and I look forward to develop further that's brilliant um 2025 one big challenge that you see um evolving subsidies and the transforming them into tax rebate and other things to ensure profitability and to have a carrot beside the stick to enable the willingness of the transition and the transformational sustainable project thank you very much let me just uh summarize the the the panel really despite the urgency of climate and sustainability despite the new products and services and and Brilliant work that Banks like both of you yours are doing the demand isn't always there the understanding isn't always there the door isn't always open so Banks need to keep working um in two ways one you have to help create the market for this as well as serve the market and the other is that you need to really understand the consequences for society more widely can I ask you to thank my two wonderful panelists thank you very much thank you la [Music]