The Banking Executive Magazine - February 2023 Issue

WORLD ECONOMIC FORUM CALL FOR HONORING NET-ZERO PLEDGE BY 2050 The World Economic Forum advo- cated banks to honor their pledges and help reduce global carbon emis- sions meaningfully. For this purpose, it suggested that the broader incen- tive systems driving global business activity need to be realigned in nu- merous ways: • Banks and financial institutions need a universal way to estimate the volume and cost of the carbon they emit. Right now, it is a mixture depending in part on jurisdiction. • A global carbon price, driven by collective policy actions and mar- ket dynamics, is needed. • Banks need international agree- ment on the proper accounting practices for carbon so they can all measure their progress the same way. No one is entirely sure how much carbon companies are pro- ducing because the data are not readily and universally available. Banks will need to develop stan- dards for their own use, but those might differ. • Authorities could help by creating standards so that all companies use the same language when reporting their carbon activities. • Central banks are not created to enforce climate policy. But they do seek financial stability. • Banks need the ability to track car- bon emissions around the world. In addition to a stronger emissions database, the net-zero future will not come about without a more coherent global approach to cli- mate policy. ROAD AHEAD FOR ARAB BANKS The global transition to net zero will require a new commercial and in- dustrial revolution. Huge changes have to be made to every sector of the economy including power gener- ation, manufacturing, transport, housing and agriculture. Such transi- tion will require significant invest- ment. Arab banks have an important role to play. Beyond being responsible for emissions related to their own oper- ational footprint, Arab banks can act as climate partners to individuals, corporations and governments, pro- viding and channelling the finance needed to invest in sustainable busi- ness models. Arab banks journey to net zero will be at different speeds in different Arab countries and to varying de- grees, given technology constraints. Below are some recommendations to Arab banks in their transition towards net zero: • Recommendation #1. Arab banks should have a clear vi- sion on how to build their net zero strategies. • Recommendation #2. Arab banks need to have a clear sustainability strategy and develop an action plan to deliver it. • Recommendation #3. Arab banks should support green investments. Core part of banks’ sustainability strategy needs to in- volve investing in funds that help advance innovative carbon-effi- cient technologies and supply chains. • Recommendation #4. Arab banks should help the develop- ment of eco products. • Recommendation #5. Arab Banks can empower their customers to measure, reduce and offset their carbon emissions by in- tegrating carbon management products into their mobile banking apps. • Recommendation #6: Arab banks should play a leading role in setting standards and regu- lations for the transition to net zero. the BANKING EXECUTIVE 34 ISSUE 170 FEBRUARY 2023