Seamless Xtra’s Mark Dowdall speaks with Emmanuel Rondeau, a Non-Executive Director for La Banque Postale in France and a Visiting Professor with The London Institute of Banking & Finance (LIBF).
Recently, he co-authored a whitepaper for LIBF, titled “The 2024 priorities for building a sustainable financial services firm in the Middle East”. Here, they delve into the key messages from the report.
Before we get into the findings Emmanuel, I’d like to begin by asking what is your interpretation of the word sustainability and why do you think that is so important in the financial services industry?
Well, you’re very right. We start with this question because it has been a long period of time when there was some confusion around sustainability and in the sense that sustainability was only about CO2 emissions. Everyone is focusing on global warming and and the climate action but I think it is commonly agreed across the globe and across industries that sustainability is broader than that.
It is all spectrum as defined through the acronym of ESG – Environmental, Social and and Governance. That is now pretty well defined and and agreed but still of course climate change is one of the main components of this agenda. So sustainability is very much the way to make sure that our economic activities are not compromising the future and the way future generations will be able to live. It’s very important for the financial world because finance has been considered a key driver of energy and of how efforts help this transition to a greener world.
Obviously then you took a look at the financial services landscape in the Middle East in general. Do you think the sector across the region is doing enough in this area right now?
It is very clear that it has started to be more active than has been the case over the past decade. In that respect, COP27 in Sharm el-Sheikh in Egypt and then COP28 in Dubai have been very important as a factor of mobilisation of the regional financial industry around these critical topics. Through our contacts in the regions we see a very strong commitment now picking up. The government and central banks are starting to frame new regulations to make sure that the financial industry is taking it seriously and and starting to implement the foundations of a more sustainable approach to to their business.
Now, it seems more than anything that the white paper you released recently is there to serve really as a guide for bankers and financial institutions in the region who are trying to navigate that transition to sustainability. What are some of the most critical steps that you recommend in the report?
What we wanted to highlight here with my colleague Vera Spender Koubek is to be very concrete that it’s no longer the time for awareness and the basics of sustainable finance. We are now in the implementation phase which means that all actors are facing the complexities of implementation. And so we tried to highlight the key topics for 2024.
I think the first thing to start with is the pillars of what is a proper strategy and how to orchestrate a strategy around sustainable finance. And we have highlighted two pillars here. One being the double materiality metrics. This means the material assessment where each financial institution now has to assess where they are more exposed to sustainability risk and how to deal with that. The second pillar is around the the transition plan which will become a key driver of the strategy for all financial institutions across the globe.
The other key message is to pay attention to what’s going on in other regions. And I think definitely Europe is taking the lead on sustainable finance. New EU regulations have been introduced such as the EU Taxonomy, for instance, and the new reporting directive called CSRD. These are now imposing new standards on companies across Europe that enables them to deal with their green exposure and better report on these features.
Although it’s in Europe, the reality is that it’s impacting everyone because in this sustainability revolution we now need to consider the whole value chain and it’s not just what is happening locally. It’s what is going through third party suppliers and customers too. So you have to pay attention to the whole chain and in that respect I think all regions, including the MENA region, will be impacted by these these new regulations that are now being implemented in Europe.
It’s really a joint effort then at the moment then isn’t it? It doesn’t just exist in one region. This is obviously something that is global and I think we all have to work together on that. In terms of the regulatory landscape in the Middle East, do you see that as challenging in itself?
Well, it’s early days, but most central banks have now implemented the initial framework in terms of identifying climate risk and sustainability risk. More broadly, reporting regulation is starting to to to be standardised. We are still all progressing together in this field. While it is true that Europe may be more advanced on on some some aspects, at the same time it is just a two to three-year advance.
Aside from the Middle Eaat, we have Asia, which is of course a key area for sustainability because of the impact of China and India on on the global picture, Europe which has very ambitious targets in terms of sustainability, and of course the US where there are very significant debates between the pros and the cons of the sustainability agenda. So it’s a global story with regional implications and it requires a lot of interaction and exchanges to try and leverage on best practices wherever they are.
