The Banking Executive Magazine - November 2022 Issue

ISSUE 167 NOVEMBER 2022 the BANKING EXECUTIVE 1 Editorial HOW CAN BANKS PLAY A POSITIVE ROLE IN CLIMATE CHANGE? The United Nations Ckimate Change Conference of Parties (COP27) in Sharm El Sheikh, Egypt, brought together world leaders to discuss actions toward achieving the world’s collective climate goals that were agreed upon under the Paris Agreement in 2015. The main focus of COP27 was on putting pledges into implementation, with finance playing a major role in securing the necessary funding for the mitigation and adaptation measures that will address climate change. In order to help countries reduce emissions and slow global warming, the United Nations produced a list of projects totaling $120 billion during the summit that banks, investors, and insurers might fund. Increasing consumer awareness and momentum around the climate crisis urges banks to understand the role they have in making a positive change on the environment and their customers. Banks have to take responsibility and address climate issues at hand, for example by funding the required change to society. Banks need to act boldly much as they did during the Covid-19 pandemic in which they showed flexibility and adaptability to a new status quo as well as a true commitment to helping consumers in mental and financial distress. In a climate context, this means that banks need to take their actions beyond the initial scope of ESG practices (Environmental, Social, and Governance), expanding to the core of the bank’s operations. ESG should first be embedded holistically across the banking organization. This starts by measuring the impact the bank is having on global sustainable development goals and defining clear targets, supporting universal initiatives such the Paris Agreement and assisting implementation initiatives as outlined during this year’s COP27. Consequently, banks need to translate these targets into strategies, action plans and key performance indicators (KPIs) for the business, for instance, into specific policies for the risk department, corporate lending etc. Dr. Joseph Torbey, Chairman - World Union of Arab Bankers