Muscat: A global survey released by HSBC shows how sustainable finance is gaining momentum in the Middle East, with ‘values’ the main driver among of issuers of bonds, loans and other securities in the region.
The HSBC 2020 Sustainable Finance and Investing Survey also highlights how the Middle East sustainable finance market is at an earlier stage of development than markets such as Europe, Asia and North America, with some contrasting results between investors and issuers.
Among issuers in the Middle East, 93 per cent say environmental and social (E&S) issues are important to them — but only 65 per cent of investors feel that way (compared to the overall global average of over 90 per cent). Within these majorities, the shares saying E&S issues are ‘very important’ are also lower than in other regions. Furthermore, just 7 per cent of investors say they always take environmental, social and governance (ESG) factors into consideration in their investments and few support environmentally or socially desirable projects at the risk of lowering their returns.
However, it should be noted that a large share of investors in the Middle East (41 per cent, more than anywhere else) are intending to develop firm-wide policies on responsible investing or ESG issues. And among investors who already have these policies in place, very high numbers seek out material ESG issues when they invest and incorporate impact goals. Middle Eastern investors are also very optimistic about the benefits of ESG - more in this region than elsewhere see the potential for ESG strategies to outperform.
Gareth Thomas, HSBC’s Regional Head of Global Banking for the Middle East, North Africa and Turkey (MENAT), said, “The results of the HSBC Sustainable Finance and Investing Survey reflect what we are seeing on the ground, with Middle East green and sustainable bond issuance so far this year up nearly 50 per cent on total issuance in 2019. And 2019 saw nearly 60 per cent growth in 2018. The green agenda is here to stay so it is imperative that investors and issuers in the Middle East engage on the topic to better understand how they can capture the economic as well as environmental and social benefits of more sustainable business models.”
The last few months have seen the region’s sustainable finance market deepen and become increasingly diversified. In September, Saudi Electricity Company raised US$1.3 billion in the first public USD-denominated green issuance from the Kingdom, which was followed just a few weeks later by Egypt issuing the region’s first sovereign green bond. Beyond the bond market, in July, Saudi Arabia’s Ministry of Finance raised US$258 million via the region’s first green Export Credit Agency loan.
Moral values are influential in the region. When asked why they care about E&S issues, 62 per cent of issuers and 47 per cent of investors say ‘we believe it’s right’ — in each case, the strongest level globally.
The survey results also suggest that the global COVID-19 pandemic has accelerated engagement with ESG issues in the Middle East. Above-average proportions of issuers (44 per cent versus the 41 per cent global average) and investors (30 per cent versus 29 per cent) now believe more strongly than before in the importance of becoming sustainable or considering ESG issues in investing.