Culture and
sustainability
Environmental and
social opportunities
Today, lenders and investors increasingly look for ‘better quality
information’ to assist them in making informed decisions, and
sustainability is at the top of their agenda. Daniel Gribbin presents
the case for detailed, well-regulated sustainability disclosures.
Several factors have contributed to Larry Fink, CEO of Blackrock, one of
the recent, heightened awareness the world’s largest investors, in his Barriers to sustainable development
of the importance of sustainability 2017 letter to investees stated “As Although there has been an increase
and its social, economic and wealth shifts and investing preferences in the dialogue and rhetoric regarding
environmental effects – particularly change, environmental, social, and sustainable finance in the region, the
in the banking sector. The Paris governance issues will be increasingly mobilization of both private sector and
Agreement on climate change and material to corporate valuations.”16 government capital continues to be
the UN’s sustainable development measured. Some of the key barriers
Locally, both the Abu Dhabi to sustainable finance include:
goals (SDGs) have resulted in a
Exchange and Dubai Financial
USD12 trillion14 market each year, – Regulatory and policy gaps
Markets are now members of the
and the potential for USD 90 (including uncertain and
Sustainable Stock Exchange Initiative
trillion15 investment opportunities inconsistent regulatory/policy
(joining 83 global stock exchanges
before 2030. regimes and differing regulatory
globally). In January 2019, 25 local
Changing investor concerns entities17– many of them banks – regimes across regions)
and increasing engagement in signed the Abu Dhabi Sustainable – Transfer of knowledge and skills
environment and social issues has Finance Declaration, announcing from the developed world to the
given rise to emerging mandates their intent to advocate sustainable developing world, particularly in
and legislation. These include: finance and investments focused the area of project generation
the European Union’s mandatory on driving long-term socioeconomic
disclosure on sustainability and environmental development. – Technology innovation to
performance by the financial services reduce cost (new technology/
So what is the banking sector’s role improvements)
sector for large public-interest
in supporting the growing space
companies and the Financial Stability – Challenges of attracting and
of sustainable finance, and how is
Board’s Task Force on Climate mobilizing finance/investment
sustainability reporting supporting
Related Financial Disclosures (TCFD). into emerging economies given
this trend?
the level of inherent risk and risk/
reward balances
– Challenges and costs associated
“Sustainability reporting could also with relevant small ‘micro’
projects and/or the lack of large
improve stakeholder engagement, brand scale projects in the region
– Need for sound transparent
reputation and social license to operate disclosures (most importantly
data) to support investment
for banks, beyond the carbon footprint.” decisions and due diligence
processes, analysis and emerging
new valuation methodologies.
14. http://report.businesscommission.org/report, 15.https://newclimateeconomy.net/content/press-release-economic-growth-and-action-climate-change-can-now-be-achieved-
together-finds, 16.https://www.blackrock.com/corporate/investor-relations/larry-fink-ceo-letter 17.http://wam.ae/en/details/1395302732894
The role of sustainability reporting –– New sophisticated in-valuation The lack of disclosure of
With credit risk and valuation approaches have emerged, sustainability data can represent a
approaches increasingly shaped where banks look to incorporate challenge. However this is gradually
by environmental, social and non-financial considerations into being addressed by governments
governance-related input, there is a valuations, recognizing that the in the region and stock exchanges.
pressing need for better reporting ability to see the whole picture Christiana Figueres, former
and market disclosures. Financial is fundamental to valuing a head, United Nations Framework
data alone is no longer sufficient. company or asset. Considering Convention on Climate Change
sustainability related performance (UNFCCC), said that “Rivers of
In the Middle East, banks are
has been found to identify capital need to flow to assets and
only beginning to leverage the
potential upsides, ‘alpha’, where projects that are the right ones for
available environmental and social
companies manage such issues the 2050 world we have to build.”21
data to inform actionable business
better than their peers.20 Organizations would be well advised
insight. At the same time, they are
to include sustainability reporting
gradually putting more emphasis –– Sustainability reporting could
within this list of projects, as it can
on sustainability reporting – though also improve stakeholder
act as an enabler for sustainable
there is room for improvement. engagement, brand reputation
finance and facilitate the promotion
In KPMG’s 2018 Corporate and social license to operate for
of sustainable development.
Responsibility Reporting Survey, of banks. Other stakeholders such
the top 100 largest organizations as consumers, governments and Increasingly, investors, employees,
by revenue in the UAE, 37 percent non-governmental organizations customers, and other stakeholders
of banks were reporting their (NGOs) are demanding greater are calling for greater focus by
sustainability performance.18 transparency and accountability. banks on the long term, as set out
in KPMG’s ESG strategy, and the
In the banking sector, sustainability Going beyond the minimum
long view – a framework for board
reporting may be useful in the Sustainability reporting goes beyond
oversight 2017.22
following key areas. the carbon footprint and health
and safety initiatives. Frameworks
–– Sustainability considerations and
prescribe that companies should
analysis may allow banks to access
report on topics that are material to
new markets and explore new client
their company and their stakeholders.
engagement approaches. Examples
Financial institutions differ from
include the Australian New Zealand
most organizations in that their main
Banking Group, which announced a
impact is indirect, through their
sustainable finance19 target of USD
investments or lending portfolios, so
7.1 million, and appointed a head of
sustainability performance should Daniel Gribbin
sustainable finance. Locally, First
include both indirect and direct Sustainability Services
Abu Dhabi Bank issued the only
effects. Considerations include: T: +971442496513
green bond in the market in 2017.
E: dgribbin1@kpmg.com
We have also seen banks begin to –– Disclosure of sustainability or
introduce ‘green loans’ and SDGs the environmental, social and Daniel joined KPMG Lower Gulf in
social bonds. governance (ESG) policy of the bank. 2018 as a Senior Manager in the
Sustainability services team as a
–– Banks are aiming to implement –– Disclosure of the exposure to
subject matter expert specializing
sound risk-management environment and social risks
in Global Reporting Initiative (GRI)
processes, which involves through lending and investments.
reporting, strategy implementation
aggregating, managing and
–– Set targets and report on the development, corporate social
integrating sustainability data
impact made through lending and responsibility, health and safety, and
and metrics with financial data to
investment activities. environmental management. Daniel
help understand and reduce their
has extensive industry experience
risk exposure. The assessment
working in the financial services,
of climate risk exposure across
minerals and mining, logistics and
lending portfolios is an example.
consumer manufacturing industries.
Article co-authored by Hanife Ymer, KPMG Lower Gulf director
as of 8 April 2019.
18.https://assets.kpmg/content/dam/kpmg/pdf/2016/02/kpmg-international-survey-of-corporate-responsibility-reporting-2015.pdf, 19.http://www.
anz.com/resources/4/a/4a92c630-7b83-4db4-bae7-9d5b70864623/2018-cdp-response-full.pdf?MOD=AJPERES, 20.https://assets.kpmg/content/
dam/kpmg/pdf/2015/06/introduction-kpmg-values.pdf, 21.https://docplayer.net/19324808-Green-bonds-financing-the-development-of-low-carbon-
climate-resilient-cities.html, 22.https://assets.kpmg/content/dam/kpmg/lu/pdf/lu-en-esg-strategy-framework-for-board-oversight.pdf UAE banking perspectives 2019 35
