Middle East 'Wide Awake To Climate Change' With Issuers Planning Big Shifts In Capital Allocation

More than 90 per cent of issuers of bonds, loans and other securities in the Middle East believe they will see real impacts on business over the next decade as a result of climate change

The 2019 Sustainable Financing and Investing Survey, published by HSBC, found that 56 per cent of issuers in the region are already being affected by global warming and that, uniquely to the Middle East, not a single issuer thinks they will be safe from the effects of climate change for the next 30 years.

Middle Eastern issuers do not plan to sit still. The report shows that 86 per cent plan to move capital over the next five years either from activities challenged by environmental and social issues, or towards activities that promote positive environmental or social outcomes. This scored substantially more than the next closest region, Europe, where 69 per cent expect to move capital.

The study showed that climate change is understood as a real and present danger by issuers in the Middle East, and that they are incorporating climate change and sustainability goals into their decision-making and strategies.

Sabrin Rahman, Regional Head of Sustainability for Middle East, North Africa and Turkey at HSBC, says: “The 2019 Sustainable Financing and Investing Survey demonstrates that issuers in the region are well aware of the impacts of climate change. More importantly, the survey shows that issuers and investors are incorporating sustainable-focussed targets into their plans, and of particular significance is their enthusiasm for green debt instruments.”

This awareness of climate change means most issuers in the Middle East have both a strategy for reducing their environmental impact and one for ensuring they have a positive bearing on society.

The report shows that there is a high level of interest in ESG-linked loans in the region, with a combined 94 per cent of issuers saying the product sounds either ‘very interesting’ or ‘potentially interesting’.

However, Middle Eastern investors report the highest regional perception of obstacles to pursuing ESG investing more fully and broadly: 77 per cent versus 61 per cent globally.

According to investors, the region’s biggest hurdles are: lack of ESG data comparability between issuers (54 per cent compared to 26 per cent globally); a shortage of expertise or qualified staff (46 per cent compared to 27 per cent globally); or a lack of demand from clients (41 per cent against 20 per cent globally).

The report also showed that Middle Eastern investors are particularly positive about labelled green, social and sustainable bonds. Almost half of investors in the region – 49 per cent – report that they will start buying these instruments seriously for the first time in the next two years, while a further 19 per cent will increase their investments.

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