HSBC released, on Thursday, a global survey on sustainable finance markets. The HSBC 2020 Sustainable Finance and Investing Survey 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% say environmental and social (E&S) issues are important to them — but only 65% of investors feel that way (compared to the overall global average of over 90%). Within these majorities, the shares that believe E&S issues are very important are also lower than in other regions. Furthermore, just 7% 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%, more than anywhere else) are intending to develop firm-wide policies on responsible investing or on ESG issues. As for 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 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% on total issuance in 2019. And 2019 saw nearly 60% growth on 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 has seen the region’s sustainable finance market deepen and become increasingly diversified. In September, Saudi Electricity Company raised $1.3bn in the first public US dollar-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 $258m via the region’s first green Export Credit Agency loan.
Moral values are clearly influential in the region. When asked why they care about E&S issues, 62% of issuers and 47% of investors say ‘we believe it’s right’ — in each case, the strongest level globally.
The survey results also suggest that the novel coronavirus (COVID-19) pandemic has accelerated engagement with ESG issues in the Middle East. Above average proportions of issuers (44% versus the 41% global average) and investors (30% versus 29%) now believe more strongly than before in the importance of becoming sustainable or considering ESG issues in investing.