Coffee with: Faisal Al Shimmari, Mashreq’s Head of ESG & Corporate Strategy

Coffee with: Faisal Al Shimmari, Mashreq’s head of ESG & Corporate Strategy: Al Shimmari (LinkedIn) is responsible for UAE banking group Mashreq’s environmental, social, and corporate governance (ESG) strategy, the delivery of the bank’s green targets including net-zero zero by 2050, and commitments to the UN-backed Science Based Targets initiatives (SBTi). The company facilitated some USD 20 bn in ESG finance and adaptation-related investments in the UAE, Egypt, India, Bahrain, and Qatar during 1H 2023. Mashreq has been the sponsor of both COP27 and COP28. Al Shimmari was appointed as head of ESG in August, and also serves as Mashreq’s Executive Vice President.

In its most recent announcement, Mashreq recommitted to channeling AED 110 bn (USD 30 bn) in sustainable finance by 2030, as part of the total AED 1 tn green financing pledge made by the UAE Banks Federation on Finance Day at COP28. Last year, Mashreq released a climate risk framework (pdf) outlining risk management strategies to manage climate-related-risks.

We had a brief chat with Al Shimmari halfway through COP28 to discuss Mashreq’s plans to expedite sustainable finance, reaching net zero, and the obstacles banking institutions face in implementing ESG strategy.

Edited and condensed excerpts of our conversation follow.

MASHREQ’S SUSTAINABLE FINANCE GOALS-

Mashreq places sustainable finance as a key pillar in laying the foundation of the energy transition and achieving net zero emissions. Our recent USD 30 bn sustainable finance commitment at COP28 and partnership with SBTi in September reflects Mashreq’s understanding of the need to transform the “business as usual” through embedding ESG into the bank's corporate DNA. The SBTi commitment will ensure sustainable financing is provided in the future to enable our clients to facilitate their transition journeys.

Mashreq’s ESG strategy falls under the wider Climb2Change bank initiative. Under the initiative — which was launched last month — Mashreq will continue to offer sustainability-linked financing and maintain its net-zero commitment. It will also launch clean-up expeditions on 14 of the world’s highest mountains in a bid to promote recycling, waste reduction, and environmental preservation. Since then, Mashreq partnered with renowned climbers Alain Roberts and Alexis Landot to scale the Burj Khalifa skyscraper in Dubai as a message to inspire action as well as raise awareness for climate issues.

WHAT IS NEEDED TO GET THERE-

The key enablers require redefining public private partnerships, which I call PPP 2.0. If we don't have the taxonomy for defining what “green” is, or what “social” is, then issuing subsidies, incentives, rewards, or even tax rebates for green projects would not materialize in the economical ecosystem.

Another key challenge identified globally is embedding climate-risk factors into decision making. Some regulators have started introducing financial stress testing exercises in banks to evaluate how it influences the interest rate, insurance, and investment decisions. This process also has to be part of the financial and regulatory taxonomy, and indeed we are seeing that an evolution in regulation is happening in different jurisdictions around the world.

DATA COLLECTION AS A KEY HURDLE-

When discussing how to reduce emissions — specifically scope 3 emissions — the availability and tools for data collection arises as a key challenge. The commitment around it requires a big learning curve and a joint approach for both banks and clients. They need to be aware of the importance of the data collection to allow for a monitoring system to be put in place as providing this information is not obligatory under today’s regulations. I call this priority the “ESG KYC — Know Your Customer.” This data will give us foresight to the future and can influence strategic investment decisions.

In a few years, it is expected that collecting data to calculate climate risk will become part of the regulations landscape. In fact, there are already some regulators who are asking the questions, adding it in the principles, and even in the regulations.

MASHREQ’S RECENT GREEN AGREEMENTS-

We were involved in the amendment of the USD 2.2 bn agreement signed in 2020 with Bapco Energies to increase it to USD 2.5 bn, the largest sustainability-linked loan (SLL) in the region to date.

ACTIVITIES AT COP-

Mashreq facilitated and organized more than 45 expert discussion panels and presentations for different topics across all areas of sustainability not limited to climate risk. Mashreq also participated in other discussion panels in both the blue and green zones.