Loans based on sustainability targets being offered in Oman

Muscat: Loans that have repayment conditions linked to sustainability targets are being issued to companies in Oman.

One such bank is HSBC, which at the end of last year, completed its first sustainability linked loan in Oman. Issued to an oilfield services business, the client borrowed money where the terms of the loan were linked to sustainability factors such as the amount of wastewater generated.

“As a global business, we recognise that our planet urgently needs action to protect communities, businesses and the natural environment from the damaging effects of climate change,” said Simon Adcock, head of commercial banking at HSBC Oman. “We also recognise the potential impact of climate change and have set out an ambitious plan to unlock climate solutions that can support our customers in their energy transition and their journey towards net zero.”

Adcock's interview is part of Tejarah Talks, a series of discussions around sustainable business in Oman, organised by the Ministry of Commerce, Industry, and Investment Promotion.

Oman’s renewable energy sector is full of potential. Aiming to diversify its energy sources, the Government has set an ambitious goal of covering 30 percent of its electricity demand with renewable energy projects by 2030. This presents substantial opportunities for business and the wider economy.

With the launch of several major renewable energy projects in the sultanate, Oman Power & Water Procurement Company (OPWP) expects solar energy, wind power and waste energy projects to account for as much as 30 percent of the country’s energy mix by 2030.

“As a community, taking personal responsibility for something as simple as waste can collectively deliver a substantial contribution to sustainability, for example all too often plastic waste is discarded without any regard for the environment,” said Adcock. “Everyone can play a role.

“It has become more important than ever for businesses to embrace innovation and sustainability, open up new growth opportunities and stay relevant in the new low carbon economy,” he explained. “That is why we are intensifying efforts to help businesses, small and large, transition to more sustainable business models.

“We aim to unlock climate solutions such as clean tech innovation, sustainable infrastructure and nature-based solutions. Radical ideas are needed to tackle climate change, but turning concepts into commercially viable solutions at a global scale requires investment and governance.”

In January 2021, HSBC formed a dedicated Sustainable & Transition Finance Team in the Middle East to help institutions, corporates and individuals transition to a more sustainable economy. The team leverages deep technical knowledge of environmental, social and governance opportunities, the challenges facing customers, and the evolving regulatory environment.

Furthermore, the HSBC Sustainable Financing & Investing Survey 2021, which took the pulse of major corporate issuers of securities and the companies that invest in them, showed that 97 percent of issuers in the region who responded to the survey had increased the attention that they pay to environmental and social issues over the past year.

Nearly 45 percent of issuers said that they were already seeing the impact of climate change on their business or activities – up from just seven percent a year ago. It is now critical for companies to engage on the topic to better understand how they can capture the economic, as well as environmental and social benefits of adopting robust sustainability policies.

Explaining the challenges facing sustainability efforts in Oman and other countries, Adcock said, “The challenge is not only in Oman but across many emerging economies. At HSBC, we are committed to working with our customers during their journey to lowering carbon emissions.  We are mobilizing finance to support our customers’ transitions, accelerating innovation to help scale up climate change solutions and building global partnerships to ensure investment is swiftly channeled towards sustainable projects.”

He added: “Across broader industries, we are seeing companies feeling the pressure of changing customer demands, for example, asking for less plastic packaging or single use plastics with consumer goods and pressure from investors or other large companies within their supply chains to change their practices. The subject is really increasing in profile as we emerge from the pandemic and companies who adapt quickly and view this as an opportunity, rather than a threat, will be the ones who thrive in the coming years.”