FAB: Mandatory ESG disclosure will help accelerate green transition
As of now, only listed companies must publish this information in annual reports
Every organisation has a responsibility to address climate change and environmental, social and governance (ESG) disclosures must be a key part of this exercise, says Shargiil Bashir, Chief Sustainability Officer at First Abu Dhabi Bank (FAB).
“We need a standard set of disclosure requirements on ESG for all companies. As of now, only listed companies must mandatorily publish this information while private firms do so on a voluntary basis. ESG disclosure practices and guidelines for all companies would align this information in much the same way as how financial statements work.”
Such standards would enable better transparency and greater understanding of the internal workings of companies, meaning banks could apply better judgement when lending to green projects. “This process serves to uncover opportunities as well as gaps for companies to work more effectively.”
The banking industry has always been instrumental in pushing through change and transformation in economies. “Banks are a touchpoint in society as they engage with broad stakeholder groups such as governments, public and private sectors, and consumers all across diverse industries and segments. Banks have the responsibility and, in many ways, the capabilities to help companies to turn their net zero commitments into action,” adds Bashir.
As per Bloomberg’s Capital Markets League Tables, green and sustainable bond and sukuk issuances in the GCC reached a record $8.5 billion from 15 deals in 2022. This is a significant increase from $605 million from six deals in 2021. First Abu Dhabi Bank remained one of the region’s leaders in 2022 with three green bond issuances accounting for approximately $1.49 billion during the period.
“At FAB, we want to support the UAE’s ambition to achieve the Net Zero 2050 Strategic Initiative and also enable our clients and employees to be more conscious and environmentally responsible. We were the first bank in the GCC to join the UN-led Net Zero Banking Alliance, and also the first to issue a green bond of $587 million in the region in 2017,” says Bashir. Since 2017, the bank has issued 14 more green bonds.
“The bond issued in 2017 worked on 13 different projects. About 63 per cent of the funds supported projects that focused on energy efficiency; 30 per cent was invested for renewable energy, and the remaining 6 per cent was for wastewater management projects. Some of the solar projects supported through this bond avoided carbon emission of close to two million tonnes per year,” says Bashir.
Of the total amount of green bonds, 75 per cent was invested in projects in the UAE, and some of it was in North Africa, and the rest in Europe.
On the consumer front, the bank has tied up with Tesla to introduce green car loans, offering the lowest interest rate to customers opting for electric vehicles. It has introduced a similar concept for green housing loans, too. “We look to create value for society and across communities both for present and future generations, and it’s our aim to be the regional pacesetter in sustainability. That includes sustainable financing, green bonds, governance, awareness raising, etc. And we’re eager to build on the work we’ve done so far. In 2022, we issued green bonds of more than a billion. I foresee that green bonds will be an important financial instrument in the future as well,” says Bashir.
FAB is also targeting carbon neutrality in its own operations by 2030. It takes pride in embarking on this journey and in bringing a cultural shift within its working environment. “We are working on embedding our ESG strategy in every aspect of our work. For us, it is not only about green bonds or sustainable financing, but also about raising awareness across the organisation. This year, our employees have taken over 10,000 hours of training on ESG. Every employee has been through a standard ESG training to understand what it is.
"Depending upon the role and responsibilities, there was additional training as well. I think it is important to raise awareness because it is not just about creating a product, it is about mindset and culture that focuses on sustainability,” says Bashir.
Since 2018, the bank has reduced its emissions by more than 30 per cent. “Embedding ESG in our processes, products, and way of working will be key for us in the coming years, and I hope multiple other organisations will take these steps. This is about creating a culture to continuously think about the ESG impact we have,” concludes Bashir.