Mashreq Bank has announced that it has facilitated sustainable finance and adaptation-related investments worth $15.5 billion since January 2021. This announcement highlights the importance of Environmental, Social, and Governance (ESG) risks and opportunities in ensuring the long-term success of companies, their operating models, and the interests of investors. Joel Van Dusen, Group Head of Corporate & Investment Banking at Mashreq, highlighted that ESG principles have become a crucial element of business strategy and supply chain operations, moving from being a “nice to have” to a core element of every company’s operations.
Dusen explained that ESG principles are related to cash flow in five important ways. Firstly, they minimise regulatory and legal intervention, secondly, they increase employee productivity, thirdly, they optimise investment and capital expenditures, fourthly, they facilitate top-line growth by attracting customers through sustainable products and services, and lastly, they reduce costs by lowering energy consumption.
Dusen warned that businesses that neglect or do not put the right strategies in place to improve their environmental impact risk damaging their reputation and facing greenwashing claims. Furthermore, they may lose market share, as investors and consumers are increasingly prioritising companies that demonstrate genuine and tangible ESG policies and strategies to offer more sustainable products and services.
Dusen also emphasised that an increasing number of jurisdictions, including the UAE, are passing regulations requiring businesses to adopt and report on ESG metrics. Additionally, some markets, such as the European Union, are introducing tariffs for non-compliant companies and products. The digitisation of processes is enabling better reporting, efficiency gains, and data capture and analysis, which can help in optimising energy consumption and supply chain efficiencies. The latest generation of digital technologies such as the Cloud, Artificial Intelligence (AI), and Machine Learning (ML) can make enormous inroads in this regard.
The financial sector plays an important role in supporting ESG adoption across the supply chain by developing financial solutions that help businesses achieve their ESG objectives. Green bonds are an excellent example of this, but it can also be extended to ESG-linked supply chain finance programmes that reward suppliers who meet specified targets with a lower cost of working capital.
Mashreq Bank’s announcement highlights the importance of ESG principles in today’s business environment. It is essential for companies to adopt and report on ESG metrics, as they can impact stock prices, business valuations, and investor appetite. The financial sector has a crucial role to play in supporting ESG adoption across the supply chain by developing financial solutions that help businesses achieve their ESG objectives.