ESG taking root as driver of growth in the GCC

GCC: 55% of investors and 30% of corporate issuers have an ESG strategy in place

Financial return is the top driver in Environment, Social and Governance (ESG) decision making by investors and corporate issuers from the GCC , according to new research from HSBC, suggesting that ESG activity is taking root as a key part of business growth in the region.

Georges Elhedery, Group General Manager, Chief Executive Officer, MENAT, HSBC Group, said, “Our research tells us that many investors and corporate issuers from the GCC have an ESG strategy in place. Critically, financial returns drive ESG decision making among GCC institutions, ahead of factors such as company policy and stakeholder pressure, which suggests that ESG is taking root as an important driver of business growth in the region.”

Discussions were held with 1,731 investors and corporate issuers around the world, including 201 from the United Arab Emirates and Saudi Arabia, for the 2018 HSBC Sustainable Financing and ESG Investing Report. This revealed that 55% of investors and 30% of corporate issuers from the GCC have an ESG strategy in place, compared with a global average of 61% of investors and 48% of issuers.

By comparison, 40% of investors and 24% of corporate issuers in Asia have an ESG strategy in place, while Europe and the UK see more than 80% of investors and issuers with an ESG strategy in place.

Regionally in the GCC, the use of ESG financial instruments among corporate issuers is 71%, which is in line with Asia but behind Europe. On the Investor side, 60% are involved in ESG investing, which is more than in Asia but less than in Europe. A higher proportion of GCC issuers are involved in the market leaving a “competitive” gap to be filled among investors but, when taken in context of their regional peers in Europe and North America, leaves room for growth for both.

Perceived Barriers

Respondents from the GCC see greater barriers to increasing their ESG commitments than most of their global peers, with 71% of investors and 63% of issuers seeing barriers to increasing their ESG commitments. For those GCC investors who see barriers to increasing their ESG investments, a lack of investment opportunities is the top factor, followed by ESG data quality. For issuers, the two key barriers are ESG disclosure demands and relatively poor financial returns. Globally, 33% of issuers and 43% of investors see barriers to increasing their ESG commitments.

Low Awareness of Taskforce on Climate Related Financial Disclosures (TCFD)

While international regulation is cited as the number one reason to increase disclosure levels globally, only 8% of issuers and 10% of investors are aware of Taskforce on Climate Related Financial Disclosures’s (TCFD) existence. In the GCC, this figure is just 1% for issuers and 3% for investors. The TCFD is the task force that has worked to develop a set of clear and consistent global recommendations for corporate disclosure around climate risk. For issuers specifically, only the UK (20%) and Canada (11%) have double digit levels of awareness. This is led largely by companies with greater than USD$10 billion turnover.

Daniel Klier, HSBC’s Group Head of Strategy and Global Head of Sustainable Finance, said:

“The market is now looking to regulation to provide clarity and definition, especially as inconsistency of definitions is an issue for all. With the providers of capital looking for enhanced disclosure, and TCFD providing a framework for doing so, implementing the recommendations is now a pressing global priority.”

-Ends-

About the report
The reporting is based on direct interviews with 1,731 global entities, including 863 issuers and 868 investors, conducted by East & Partners over a five-week period ending 29 June 2018 Group Treasurers, CFOs, CIOs and heads of investments strategy included in the sample frame were located across Europe, North America, Asia and the Middle East. Demographic breakdowns are provided in the methodology section of the analysis report, broken down by interviewee, assets under management (AUM), annual revenue and industry distribution for the two respective segments.

HSBC in the MENAT region
HSBC is the largest and most widely represented international banking organisation in the Middle East, North Africa and Turkey (MENAT), with a presence in 9 countries across the region.  HSBC has operations in the United Arab Emirates, Egypt, Turkey, Qatar, Oman, Bahrain, Kuwait and Algeria. In Saudi Arabia, HSBC is a 40% shareholder of Saudi British Bank (SABB), and a 49% shareholder of HSBC Saudi Arabia for investment banking in the Kingdom.

This presence, the widest reach of any international bank in the region, comprises some 350 offices and around 10,500 employees. In the year ending 31st December 2017, HSBC in the MENAT region made a profit before tax of US$ 1.5bn.

Media enquiries to:

Edward Moore +971 54 309 6283 

edward.j.moore@hsbc.com

© Press Release 2018