UAE’s Mashreq finances sustainable investments worth $15.5bn

UAE’s Mashreq Bank financed sustainable and adaptation-linked investments worth $15.5bn since January 2021 as businesses and governments globally are increasingly recognising that environmental, social and governance (ESG) risks and opportunities are fundamental to guarantee long-term success.

Joel Van Dusen, group head of corporate and investment banking at Mashreq, said that ESG principles have become a core element of every company’s operations and supply chain. He highlighted that sustainability credentials have moved from a “nice to have” to a crucial element of business strategy.

ESG is related to cash flow in five important ways. It minimises regulatory and legal intervention, increases employee productivity, optimises investment and capital expenditures, facilitates top-line growth and reduces costs by lowering energy consumption.

“The levels of scrutiny on environmental credentials that businesses face will only continue to increase. Demonstrating genuine and tangible ESG policies as well as a solid strategy to offer more sustainable products and services has therefore become paramount,” said Dusen.

S&P Global projected in February that total global bond issuance will grow only moderately in 2023. However, the rating agency said faster growth for green, social, sustainable and sustainability-linked bond issuance will lead to a larger market share for this asset class across all regions and sectors.

Read: Here’s why ESG adoption is a must for businesses

The financial sector has an important commitment to make in supporting ESG adoption across the supply chain by developing financial solutions that help businesses achieve their objectives.

Green bonds are an excellent example of this, but they 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’s growth strategy

Meanwhile, Mashreq has been pivoting to digital banking recently in a bid to fend off non-traditional financial services startups. The bank said the digital transformation and the digitisation of processes are enabling better reporting, efficiency gains, and data capture and analysis.

The latest innovative technologies such as the cloud, artificial intelligence (AI) and machine learning (ML), which are already part of the business digitisation toolkit, can make enormous inroads in optimising energy consumption and supply chain efficiencies.

Mashreq posted a full-year net profit of $1bn (Dhs3.7bn) in 2022. The bank’s operating profit surged nearly 40 per cent to Dhs4.4bn in 2022 driven by the lender’s healthy operating income growth while customer deposits rose by 12 per cent year to date to Dhs113.8bn.

Mashreq’s digital solutions including Neo and personal banking net profit grew by 43 per cent while NeoBiz and NEOPAY have grown in net profit by 289 per cent and 37 per cent, respectively.

Sustainable finance

In other news, First Abu Dhabi Bank (FAB) facilitated more than $9bn worth of sustainable projects last year as part of its target to disburse $75bn by 2030.

The Abu Dhabi-based lender revealed that more than half of its bond issuances in 2022 were in a ‘green’ format. It has also grown its range of sustainable accounts, loans and finance offerings to support customers to achieve their sustainability goals. FAB joined the Net-Zero Banking Alliance, a sub-unit of the Glasgow Financial Alliance for Net Zero, becoming the first UAE and GCC bank to join the alliance.

Read: UAE’s FAB facilitated over $9bn in sustainable projects in 2022

Sustainability has become a topic of crucial importance for many corporations including financial institutions and McKinsey projected in October 2022 that revenue from sustainable trade finance and cash management products will grow as much as 20 per cent annually to around $35bn by 2025.