ESG opportunities unfolding on the back of sustainable finance

15 September 2023 4 min. read

Countries in the GCC have in recent years made significant progress in developing their sustainable finance practices, with a focus on promoting a more sustainable financial services sector, encouraging sustainable investments, and supporting green projects. According to Philipp Lemmerz (PwC) and Yahya Anouti (Strategy&), these efforts are paying off – and at the same time paving the way for seven related ESG opportunities.

Expanding the GCC’s sustainable influence

Sustainable finance allows the GCC to align policymaking with international development priorities. By establishing globally competitive sustainable finance ecosystems, the GCC countries can demonstrate their technological capabilities and economic feasibility to promote environmentally and socially conscious outcomes.

Such leadership will position the GCC as a key player in the international scene, capable of influencing global policy decisions through meaningful representation in global policy forums, such as UNFCCC, COP, and G20, among others.

ESG opportunities unfolding on the back of sustainable finance

Spearheading the net zero agenda

By embracing sustainable finance principles, the GCC can potentially spearhead the global net zero agenda. Adopting sustainable finance practices, including establishing a target cap for financed emissions and scaling up investments in sustainable energy, would reduce the dependency on conventional energy sources while promoting energy efficiency and curbing carbon emissions.

Such actions will contribute to a cleaner, more sustainable future and strategically align with GCC’s sustainability objectives, such as diversifying their economies and creating new opportunities in sustainable sectors such as green tech and renewable energy. With the potential to stimulate job creation and technological innovation, the GCC’s leadership in sustainable finance could prove to be a game-changer for the achieving net zero agenda.

Broadening instruments in achieving SDGs

Sustainable finance has the potential to be a vital tool in achieving SDGs. By helping address the financing gap in SDGs, sustainable finance will unlock funding for projects and initiatives supporting sustainable development, such as renewable energy and sustainable infrastructure.

Additionally, it will encourage accountability and transparency, enabling private investors and stakeholders to assess the impact of investments and pinpoint areas for improvement.

Bolstering social inclusion and development

Sustainable finance may assist GCC nations in improving social inclusion and development by providing access to financing for socially responsible initiatives. These principles are essential in empowering women, youth, and SMEs.

Furthermore, by addressing issues such as water scarcity and financing sustainable infrastructure projects such as clean water initiatives, sustainable finance can contribute to a healthier environment and an improved quality of life for all citizens.

Promoting islamic sustainable finance

Sustainable finance is a vehicle that presents an exceptional potential for promoting Islamic finance if the integration is done right. By embedding Islamic finance principles into their sustainable finance regimes, the GCC countries can enhance the credibility and attractiveness of their Islamic finance offerings.

Being inherently rooted in ethical principles and values, Islamic finance provides an adequate, sustainable financing framework as ESG considerations are embedded into its core foundations. By including Islamic sustainable finance principles in their sustainable finance regimes, GCC countries can tap into an expanding market of socially responsible investors looking for ethical investment opportunities, providing an opportunity for the GCC to lead on a sustainable development agenda globally.

Further readingThe global Islamic fintech banking market: trends and outlook.

Attracting international investments

The GCC can communicate a clear commitment to sustainable finance by adopting high transparency and accountability in reporting financial decisions. This also means providing businesses with the resources they need to invest in innovation and technology that will assist them in achieving their sustainability goals.

Taking these steps in presenting a dedication to ESG factors will boost investor confidence and represent the region as an even more attractive investment destination for socially responsible investors.

Building sustainable business models

Sustainable finance may play a significant role in helping private businesses build sustainability models. Private companies can improve their social impact and increase their long-term viability by being incentivised to implement sustainable methods that reduce their environmental footprint. Furthermore, supplying access to capital, mainly allocated for ESG projects, can help GCC businesses improve their brand reputation and value.

About the authors: Philipp Lemmerz is a partner at PwC, Yahya Anouti is a partner at Strategy&.