Sunday 29, October 2017 by

All eyes forward

Hassan Abdalla, CEO, Arab African International Bank (AAIB) sat down with Banker Africa to discuss the bank’s sustainable finance practices.

How do you define sustainable finance?

It is realising the inherent connection between economic growth and social, environmental and governance concerns. Sustainability is a rising megatrend that is bound to change how business is being done. It is an umbrella term that includes different disciplines. Sustainable finance first appeared in the 1990s following the appearance of Sustainable Development concept in 1987. Nonetheless, it has been slow to gain momentum as the industry was growing and making handsome profit and there was no urge to stop and reconsider its business model.

What is the landscape like for sustainable finance in Egypt?

Egypt offers a very rich landscape with a huge diversified economy, deep market and large population of around 90 million inhabitants.

This situation creates challenges as much as it creates opportunities. It all depends on your ability and agility to develop your business models to leverage opportunities. For example, Egypt has a young population whereby 60 per cent are below the age of 30. This could be deciphered as a burden of unemployment but it also points the way that banks should shift their traditional operations towards microfinance, entrepreneurship funding, along with small and medium enterprises. Financial inclusion has become a nation-wide mandate endorsed by the Central Bank of Egypt. Egyptian banks are faced with a new mandate, which requires new arrangements as it provides rising growth potential.  In the same context, funding clean energy and energy efficiency is a new track that is becoming very relevant to the Egyptian context.

How does AAIB promote sustainable finance best practices?

AAIB is a forerunner in realising the importance of “sustainability” in the banking business.  AAIB is the first bank to join international frameworks in the field of sustainability; including the UN Global Compact since 2005, the London Benchmarking Group since 2007 to report on strategic philanthropy and the 2009 Equator Principles.  We have also been forerunners in introducing sustainability reporting or integrated reporting in addition to the traditional and mandatory financial report. We published the first sustainability report ‘Finance With Value Creation’ in the banking industry in 2010.

We introduced responsible lending—being the first bank in Egypt and the second in the Middle East to join the Equator Principles (EP) since 2009, and introduced social and environmental risk management.  Besides publishing our first Carbon Footprint Report in Egypt during 2013, and assigning a taskforce to study reducing our environmental impact. We are proud that we started the trend in sustainable finance

Can you explain the principles behind MOSTADAM and any successes the platform has had?

MOSTADAM platform for sustainable finance was launched in 2014 to promote sustainable finance in Egypt and the region. It targets capacity building and policy advocacy to instil sustainable practices. We reached a point where we found it compelling to share our experience with our peers and together create an industry movement. These are very special times and the traditional notion of “competition” is gradually loosing relevance… now we are heading towards coopetition. Some banks in Egypt have substantial potential and are real add to the movement towards sustainability. Synergy amongst banks will definitely position Egypt as a global forerunner in sustainable finance. We already started providing certified training to bankers representing 60 per cent of Egyptian banking sector. We also introduced two more Modules on renewable energy lending and SMEs lending in cooperation with Frankfurt School of Finance & Management.

Are there any industries in particular that are ripe for sustainable finance development?

Definitely, the clean energy and energy efficiency industries will greatly assist in the promotion of sustainable finance development. Besides the establishment of small and medium enterprises, entrepreneurship and microfinance.

What do you see for the future of sustainable finance for AAIB?

We are looking for ensuring that all our internal business practices in AAIB are integrating the ESG into its operations. We started a decade ago but it is a tedious process.

We also aspire to be a driving force to create an industry move on both the regional and global level towards enacting sustainable finance and help the financial industry rejuvenate creating economic growth with social and environmental impact. Our ultimate ambition is to help revise accounting practices to account for environmental and social issues and serve the triple bottom line rather than the single bottom line we are used to.