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Wholesale Banking

The Middle East: making strides in climate action

There is a growing sense of urgency to go green in the Middle East with Qatar, the United Arab Emirates (UAE) and Saudi Arabia intent on ramping up sustainability efforts. Banks, like ING, can help.

Solar panels in middle east

Extreme temperatures, water shortages and increasing desertification make the Middle East one of the most vulnerable places in the world to global warming. Spurred by ambitious government initiatives and rising investor demand to act against climate change, businesses in the region are tasked with speeding up their sustainability agendas.

“We’ve noticed a surge of interest from local businesses to prioritise environmental, social and governance (ESG) standards, partly prompted by various government initiatives that set ambitious clean energy targets,” says Sebastian Frederiks, ING’s head of Wholesale Banking in the Middle East.

Take Qatar, which has recently established a Ministry of Environment and Climate Change to ensure that climate-conscious practices are adopted throughout all sectors. The Ministry oversees the implementation of the country’s National Environment and Climate Change Strategy, which contributes to United Nations’ sustainable development goals. In 2021, Qatar launched a national climate change action plan aimed at achieving a 25% reduction in greenhouse gas emissions by 2030. Elsewhere in the region, Saudi Arabia has stated it aims to have a contribution of 50% of renewable energy to the overall energy mix by 2030 as defined in its ‘Vision 2030’. UAE’s ‘Energy Strategy 2050' plans to increase the contribution of clean energy in the total mix from 25% to 50% by 2050, and to reduce the carbon footprint of power generation by 70%.

With such plans, and the next two United Nations climate conferences scheduled in Egypt (COP27) and the UAE (COP 28), the region clearly wants to have a decisive role in environmental issues.

But this will bring local companies’ climate actions under greater scrutiny. Are they ready to rise to the challenge and put government pledges into practice?

Although they have a strong sense of what is needed to achieve progress on ESG, most companies are still in ‘start-up’ mode when it comes to strategy and implementation, shows a 2022 survey of Middle Eastern CEOs by consultancy firm PWC.

“Banks can help finance change, share knowledge, and offer innovative solutions. All of which we do for our clients in the Middle East. For instance, we organise ESG awareness sessions for boards of directors, we share best practices in risk and due diligence, we support sustainability-linked lending facilities, and we use our deep ESG investor distribution network for green bonds,” explains Sebastian.

ING has been active in the Middle East for years, covering a wide range of wholesale banking activities, including syndicated lending, financial markets, international real estate financing and sustainable finance. Qatar National Bank (QNB) and Qatar Investment Authority are two of the bank’s longstanding clients in the region. ING has supported QNB to establish QNB’s Green, Social and Sustainability Bond Framework. In 2020, ING was sole sustainability advisor and joint leader manager for Qatar’s first ever green bond, issued by QNB. A year later, we participated in the Gulf region’s first sustainability-linked loan for Emirates NBD, Dubai’s biggest bank, which linked sustainability metrics such as water conservation to the interest rate of the loan. More recently, ING has been hired by Abu Dhabi Commercial Bank as joint sustainability structuring advisor in a green bond.

“The Middle East and North Africa region’s syndicated market for green and sustainability-linked bonds and loans continued to deepen and mature in 2021 as total issuance substantially increased over the last few years, according to data from Bloomberg’s Capital Markets League Tables,” Sebastian says.

As the Middle East is making a conscious effort to establish itself as an influential player in environmental issues, acting on ESG strategies brings significant business opportunities in the region.

“All companies and projects can and should have sustainability considerations, whether that entails implementing alternative energy sources, recycling waste, or developing green infrastructure,” he states.

“Sustainable business is better business. That is why our responsibility is to use our financing, advisory products and services to actively support client’s transition to new sustainable business models that will ensure their success in the future.”