New Viewpoint by Arthur D. Little unveils a two-part scalable approach for banks to strengthen their ESG strategy on their path to growth.
Under the title, “ESG Data Governance Viewpoint,” ADL reveals $24.55 billion was generated MENA-wide in green and sustainable finance for 2021, grounding a strong ESG momentum across the region.
Overall, green and sustainable finance in the region witnessed an increase from 2020’s $3.8 billion, achieving an extraordinary 532% year-over-year (YoY) growth
Financial institutions in the Middle East and North Africa (MENA) have adopted environmental, social, and governance (ESG) as a key strategic element in their commitment to going green. As more reporting requirements become mandatory, and stakeholders determine the need for a comprehensive approach to ESG, these institutions have responded by shifting their focus from defining an ESG strategy to implementing it, with data governance playing a key role. Published under the title “Middle East Banks drive growth in ESG finance, face calls for ESG strategy,” Arthur D. Little (ADL) offers a two-part tailored and scalable solution for complex data to enable banks to efficiently manage ESG information in the region. The Viewpoint reviews the impacts of recent and expected disruptions and explores options for banks to strengthen and grow their ESG strategies.
An impressive $24.55 billion in green and sustainable finance was generated by the Middle East and North Africa (MENA) region in 2021, an increase from $3.8 billion in 2020, achieving an extraordinary 532% year-over-year (YoY) growth, marking a huge momentum in ESG across the entire region.
Andreas Buelow, Partner, Arthur D. Little, said: “ESG has become the new normal for financial institutions. Perhaps the most significant sign of this remains in the products and services being offered by banks, which reflect their sustainable ambitions. Green issuances from countries in the Middle East and North Africa are not standing still but are in fact outpacing global growth. With new reporting requirements taking effect, banks are facing an urgent need to kick-start their strategies and execute concepts throughout their organizations. In implementing their ESG strategies, banks are finding that the complexity of ESG data has not been entirely captured and addressed by current data governance frameworks, leaving these banks to resort to ad hoc solutions for collecting, managing, and governing ESG data.”
Nael Amin, Senior Manager, Financial Services Practice, Arthur D. Little, added: “Many financial institutions in the Middle East have designed comprehensive ESG strategies that open the door to new pathways to top-line growth, business opportunities, cost reductions, regulatory compliance, and employee satisfaction. This growing trend demonstrates the momentum that ESG is gathering in financial institutions, as the world’s banks increasingly emphasize ESG and infuse it into their business models. Banks in the Middle East have embraced the importance of a well-defined ESG strategy. During the next step, implementation, frameworks such as data governance are vitally necessary. The shift from strategy to implementation is complex and detail oriented. Different use cases of ESG have different data requirements and multiple stakeholders who add to the complexity. Thus, there is no standard “one size fits all” in regard to ESG data.”
Putting ESG strategies into action
The latest ADL Viewpoint calls for a two-part scalable solution to resolve the difficulties of complex data and enable banks to properly and efficiently manage ESG information. During the first step, an ESG data catalog is created to ensure transparency through a nondisruptive and easy-to-incorporate layer. Setting up a governance framework to ensure quality control in a scalable, structured approach is the second step.
As such, banks encounter unique challenges as they put their ESG strategies into action. A comprehensive ESG strategy covers a range of external and internal applications and can help financial institutions move toward the sustainable future they seek. Because data governance is central to a fully developed strategy, we propose a framework built around an ESG data catalog with the following three features:
- Emphasis on data transparency and quality that does not disrupt existing data landscape.
- Anticipation of future ESG-related needs.
- Support for handling complex data requirements in an ever-evolving regulatory environment.
So far, financial institutions in the MENA are continuing to embrace ESG, which is gaining momentum and wide-reaching acceptance. A well-developed, thoughtful approach that considers the framework outlined in ADL’s latest Viewpoint can create the conditions for future success.
The ADL ESG Data Governance Viewpoint can be viewed and downloaded [here].
