• ESG scoring has become part of the credit rating considerations
  • Climate change is increasingly impacting the lending and risk management practices at global banks
  • sustainability standards and practices are increasingly present in all our discussions with investors
  • Launching Sustainable Financing Framework is a culmination of NBK’s progress in the ESG area
  • “Weyay” is one of NBK’s key achievements in the environmental and social sides over the past period
  • Today, our board of directors includes a female and 4 independent members; one of which holds extensive experience in sustainability
  • The progress achieved on ESG practices helped improve our ratings and listings on several ESG indices

National Bank of Kuwait (NBK) strives to enhance its Environmental, Social and Governance (ESG) practices and related disclosure, with a focus on communicating with various stakeholders on the latest developments and achievements related to that topic. In this context, NBK organized a seminar with media representatives themed “Sustainability… A Roadmap for Implementing ESG Strategy,” in which Mr. Amir Hanna, Head of Investor Relations and Corporate Communications at National Bank of Kuwait lectured the attendees on the topic.

During the seminar, Hanna highlighted how the sustainability concept evolved over the years and stressed on the growing global emphasis on ESG practices.

“The term Environmental, Social and Governance (ESG) has recently became the focus of capital markets, and increasingly discussed across different sectors,” he explained.

Environmental and Social assets

Hanna proceeded to enumerate the reasons for the accelerating emphasis on ESG practices saying: “There are overlapping factors that have developed rapidly creating many challenges for the business sector at all levels. These factors mainly include reputational risk, the pressures exerted by activists and shareholders, the growing interest from capital markets participants, as well as regulatory requirements.”

He pointed out that capital markets are witnessing successive developments as to embedding ESG considerations into their decisions, in light of reviewing asset managers’ strategies, and credit rating agencies’ endeavors to include ESG scores in credit rating criteria.

As part of capital markets’ response to these developments, ESG assets under management witnessed continuous growth over recent years, as Bloomberg estimates that they are on track to exceed $53 trillion by 2025, representing more than a third of the $140.5 trillion in projected total AUMs.

Successive developments

Hanna indicated that: “There is an increasing support extended by shareholders in all institutions to the decisions and initiatives related to disclosure practices, the gender diversity of work team, and adherence with human rights principles and practices, noting that major companies are actively engaged in communication and interaction with environmental activists.”

He also highlighted that the world is witnessing significant developments in ESG-related regulatory requirements to the extent of requiring companies to disclose sustainability practices and commitments while adhering to unified reporting standards in this regard.

Hanna explained that the impact of climate change has become strongly present in the lending and risk management practices of financial institutions globally. In addition to existing risks, organizations are now exposed to climate change risks, where financed assets or other assets used as collateral, may be prone to physical risks including floods, hurricanes and forest fires or transition risks as countries’ policies and direction change to address the climate change topic.

NBK’s proactive approach

Hanna moved to NBK’s adoption of ESG practices saying: “Following our usual approach to act proactively, we, at NBK, started to set an organizational structure and lay the foundations back in 2016 for improving our reporting, in conjunction with our solid commitment in the CSR area. We released our first sustainability report in 2016, underscoring our endeavors to achieve more transparency and maximize the benefit for all stakeholders and aligning it with GRI reporting framework.”

“Our sustainability report covers the main trends, as well as a number of ESG-related disclosures, given our role as an active capital markets participant. NBK also launched many initiatives in this regard which helped achieve significant progress and contributed to improving the bank’s ESG ratings, and listing on several ESG indices,” he added.

Hanna continued: “Today, our board of directors includes a female and 4 independent members; one with extensive experience in the sustainability area, which makes us stand out as one of the leading institutions in adopting related governance and social standards.”

NBK has also started implementing automated systems to measure compliance with corporate governance standards and operational risk, as well as increasing ESG considerations for the different board committees, he indicated.

Unique example

Hanna mentioned that NBK has a market-leading position in ESG compliance. Key achievements in this regard include females representing almost 45% of the total work force, achieving a national labor ratio of 75%, and delivering 41,000 training hours to employees.

He pointed out that despite the financial sector’s low direct impact on the environment, NBK has presented a unique example, as environment-friendly institution through its new headquarters, which received the Leadership in Energy and Environmental Design (LEED) Gold Certification, as well as the Bank’s setting of internal goals to reduce operational emissions by 25 % by 2025.

Moving to the digital side, Hanna pointed out: “Weyay bank, the first digital bank in Kuwait, is one of NBK’s milestones in the sustainability area, given its direct impact on promoting financial inclusion, in addition to the indirect environmental impact as one of the digital solutions that contribute to reducing emissions.”

Hanna said: “NBK appreciates the role of finance in addressing environmental challenges and driving the transition to a more sustainable and low-carbon economy. In this context, NBK’s efforts in the ESG area were reinforced by recently launching its Sustainable Financing Framework. The Framework is aligned with the principles of the International Capital Markets Association (ICMA) and the Lending Market Association (LMA), confirming that the “Use of Proceeds”, “Process for Project Evaluation and Selection”, “Management of Proceeds” and “Reporting” are all aligned with the applicable principles.”

It is worth mentioning that NBK was the first banking institution in Kuwait to issue a dedicated sustainability report highlighting the Bank’s social, economic and environmental initiatives and the implementation of corporate governance principles in accordance with the standards of Integrated Reporting (IR) Framework and the Global Reporting Initiative (GRI). The Bank’s efforts in this regard over the past years were recognized by inclusion in the FTSE4Good Index and the Refinitiv AFE Low Carbon Select Index in MENA, in which NBK ranked first among regionals banks and Kuwaiti companies in terms of the index’s weight.

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