Using Gamification to Teach Children Sustainability

15 Sep 2021 | Original

On some level, our relationship with nature and the environment is deeply connected to what we were taught as children. Lessons in preventing wastefulness through recycling and reuse as children, go a long way in determining the choices we make as adults on the kind of impact we make on the environment. Hence, early years education can play a key role in building societies that value sustainability and understand the importance of protecting the environment.

It is important that societies invest time and effort in providing knowledge to young people on how humans impact the environment. If children understand the links between their consumption patterns and greenhouse gas (GHG) emissions, they will learn to practice caution in consumption choices as adults. Similarly, if children are provided with a deep understanding of how global warming will impact their own futures, they will have clarity on why it is important to preserve the environment. In recent years, the education system has made progress on imparting environmental awareness to the student body. Some schools conduct small awareness campaigns, others organize tree planting days on- and off-campus, and some ensure that students understand how to separate rubbish and recyclables.

Whatever method of imparting environmental education, it is most important is to consider how it can be made interesting and engaging for the students so that they don’t treat it as a burdensome chore, but rather actively participate and practice the lessons in their lives. One such way is gamification. Gamification is the use of game design and mechanics to promote learning by increasing participation, loyalty, competition, and engagement. It can be a useful tool when teaching children about the environment in that it captures the students’ attention and also motivates behavioral change.

Games use simulations of real-world contexts and competitions to encourage learning and adaptation of certain behaviors. One example is Super Sorter, a game that takes children to a virtual materials recovery facility where they are asked to sort mixed recyclables. Plastic bottles, cardboard boxes, and other recyclables appear on a conveyor belt and children are required to sort them using four different technologies. All the sorters specialize in one specific recyclable, and children need to place sorters strategically to get the highest recovery rate and win. Lifeboat to Mars simulates how ecosystem function. It takes children to Mars, a clean slate for humanity, where it introduces different ecosystems, food webs, and single cell organisms. Children are then tasked with making decisions using this knowledge to build an ecosystem on Mars. Similarly, Eco is a digital game that simulates a civilization and emphasizes players’ impact on the environment requiring children to find a balance between development and the conservation of the natural world. Another recent application of gamification is a playful and interactive science textbook that lets users explore different layers of the world providing an understanding of how their actions impact the environment.

A recent study shows that gamification has the potential to educate and motivate sustainable behavior and living.[1] Gamification can be a very useful tool for younger audiences in converting real world problems into understandable and actionable tasks, while ensuring that the learning process is meaningful and fun. However, the study finds that more thought needs to be put into game design to build user loyalty. The study states that if game design is not well thought out, learning takeaways may not translate to actual behavioral change. Game developers need to understand user psychology when building player interface. Games need to be novel, creative and include difficulty levels so players do not lose interest over time. The design also needs to include challenges and puzzles as further motivators for users to stay engaged. Additionally, it is important that game design has elements of storytelling to emotionally involve the user and enrich their experience.

A large number of game producers end up producing games that promote violence, destruction, and occupation. However, for young children, the best way to gamify sustainability is to use images and characters that are already popular amongst them. For example, a game with Elsa from the famous animation Frozen can teach children about global warming, and Spider-Man could teach children about saving the planet by putting an end to illegal logging. Thus, established powerhouses in the gaming industry who are already doing an amazing job at conceptualizing, designing, and launching all kinds of games for diverse audiences, and hold immense loyalty as well as profits, need to build on this knowledge-base and join the fight for a sustainable future.

[1] Schiele, Kristen. (2017). Utilizing Gamification to Promote Sustainable Practices. 10.1007/978-3-319-53121-2_16-1

Using Biotechnology to Reduce GHG Emissions from Animal Farming

15 Aug 2021 | Original

Agriculture accounts for almost 20% of the world’s greenhouse gas (GHG) emissions,[1] and livestock alone uses 80% of total agricultural land. The bulk of GHG emissions from livestock (consisting of methane, nitrous oxide, and carbon dioxide) arise from four main sheep and cattle rearing activities: enteric fermentation, manure management, feed production, and energy consumption. While governments place a high value on the introduction of clean energy, there is much to be desired in terms of finding innovative ways to control GHG emissions by the dairy and meat industry. For the world to achieve the Climate Action Plan targets for 2050, a focus on cleantech alone will not be enough.

Cutting down GHG emissions associated with livestock requires concerted research, and the development of technologies that can ensure cleaner methods of animal farming. In parallel, the world also needs to rethink its consumption patterns. While raising awareness is the first step towards altering the consumption of meat and dairy, the food industry will have to ensure the faster development and widespread distribution of alternatives to ensure a long term change in consumer behavior.

Genetic selection focused on ruminant animals’ enteric fermentation could significantly reduce overall emissions by 2050. Experts say that about 20% of animal methane emission is determined by genetic make-up alone.[2] Researchers have already developed genetic systems that can reduce methane emissions by 20%.[3] However, a lot is still to be desired in terms of breed specificity of genetic programs. Moreover, uptake remains an obstacle owing to a lack of financial incentives in the form of credit payments for methane limitation while animal rearing.

Another way to use biotechnology to reduce emissions from animal farming is through innovations that improve animal health and productivity. Healthier livestock have better productivity and longer lifespans, making it possible to meet the world’s growing meat and dairy demand with fewer animals and reduced GHG emissions. A McKinsey study suggests that in North America implementation of improved animal health measures can improve the productivity of farm animals by 8%. Researchers are working towards developing innovations in the Internet of Things (IOT) as low cost methods of supporting farmers in monitoring animal health. A great example of such an innovation is LIVEQuest, a low-cost tool developed through a partnership between the United Kingdom and China that allows farmers to place devices on livestock and continually monitor health and productivity. This helps farmers cater to livestock needs quickly and improve animal health and productivity in a cost-effective manner, thereby providing farmers with the right incentives for take up.[4]

Addressing the production of animal feed can also improve GHG emissions from livestock. In India, a software tool helps determine the best mix of feed for 2.4 million animals in more than 30,000 villages. The software considers each animals’ nutritional needs and GHG emissions when suggesting a feed mix.[5]

All the above innovations focus on the production side of the meat and dairy value chain. Working on clean innovations in production, without addressing excessive consumption patterns in meat and dairy is a one-legged approach to combating environmental degradation. It is estimated that by 2050, global meat consumption would more than double. In 2016, the United Arab Emirates (UAE) Ministry of Foreign Trade reported annual meat consumption at 85.14kg per capita, which was thrice the amount in major meat importing countries, and 18 times more than the world average.[6] Reducing the consumption of meat and substituting with less carbon-intensive food is critical in ensuring that the world is able to meet GHG reduction targets by 2050.

While changing consumer behavior would require sustained awareness campaigns, development of non-meat alternatives that look and taste like meat would be a good way to ease consumers into finding alternatives to fulfill their protein requirements. Biotechnology has advanced fairly in this endeavor, however, meat resembling products in the market are still far from being readily available.[7] Companies working on the production and distribution of these alternatives are a handful. Examples include Impossible Foods, a company producing plant based burgers that look and act like meat while using 75% less water, 95% less land and 87% fewer gas emissions than a regular beef burger; NotCo, a Chilean company that produces dairy alternatives; and Finless Foods, a company developing non-fish alternatives to seafood. These companies use cutting edge biotechnologies such as synthetic biology and artificial intelligence in creating their products. However, the field of synthetic biology is still uncharted territory as investors and governments tread carefully in devising ways that can truly change how societies eat.

The UAE is not the largest producer and/or consumer of dairy and meat in the world and hence its contributions to the GHG emissions owing to production are low compared to other countries. However, its forward-looking policies embedded in wellbeing and innovation, and its rich human capital can make it a pioneer in the research and development of biotechnologies that can disrupt the way the livestock industry impacts the world environment.

[1] McKinsey & Company. April 2020. Agriculture and Climate Change. https://www.mckinsey.com/~/media/mckinsey/industries/agriculture/our%20insights/reducing%20agriculture%20emissions%20through%20improved%20farming%20practices/agriculture-and-climate-change.pdf

[2] Ibid, 2020

[3] Ibid, 2020

[4] Innovation China UK. http://www.icukonline.org/Technology%20portfolio/NEWTON_PROJECT1.shtml

[5] Sreelata, M. 02 July, 2019. Software helps cut Indian cows’ methane emissions. https://www.scidev.net/global/livestock/news/software-helps-cut-indian-cows-methane-emissions-1x.html

[6] Pandey, V. 27 July, 2019. UAE Fresh Mutton and Fruits Market, 2016. Glasgow Consulting Group. http://glasgowconsultinggroup.com/uae-fresh-mutton-and-fruits-market-2016/#:~:text=According%20to%20the%20ministry%20of,more%20than%20the%20world%20average.

[7] Wilcox, M. 14 May, 2019. Synesthetic Biology is Changing What We Eat. Here’s What We Need to Know. https://civileats.com/2019/05/14/synthetic-biology-is-changing-what-we-eat-heres-what-you-need-to-know/

Sustainable Economic Recovery Post COVID-19 in the GCC Region

15 Jul 2021 | Original

Member states of the Gulf Cooperation Council (GCC) are facing three different but interconnected shocks: the COVID-19 pandemic, a significant drop in oil prices, and climate change. First, COVID-19 has undercut economic growth and stability in the entire world as well as in GCC countries; the International Monetary Fund (IMF) projects a 7.3% economic contraction for oil exporters in the Middle East region,[1] and S&P Global expects GCC government debt to rise to USD 100 billion in 2020.[2] Second, oil prices have fallen from US$ 64 per barrel in 2019 to US$ 40 in early June 2020, which is alarming since this is well below the fiscal breakeven point for oil.[3] While GCC countries have been trying to diversify their economies, most of them are still heavily dependent on oil exports. More than 60% of Saudi Arabia, Bahrain, Oman, and Kuwait’s government revenues come from hydrocarbon. This figure drops to 54% for the UAE, and 38% for Qatar.[4]  Third, climate change could potentially render the MENA region uninhabitable by 2100 if no action is taken to decrease global carbon emissions.[5] By 2050, temperatures in the MENA region are expected to increase by 4°C, and could reach as high as 50°C during daytime by 2100.[6] Mitribah, Kuwait has already registered temperatures of 54°C in 2016, and Sweihan, Abu Dhabi has reached 50.4°C in 2017.[7] Moreover, by 2050, the climate impact on water resources in MENA is expected to invoke losses up to 14% of GDP.[8]

Sometimes the world needs a crisis, and this certainly does apply to GCC countries. While these governments have largely focused on public health amid the pandemic, priorities are being gradually redirected to long-term economic recovery. GCC countries have announced economic stimulus packages totaling US$ 97 billion, however, investment in green economic recovery and innovation is crucial to building back their countries better. Unfortunately, and according to Bloomberg, out of the total US$ 12 trillion global stimulus packages, less than 0.2% has been allocated towards climate concerns.

Shaping a Green Recovery for GCC Countries:

  1. Investing in clean hydrocarbon energy. Green stimulus packages build resilience against the threat of climate change but also deliver more jobs and higher and equitable growth. A report by the International Renewable Energy Agency (IRENA) estimates economic returns in renewable energy at US$ 3-8 for every US$ 1 invested, in addition to quadrupling the number of jobs in the sector over the coming three decades. It also projects an additional US$ 100 trillion to be added to global GDP by 2050 if investment in this sector is accelerated.[9]
  1. Building greener infrastructure. GCC countries will also need to invest in innovative technologies for greener cities such as seawater desalination projects, green buildings, and clean mobility, as well as developing and greening public transportation systems.
  1. Investing in the blue economy. The MENA region is considered the world’s most water-scarce region holding around 1% of the Earth’s total renewable freshwater resources.[10] Additionally, the Indian Ocean is one of the world’s busiest trade routes and accounts for the passage of 80% of the world’s maritime oil trade. GCC countries will need to invest in in developing a sustainable maritime industry and ensure the sustainable use of marine ecosystems.[11]
  1. Enforcing environmental, social, and governance (ESG) disclosure. Governments and regulators will need to improve the measurement, assessment, and disclosure of companies’ ESG performance. The financial returns on ESG practices and guidelines are economically sound; a performance analysis, conducted by Morgan Stanley, of more than 10,000 mutual funds, has showed that sustainability funds met or exceeded median returns of traditional funds 64% of the time.[12]
  1. Building a real data economy. Any true reform to transform GCC countries into more resilient, greener, and growing economies will need to start with data. It may be worthwhile to follow the EU’s example. The new Recovery and Resilience Facility of EUR 560 billion by the Next Generation EU offers financial support for digital and green reforms and has prioritized the building of a real data economy. This entails compiling data from the different key sectors and industries in all European countries to support the implementation of the European Green Deal.[13]

[1] Augustine, B. (2020). GCC to lose $270 billion in oil revenues in 2020, says IMF. Gulf News. https://gulfnews.com/business/gcc-to-lose-270-billion-in-oil-revenues-in-2020-says-imf-1.1594640168553

[2] Jones, M. (2020). Gulf government debt to see record $100 bn surge in 2020. Reuters. https://www.nasdaq.com/articles/gulf-government-debt-to-see-record-%24100-bln-surge-in-2020-sp-global-2020-07-20

[3] Kabbani, N. (2020). How GCC Countries Can Address Looming Fiscal Challenges. Brookings Institute. https://www.brookings.edu/opinions/how-gcc-countries-can-address-looming-fiscal-challenges/

[4] Kandil, M. and Mahmah, A. (2020). Economic Challenges for the GCC Countries after Covid-19. Economic Research Forum. https://theforum.erf.org.eg/2020/05/20/economic-challenges-gcc-countries-covid-19/

[5] Pal, J. and Eltahir, E. (2016). Future temperature in southeast Asia projected to exceed a threshold for human adaptability. Nature Climate Change. https://www.nature.com/articles/nclimate2833

[6] Hergersberg, P. (2016). Max Planck Gesellschaft. https://www.mpg.de/10856695/W004_Environment_climate_062-069.pdf

[7] Broom, D. (2019). How the Middle East is Suffering on the Front Lines of Climate Change. World Economic Forum. https://www.weforum.org/agenda/2019/04/middle-east-front-lines-climate-change-mena/

[8] World Bank. (2018). Beyond Scarcity : Water Security in the Middle East and North Africa. MENA Development Report;. Washington, DC: World Bank. https://openknowledge.worldbank.org/handle/10986/27659

[9] Oxford Business Group. (2020). Can emerging  economies afford green recovery from Covid-19?. Oxford Business Group. https://oxfordbusinessgroup.com/news/can-emerging-economies-afford-green-recovery-covid-19

[10] Kandeel, A.(2019). Freshwater resources in the MENA region: risks and opportunities. Middle East Institute.https://www.mei.edu/publications/freshwater-resources-mena-region-risks-and-opportunities

[11] Ahmed, M. (2020). The blue economy- riding a wave of optimism? The National. https://www.thenational.ae/business/comment/the-blue-economy-riding-a-wave-of-optimism-1.1002524

[12] Morgan Stanley. (2015). The Business Case for Sustainable Investing. https://www.morganstanley.com/ideas/business-case-for-sustainable-investing

[13] European Commission. (2020). Europe’s Moment: Repair and Prepare for the Next Generation. https://ec.europa.eu/commission/presscorner/detail/en/ip_20_940

Micro, Small, and Medium Enterprises (MSMEs) and Sustainable Fashion

15 Jun 2021 | Original

Fashion is a competitive and growing industry. Big brands have lowered production costs making clothing more affordable, and release up to 24 collections per year. Not only are people buying more clothes, but also, bought garments are being replaced at a faster pace.[1] This trend in fast fashion carries a hefty price tag on the environment. Up to 85% of clothing produced each year ends up in landfills.[2] Moreover, it is estimated that the fashion industry produces 10% of global carbon dioxide emissions annually and uses up to 1.5 trillion liters of water.[3] Also, new research shows that micro-plastics from clothing make its way out to seas and oceans.[4]

Thanks to digital media, information on the harmful effects of fast fashion is readily available worldwide, and consequently, a growing population of environmentally conscious shoppers are turning to sustainable fashion. Sustainable fashion is a jmovement that emphasizes quality over quantity, and promotes making conscious buying choices driven by information on how each piece of clothing is made. This movement gave rise to a number of MSMEs who cater to this fashion niche and promise to produce clothes that are made from sustainable materials and processes, and have a smaller carbon footprint.

MSME examples of sustainable fashion include Bug Clothing, a home business led by one woman in the UK that makes handmade clothing using deadstock fabric from big designer factories; Tsouls, a small business led by an American husband and wife that produces footwear made of cork; and Joseph & Alexander,a small UAE brand that produces swimwear from plastic sourced out of oceans. It is important to note that as MSMEs enter the sustainable fashion market, this creates the opportunity for complementary business to emerge, such as MESME vendors and suppliers. Interesting examples include Sourcing Playground, a B2B platform that connects brands to more sustainable manufacturers; and Queen of Raw, a platform for businesses to buy and sell deadstock fabric.

Another way startups are augmenting sustainability in fashion is through the development of dyes and fabric using biotechnology. Typically, dyes used in mass production are manufactured using harsh chemicals, release toxic byproducts, and consume a lot of water and energy. Tech startups have come to the rescue and are using synthetic biology to change the way dyes are produced. Two promising examples from Europe are Pilio bio and Colorfix.  Pilio bio is located in Paris and manufactures pigments and dyes using enzymes, and Colorfix is based out of Norwich in the UK and uses microbes to dye textiles using minimal water and energy.

Tech MSMEs are also using biotechnology to produce fabric that is more sustainable. Growing plant-based textiles (such as cotton), requires land and consumes large quantities of water. Similarly, synthetic fibers derived from fossil fuels not only contribute to greenhouse gas emissions, but also leave microplastic residues in clothing. Two notable tech MSMEs working towards producing sustainable fabric are Spiber and Bolt Threads. Spiber is a Japanese startup that produces fabric using protein fibers. The company has created outdoor jackets made from microbe-derived silk, and works toward lowering the cost of spider silk production to levels similar to that of synthetic fibers. Bolt Threads produces spider silk using yeast and is selling to big brands like Stella McCartney.

It is clear that MSMEs around the world are working towards making fashion sustainable with full force. Their approaches are innovative, and focus on building environmental awareness in communities. They are key agents of change, and can play an integral role in shifting the way societies consume and impact the environment. Around the world, governments have erected support programs for MSMEs to encourage this change.[5] Some programs provide funding to small businesses, while others aim at connecting artisans to large scale producers, latest technologies, and international markets. Moreover, central banks offer a variety of schemes that aim at providing MSMEs easy access to finance. Currently, ethical design is geographically concentrated in Australia, Scandinavia, and the United Kingdom. Broadly speaking, these regions have progressive governments who incentivize sustainable and ethical practices, as well as business environments that are increasingly environmentally conscious and competitive. In order to promote sustainable consumerism, it is essential that governments take an even more proactive effort towards supporting, rewarding, and promoting MSMEs that make mindful consumption possible.

[1] McFall-Johnsen, M. (2019). The fashion industry emits more carbon than international flights and maritime shipping combined. Here are the biggest ways it impacts the planet. Business Insider Nederland. https://www.businessinsider.nl/fast-fashion-environmental-impact-pollution-emissions-waste-water-2019-10?international=true&r=US#while-people-bought-60-more-garments-in-2014-than-in-2000-they-only-kept-the-clothes-for-half-as-long-2

[2] McFall-Johnsen, M. (2019). The fashion industry emits more carbon than international flights and maritime shipping combined. Here are the biggest ways it impacts the planet. Business Insider Nederland. https://www.businessinsider.nl/fast-fashion-environmental-impact-pollution-emissions-waste-water-2019-10?international=true&r=US#while-people-bought-60-more-garments-in-2014-than-in-2000-they-only-kept-the-clothes-for-half-as-long-2

[3] Davis, N. (2020, April 7). Fast fashion speeding toward environmental disaster, report warns. The Guardian. https://www.theguardian.com/fashion/2020/apr/07/fast-fashion-speeding-toward-environmental-disaster-report-warns

[4] Messinger, L. (2018). How your clothes are poisoning our oceans and food supply. The Guardian. https://www.theguardian.com/environment/2016/jun/20/microfibers-plastic-pollution-oceans-patagonia-synthetic-clothes-microbeads

[5] European Commision. (2016). Support for SMEs and entrepreneurs. Internal Market, Industry, Entrepreneurship and SMEs – European Commission. https://ec.europa.eu/growth/smes/support/networks_en

 

Islamic Finance and the Market for Green and Sustainable Sukuk

15 May 2021 | Original

Despite the decelerating growth in Islamic finance due to the COVID-19 pandemic and the sharp drop in oil prices, the industry has grown significantly in the past couple of decades and is estimated to reach around US$ 3.5 trillion by 2021.[1] Islamic finance has emerged as an untapped and substantial source of funds for sustainable development in both Muslim and non-Muslim countries.[2] One of the most promising areas for Islamic financing is green sukuk, a new green bond targeting environmentally sustainable projects whilst conforming to Sharia investment principles.[3]

The first green sukuk was issued by Malaysia’s Tadau Energy in 2017 at a value of US$ 59 million to cover a solar power plant. Others followed such as the world’s first sovereign green sukuk of US$ 1.25 billion in Indonesia; Majid Al Futtaim’s first green corporate sukuk in the region in 2019 (US$ 600 million); Saudi-based Islamic Development Bank green sukuk (US$ 1.12 billion) in 2019; and earlier this year Egypt has announced that it will begin issuing green bonds rendering it the first sovereign issuer in the MENA region.[4],[5] Most of these sukuk were oversubscribed reflecting the high demand for green investments.

Other types Islamic finance products include Sustainable and Responsible Investment (SRI) and Sustainable Development Goals (SDGs) sukuk. SRI sukuk are designed to fund socially responsible and humanitarian projects. One example is the first US$ 50 million vaccine sukuk issued in 2019 by the International Finance Facility for Immunization with the Islamic Development Bank to accelerate funding for immunization programmes that save children’s lives in the world’s poorest countries.[6] Other examples include the Khazanah Nasional Berhad SRI Sukuk in Malaysia to improve access to quality education in government schools;[7] the first sustainable sukuk in Turkey issued by Zorlu Enerji through the Industrial Development Bank of Turkey in 2020;[8] and the US$ 1.5 billion first sustainability sukuk by Islamic Development Bank in response to COVID-19.[9] As for SDGs sukuk,  in 2018 HSBC Amanah Malaysia was the first financial institution in the world to issue an SDGs sukuk to support seven of the SDGs.[10]

As investor appetite for green and sustainability bonds grows, key considerations for the future of sukuk markets include:

  • The need for a legal framework. Many Arab states, such as the UAE, have integrated environmental, social and governance (ESG) measures in their vision and national plans. A key step towards implementing these strategies in the green and sustainable sukuk market would be requiring issuers to disclose their ESG performance.[11] Another way measure to increase the attractiveness of green and sustainable sukuk is for governments to enforce a certain percentage of issuance to be green or socially responsible.[12]
  • The need for incentives. Despite the extra cost to issuers, the main driver for green and sustainable sukuk is investor engagement and goodwill. One of the main issues that face green sukuk issuers especially in the GCC area is the lack of tax incentives. It may be worthwhile to follow the example set in Malaysia where the government has started paying for the cost of third-party checks for issuers of SRI green bonds.[13],[14]
  • Finding the right project. According to the President of the Gulf Bond and Sukuk Association, Mr. Michael Grifferty, one of the biggest challenges that the green sukuk market faces is finding projects that are sustainable, measurable, and size- and scope-appropriate for capital market financing. In order to attract more investors into the market, issuers in the GCC need to certify and report on their green and sustainable performance, integrate green policies internally, and adopt an appropriate governance framework. [15]
  • Diversifying into blue sukuk. Continuous issuance of green bonds has driven the Republic of Seychelles to issue the world’s first sovereign blue bond in 2018 at a value of US$ 15 million to protect marine environments and safeguard fisheries.[16] Islamic finance could diversify its product range beyond green and sustainable sukuk to include blue sukuk that address marine and ocean ecosystems.

[1] Bouahina, A. and Ahmed, S. 19 February 2020. As Islamic finance continues upsurge, new tool helps harness it for developing- country infrastructure. World Bank. https://blogs.worldbank.org/ppps/islamic-finance-continues-upsurge-new-tool-helps-harness-it-developing-country-infrastructure

[2] Deloitte. 27 November 2015.  Corporate Sukuk in Europe: Alternative financing for investment projects. https://www2.deloitte.com/content/dam/Deloitte/xe/Documents/financial-services/me_Islamic-finance_corporate-sukuk-in-europe.pdf

[3] World Bank. 15 February 2018. https://www.worldbank.org/en/news/video/2018/02/15/green-sukuk—financing-the-future

[4] Noronha, M. A new shade of green: Sukuk for sustainability. EIU. https://eiuperspectives.economist.com/sustainability/new-shade-green-sukuk-sustainability

[5] Meskin, M., 03 March 2020. Middle East sovereigns must follow Egypt’s green example. Global Capital. https://www.globalcapital.com/article/b1klms1yd64qxf/middle-east-sovereigns-must-follow-egypts-green-example

[6] IFFIm, 09 April, 2019. IFFIm issues sukuk to the Islamic Development Bank. International Journal of Management and Applied Research. https://iffim.org/press-releases/iffim-issues-sukuk-islamic-development-bank

[7] Zain, N. et al. 2019. Innovations in Sukuk in the Global Finance Market: Reviewing Key Considerations. http://ijmar.org/v6n4/19-021.pdf

[8] GIFIIP. (2020). Turkey Issues its First Sustainable Sukuk. http://www.gifiip.org/turkey-issues-its-first-sustainable-sukuk/

[9] IsDB. (2020). Islamic Development Bank issues USD 15 billion debit sustainability sukuk in responsive to covid-19. https://www.isdb.org/news/islamic-development-bank-issues-us-15-billion-debut-sustainability-sukuk-in-response-to-covid-19

[10] UNDP. (2018). HSBC Amanah Malaysia issues world’s first United National Sustainable Development Goals Sukuk. https://www.undp.org/content/undp/en/home/news-centre/news/2018/HSBC_Amanah_Malaysia_issues_worlds_first_United_Nations_Sustainable_Development_Goals_sukuk.html

[11] CFI Institute. (2019). ESG Integration and Islamic Finance: Complementary Investment Approaches. Principles for Responsible Investment. https://www.unpri.org/download?ac=9578

[12] Jivraj, H. (2020). Why so few green sukuk? Sector still faces longstanding challenges, say practitioners. Salaam Gateway. https://salaamgateway.com/story/why-so-few-green-sukuk-sector-still-faces-longstanding-challenges-say-practitioners

[13] Ibid, 2019

[14] EIU. (2020). A New Shade of Green Sukuk. https://www.gulfbondsukuk.org/wp-content/uploads/2020/03/A_New_Shade_of_Green_Sukuk.pdf

[15] Ibid.

[16] World Bank. (2018). Seychelles Launches World’s First Sovereign Blue Bond. https://www.worldbank.org/en/news/press-release/2018/10/29/seychelles-launches-worlds-first-sovereign-blue-bond

Desalination Effects on the Environment and the Role of the UAE

15 Apr 2021 | Original

In the UAE, 42% of the potable water supply comes from thermal desalination of seawater. The UAE has more than 70 major desalination plants, and produces 14% of global desalinated water making it the second-largest producer worldwide.[1] According to the State Energy Report in 2015, water demand in the UAE grew at the rate of 35.8% from 2008 to 2012, while the installed capacity of the desalination plants reached 1,585 million gallons per day, and total water production stood at 393,878 million gallons per year.[2] As its population grows and economy expands, the UAE will continue to increase desalination to ensure water availability.

Desalination is a method used to reduce the salt content of sea and ocean water so that it can be consumed for drinking and economic activities. Desalination plants typically use a large amount of natural gas, and are one of the major contributors to greenhouse gas (GHG) emissions in the region. To reduce its carbon footprint, the UAE has embedded sustainability and innovative desalination technologies in its water safety policies. One such effort is the 2013 Renewable Energy Desalination Programme founded by Masdar, Abu Dhabi’s renewable energy company. Under the programme, Masdar’s mandate is to research and develop energy efficient desalination technologies.

While a lot of headway has been made in achieving energy efficiency, there remains a need to increase focus on the treatment of harmful desalination byproducts. Desalination processes lead to the production of brine, a high-salinity byproduct that can threaten maritime ecosystems if released back into the sea without treatment. Even when not released back into the sea, brine can seep underground and harm groundwater.  Brine reduces oxygen levels in water, introduces harmful toxins, and increases the temperature of seas and oceans. It is estimated that the UAE contributes more than 20 percent of brine globally. Brine treatment in itself is a challenging process that uses high levels of energy and capital, and releases high levels of GHG emissions as well.

To eliminate the harmful effects of brine on the environment, disruptive technologies would need to be researched and used on a larger scale, and at a faster pace. For example, the UAE is researching innovations to repurpose brine for agricultural use as part of a project led by the International Center for Biosaline Agriculture (ICBA). The aim is to be able to reinvent the agriculture system as saltwater based. Another promising technology that is being experimented with in the UAE is the development and use of algae that can absorb salt from water. Indeed, in Brazil, researchers are working on introducing certain algae into brine that can tolerate salty water. In addition to neutralizing some of the harmful toxins in brine, the algae is said to be digestible by humans and is high in proteins and vitamins.

There is plenty of scope for creative innovation in desalination technology and brine treatment. Recently, the Columbia University School of Engineering and Applied Science developed a new technology that uses a radically different approach to the treatment of brine. Their methodology costs less and uses less energy, while removing more than 95 percent of salt in brine, hence making it possible to either return it safely to oceans, or use it in other economic activities.[3] Another innovation was developed by a Canadian based company called Oneka. The company produces small buoys that are placed in the ocean to desalinate water that is then directly pumped to communities. Not only does this innovation use zero land and electricity, it produces brine that is only slightly more saline than ocean water, and since the buoys are placed in the ocean, the brine is distributed in a larger area and dilutes rapidly. While this innovation is targeted towards small island communities, there is a potential for research on larger scale applications of the same technology.

The UAE plays a key role in global innovation. It has rich human capital, a growing economy, an enlightened government, and is a hub for disruptive innovations. Given this, and its heavy reliance on desalination, the UAE can pioneer researching, developing and adopting technologies that can make brine treatment efficient and eliminate its harmful effects on the maritime environment. This way the UAE can play an important role in the provision of safe and sustainable access to clean water the world over.

[1] United Arab Emirates Information and Services.(2020). Water Security Strategy 2036. Retrieved from https://u.ae/en/information-and-services/environment-and-energy/water-and-energy/water-#:~:text=Connecting%20desalination%20technologies%20to%20renewable,stage%20flash%20distillation%20(MSF).

[2] Ibid.

[3] Columbia University School of Engineering and Applied Science. (2019). Radical Desalination Approach May Disrupt the Water Industry. https://phys.org/news/2019-05-radical-desalination-approach-disrupt-industry.html

Building Resilience In Supply Chains

15 Mar 2021 | Original

In the last two decades, supply chains have become increasingly globalized. Around the world, profit-seeking organisations have established low-cost country sourcing (LCCS) as an effective tool to realize cost saving targets. This led to the development of intricate supply chains spanning across multiple continents and countries.[1] On the one hand, global supply chains have enhanced efficiency (via just-in-time logistics management), and allowed for greater cost competitiveness (via low production costs). On the other, broad networks increased exposure to global disruptions. That is, the cost benefits of global supply chains are not without risks.

At the micro level, risks can originate from within a particular supply chain or company. This type of risk can impact the performance of a certain product or product line, but is unlikely to cause large scale disruption.[2] At the macro level, external or systemic risks stemming from economic, environmental, geopolitical, societal and technological developments can cause large-scale disruption, and have the potential to create a domino effect across companies and sectors throughout different countries. One example is the recent COVID-19 pandemic, which has caused a massive supply chain disruption around the world, leaving the global economy reeling in its wake. Indeed, COVID-19 has exposed the vulnerability inherent in global networks pushing risk mitigation and supply chain resilience to the forefront of corporate strategy.[3]

While in the short-term companies are clamoring to find quick solutions to stem financial hemorrhage, there is a clear need for building resilient supply chains in the medium- to long-term. Robust procurement strategies will require an integrated model that combines sustainability with traditional supply chain criteria such as price, quality and innovation.[4] The first step in this direction is to conduct a periodic risk analysis for each node in the supply network. Based on this analysis, businesses will need to diversify their suppliers and avoid overly concentrated sourcing (both in terms of companies and countries) to minimize the risk of potential disruptions. Another tool is the regionalization or near-shoring of supply chains. This strategy looks to sourcing goods regionally in order to shorten transportation routes and reduce supply chain risk as well as the environmental impact of distant LCCS.

The corporate need for resilient supply chains coincides with a rise in consumer demand for sustainable and environmentally-conscious products and production. Realizing the importance of sustainable sourcing of raw material for commercial viability, various businesses have prioritized social and environmental sustainability and are requiring suppliers to conform to environmental standards. Many have also incorporated sustainability certification as an effective way of building resilient supply chains.[5] This has allowed global firms to manage procurement risk and address consumer demand for sustainability in one fell swoop.

However, in order to build more resilient supply chains, corporate strategy must look beyond procurement, managing logistics and inventory are equally important. To mitigate logistical risks, businesses have to actively avoid reliance on a single port in a given region, even though this may be at the expense of efficiency.[6] Moreover, alternative transportation options and distribution solutions must be evaluated to ensure that freight costs are not geographically concentrated. In this regard, companies must invest time and resources in identifying and securing logistics capacity, estimating capacity and accelerating, and adapting flexibility on transportation mode.[7] Environmental sustainability must be prioritized to identify innovative transportation solutions which not only reduce costs, but also carbon emissions.

As for inventory management, mitigating supply chain and procurement risk may spell the end for just-in-time systems. In the last few decades, companies around the world have strived to minimize inventory across the supply chain and to use a safety stock buffer to manage supply variability. The recent pandemic has put the spotlight on the need to maintain additional inventories of critical items, especially strategic stock, i.e. raw materials or parts that are sourced from a single supplier and/or require a long time to produce/supply.[8] In order to ensure that customers do not face any supply shortage in disruptive times, businesses will also have to consider the creation of regionalized buffer stocks of essential parts, raw materials and/or finished goods in alternative distribution locations. Active scenario planning using predictive technological tools must also be undertaken to prioritize which products will be produced in the event of raw material or parts inventory shortage, particularly when one component is used to produce multiple finished goods. [9]

In conclusion, global supplier competitiveness coupled with improved accessibility has made LCCS integral to cost-effective procurement. But, as supply bases in all industries feel the impact of the COVID-19 pandemic, newer and more innovative supply chain management has become necessary, not only for recovery, but also to serve as a future preventative measure by building robust production mechanisms that are more resilient to disruptive forces. The effective implementation of this outlook towards solid procurement strategies will require consistent due diligence, clear objectives, and resource commitments.

[1] Chartered Institute of Procurement & Supply. Global Supply Chains. https://www.cips.org/knowledge/procurement-topics-and-skills/supply-chain-management/global-supply-chains/

[2] JLL. 2020. Mitigating risks by building resilient supply chains. https://www.us.jll.com/en/views/mitigating-risks-by-building-resilient-supply-chains

[3] Rennie, R. 26 June, 2020. 3 ways sustainable supply chains can build better business in a post-COVID world. World Economic Forum. https://www.weforum.org/agenda/2020/06/sustainable-supply-chains-covid-19-era/

[4] Ernst & Young. 2016. The State of Sustainable Supply Chains. https://www.ey.com/Publication/vwLUAssets/EY-building-responsible-and-resilient-supply-chains/$FILE/EY-building-responsible-and-resilient-supply-chains.pdf

[5] Rennie, R. (2020.) 3 ways sustainable supply chains can build better business in a post-COVID world. World Economic Forum. https://www.weforum.org/agenda/2020/06/sustainable-supply-chains-covid-19-era/

[6] JLL. (2020). Mitigating risks by building resilient supply chains. https://www.us.jll.com/en/views/mitigating-risks-by-building-resilient-supply-chains

[7] Alicke, K. et al. (2020). Supply-chain recovery in coronavirus times—plan for now and the future. McKinsey & Company. https://www.mckinsey.com/business-functions/operations/our-insights/supply-chain-recovery-in-coronavirus-times-plan-for-now-and-the-future

[8] JLL. (2020). Mitigating risks by building resilient supply chains. https://www.us.jll.com/en/views/mitigating-risks-by-building-resilient-supply-chains

[9] Deloitte. (2020). COVID-19 Managing supply chain risk and disruption. https://www2.deloitte.com/global/en/pages/risk/articles/covid-19-managing-supply-chain-risk-and-disruption.html

Five Reasons Europe is Leading on Climate Action

15 May 2019 | Original

Being in the Northern hemisphere, Europe is warming up faster than any other continent, sustaining a temperature increase that is 0.9°C higher than the global rate.[1] The past three decades have been the hottest on record for Europe, and the continent has suffered extreme heatwaves in four of the past five years.[2] To meet its climate targets, Europe has developed the following actionable plans outlining five key steps:

  1. The European Green Deal: The EUR 1.8 trillion deal aims to transform the European Union (EU) into the world’s first resource-efficient, climate-neutral continent by 2050. The deal calls for increasing the EU’s 2030 climate target by 50%; revising vehicle taxation; developing a new offshore wind power strategy; providing more support to the circular economy; building a comprehensive network of charging points for electric vehicles; supporting biodiversity; and revising agricultural strategies to cut down on the use of chemical pesticides, fertilizers, and antibiotics. While the European Commission President Ursula von der Leyen believes that the deal will be Europe’s ‘man on the moon’ moment, it will not be sufficient if the rest of the world does not fulfill its commitments and achieve their targets.[3]
  2. The EU Taxonomy: The Technical Expert Group on Sustainable Finance released the EU taxonomy in March 2020 as a “tool to help investors understand whether an economic activity is environmentally sustainable, and to navigate the transition to a low-carbon economy.”[4]It provides sustainability criteria for 70 economic activities which produce 93% of Europe’s emissions. More activities will be included by the end of the year, and companies and investors will start disclosing environmental performance in 2022.[5]
  3. The EU Emissions Trading System (ETS): The ETS initiative was developed to help Europe achieve its climate targets under the Kyoto Protocol. It operates in all European countries in addition to Iceland, Liechtenstein and Norway. The ETS, which covers around 45% of the EU’s greenhouse gas emissions, limits emissions from more than 11,000 energy intensive installations and airlines. It is based on a ‘cap and trade’ principle where companies receive or buy emission allowances that can be traded with other companies as needed. Companies can even buy credit from international emission-saving projects around the world. At the end of the year, companies must have enough allowances to cover their emissions or they will be fined.[6]
  4. The Land Use, Land Use Change and Forestry (LULUCF) Regulation: The LULUCF regulation requires all member states to ensure that accounted emissions from land use are compensated by an equivalent removal of carbon dioxide from the atmosphere. For example, member states have to offset all deforestation either by equivalent afforestation or by improving sustainable management of existing forests.[7] The significance of the LULUCF regulation is that it broadens the scope of governance to include all managed land within the EU, and establishes a new governance process to monitoring emissions and deforestation.[8]
  5. Using the law to enforce climate change action: In June 2020, Denmark enacted one of the most stringent climate laws worldwide. The new law addresses five main challenges that countries face. First, it allows for cross-party support so that Denmark stays on track to meet its climate goals even if governments change. In theory, this means that governments will need to step down if they are not on track. Second, the law targets Denmark’s fair share of emission reductions by 2040. Third, the law aims further beyond Denmark’s fair share to achieve a net-zero climate target by 2050. Fourth, it highlights its commitment to support other countries since climate change is a global problem. And, finally, it ensures that all policies are ‘green-checked’. In addition to tough environmental laws, there is a movement in Denmark that is demanding the incorporation of climate change considerations into its constitution, which could eventually render harmful environmental action illegal.[9]

[1]Euronews. 22 April, 2020. Climate change: Europe warming up faster than the global average after record year in 2019https://www.euronews.com/2020/04/22/eleven-of-the-12-hottest-years-on-record-occurred-since-the-year-2000-study-finds

[2] European Council. Taking the lead on climate change. https://www.consilium.europa.eu/en/eu-climate-change/

[3] Fleming, S. 07 February, 2020. Europe Climate Change New Green Deal. WEF https://www.weforum.org/agenda/2020/02/europe-climate-change-new-green-deal/

[4] PRI. EU Sustainability Finance Taxonomy. https://www.unpri.org/sustainability-issues/eu-sustainable-finance-taxonomy

[5] Climate-Kic. 09 March, 2020. EU Taxonomy shows the way to net zero by 2050. https://www.climate-kic.org/news/eu-taxonomy-shows-the-way-to-net-zero-by-2050/

[6] The European Union. EU Emissions Trading System (EU ETS). https://ec.europa.eu/clima/policies/ets_en

[7] European Parliament.(2019). Proposal for a Regulation on the Inclusion of Greenhouse Gas Emissions Land Use, Land Use Change, and Forestry (LULUCF) intro the 2030 Climate and Energy Framework. European Parliament.   https://www.europarl.europa.eu/legislative-train/theme-resilient-energy-union-with-a-climate-change-policy/file-jd-lulucf-regulation

[8] European Commission. Land use and forestry regulations from 2021-2030. https://ec.europa.eu/clima/policies/forests/lulucf_en

[9] Timperley, J. (2020). The Law that Could Make Climate Change Illegal. BBC.  https://www.bbc.com/future/article/20200706-the-law-that-could-make-climate-change-illegal

Conscious Shopping Grows Demand for Green Business

15 Apr 2018 | Original

Black Friday is one of the busiest shopping days in many different parts of the world. In 2011 Patagonia, a manufacturer of upscale outdoor clothing recognized for its environmental efforts led a campaign against a competitor’s best-selling jackets on Black Friday due to its high negative cost on the environment. Because of this campaign, Patagonia revenues grew about 30% to US$ 543 million in 2012, followed by another 5% growth in 2013. By 2017, the company reached US$ 1 billion in sales.[1]

While many would consider this an anti-marketing campaign, Patagonia does in fact practice what it preaches. Nearly 70% of their products are made from renewable and recycled materials, including plastic bottles, and they are aiming to increase this percentage to 100% within the next five years.[2] The company has also committed 1% of sales or 10% of profits, whichever is greater, to environmental activism since 1986.[3] Two key takeaways can be driven from this story: (1) business and the environment could, and should, go hand in hand, and (2) conscious consumer behavior will shape the future of the retail industry.

Consumer behavior has dramatically changed in recent years. IBM Institute for Business Value in association with The National Retail Federation conducted a survey which showed that 81% of shoppers worldwide belong to one of two segments: value-driven consumers who want good value (41%), and purpose-driven consumers who seek products and services aligned with their values (40%).[4] The survey has also found that 57% of consumers are willing to change their shopping habits to reduce the negative impact on the environment. The 2019 Deloitte Global Millennial Survey also found that 42% of millennials have either begun or deepened relationships with businesses who have had a positive impact on the environment.[5]

Nonetheless, the retail industry faces certain dilemmas in its journey to greening their supply chain, procedures, services, and products when trying to meet certain consumer expectations. To survive, retail companies need to come up with new collections every season. This has detrimental effects on the environment since the majority of fashion retailers use coal-based energy in manufacturing clothes. Indeed, 10% of annual global carbon emissions, and 20% of worldwide wastewater are caused by the fashion industry.[6] At this rate, greenhouse gas emissions from textile and apparel are expected to grow by more than 60% by 2030.[7] Additionally, to preserve exclusivity, some retails, such as Burberry, H&M, and Nike, used to burn or destroy unsold merchandise causing more damage to the environment.[8] After public outcries against such practices, these brands, along with tens of others, have signed a pact with the G7 to stop global warming, restore biodiversity, and protect oceans.[9] Many private sector companies have been established to solve the issue of unsold merchandise, such as the Parker Lane Group who handle excess inventory and customer returns, and help find new markets for unsold items or recycles what cannot be resold. Another example is Optoro who use artificial intelligence and machine-learning software to market millions of items for resale or donation.[10]

Consumer expectations for same- or next-day delivery could have a negative impact on the environment. Trips that deliver one package can emit carbons 35 times greater than a fully-loaded delivery vans. One-day shipping could become more climate-friendly if retailers use electric vehicles. Another possible solution is the use of ‘nudging’; a study by MIT’s Center for Transportation and Logistics found that 52% of consumers in Mexico were willing to wait longer when they were told that slower shipping would save trees. Other nudging approaches include adding virtue signals to neighbors who use or do not use slower delivery options, such as different box colour, or simply giving discounts and redeemed points.[11] A German company, Organic Baby Food, has actually started offering two delivery options, either a three-day express delivery or a 30-day ‘climate-friendly’ shipping option.[12]

Businesses and manufacturers around the world play a major role in addressing climate change, and small steps could leave a tremendous impact. These steps include offering loyalty points on recycling, creating policies for returning plastic bottles, offering electric charging stations, eliminating single-use plastic, and using data to understand consumer behaviour and preferences to deter overproduction.

[1] Thangavelu, P. 03 February, 2020. The Success of Patagonia’s Marketing Strategy. https://www.investopedia.com/articles/personal-finance/070715/success-patagonias-marketing-strategy.asp

[2] Ibid, 2020

[3] Feloni, M. 21 December, 2018. Patagonia Mission Environmentalism Good for Business. https://www.businessinsider.com/patagonia-mission-environmentalism-good-for-business-2018-12

[4] The remaining 19% of consumers are either brand-driven or product-driven.

[5] Deloitte. 2019. The Deloitte Global Millennial Survey 2019. https://www2.deloitte.com/content/dam/Deloitte/global/Documents/About-Deloitte/deloitte-2019-millennial-survey.pdf

[6] World Bank. (2019). How Much Do Our Wardrobes Cost to the Environment?. https://www.worldbank.org/en/news/feature/2019/09/23/costo-moda-medio-ambiente

[7] ibid, 2019

[8] Cernansky, R. (2020). Fashion Has a Waste Problem. These Companies Want to Fix It. https://www.voguebusiness.com/sustainability/fashion-waste-problem-fabrics-deadstock-pashko-burberry-reformation

[9] The Fashion Pact. https://thefashionpact.org/?lang=en

[10] Cernansky, R. (2020). Fashion Has a Waste Problem. These Companies Want to Fix It. https://www.voguebusiness.com/sustainability/fashion-waste-problem-fabrics-deadstock-pashko-burberry-reformation

[11] CNN. (2019). America’s addiction to absurdly fast shipping has a hidden cost. https://edition.cnn.com/2019/07/15/business/fast-shipping-environmental-impact/index.html

[12] Crudo, B. (2020). Here’s how retail can be profitable and sustainable. Green Biz. https://www.greenbiz.com/article/heres-how-retail-can-be-profitable-and-sustainable

 

Building Resilience: Sustainable Financing in Emerging Markets

15 Apr 2018 | Original

The global response to COVID-19 bears witness to the power of collective action, and how technology can be mobilized to garner and streamline efforts across sectors, including health, education, telecommunication, and more. The pandemic has also exposed how vulnerable and fragile our economy can be; in a matter of months, hundreds of thousands of people died, millions of jobs were lost, and livelihoods shattered. Leading international organizations project global gross domestic product (GDP) growth for 2020 to range between -8.8% and 1%, and the number of those living in extreme poverty to increase by 420 million people.[1] In the wreckage left behind by the coronavirus pandemic, sustainable finance is all the more crucial in paving the way from devastation to recovery.

The next decade presents a ‘use it or lose it’ moment for emerging markets to reorient the financial sector towards building a more sustainable and resilient future. Investments in infrastructure are expected to reach US$90 trillion by 2030 to meet the needs of increased populations around the world, and COVID-19 has urged governments to provide large stimulus packages.[2] This places greater emphasis on the need to invest with a view of environmental, social and governance (ESG) issues, and not just traditional finance metrics. Indeed, for low and middle-income countries, returns on responsible investment is high, amounting to US$4 on every US$1 spent on resilient infrastructure.[3] Moreover, The Sustainability Report by Morgan Stanley analyzed the performance of more than 10,000 mutual funds to find that sustainable equity met or exceeded median returns of traditional equity 64% of the time.[4] This proves that there need not be a trade-off between financial and non-financial returns. In fact, ESG investments have a higher potential for long term payoffs. As the current pandemic forces a more prudent management of financial resources, sustainable investment options by governments, investors and corporations need to be prioritized.

Sustainable finance is not confined to environmental-linked investments, but extends to all financial products and services that integrate ESG criteria into its decision processes, policies, frameworks, and practice. It is about reducing the financial gap in meeting SDGs to solve major and global problems such poverty, inequalities, and climate change. Seven trends in sustainable finance will transform the future landscape of ESG in emerging markets:

  1. Increasing commitments to address climate change. In order for nations to prevent irreversible damage and stay at the current 1.5 degrees of global warming, global emissions must drop by 50% over the next decade.[5] A growing green bond market has emerged to help investors align their financial objectives with real economy impact, and to achieve the targets of the Paris Climate Agreement and Sustainable Development Goals. One example is the Real Economy Green Investment Opportunity GEM Bond fund (REGIO) created by HSBC Global Asset Management and leading Development Finance Institutions (DFIs). The fund has raised US$474 million and aims to aid investors in emerging economies to achieve the long-term SDGs.[6]
  2. Intensifying interest in the importance of ESG investment and disclosure. Making, assessing and managing investments based on ESG factors is gaining momentum worldwide. In 2018, 80% of the world’s largest corporations used Global Reporting Initiative (GRI) standards.[7] In 2020, the Dubai Financial Market(DFM) launched the UAE Index for Environment, Social and Governance (ESG) to encourage listed companies in the UAE to embrace ESG best practices.[8]
  3. Minding the gap through innovative financing. The financing gap to achieve sustainable development goals (SDGs) by 2030 is US$2.5 trillion annually.[9] The challenging landscape of sustainable financing in emerging markets has given space for innovative financing to develop. An example of this is the South African Impact Bond Innovation Fund, which is the first social impact bond focusing on early childhood in the Global South.[10] Another example is Majid Al Futtaim’s first Green Sukuk in the MENA region with a value of US$600 million.[11]
  4. Banks stepping up sustainability- and green-linked loans. Banks have been increasingly tying loan terms to ESG performance; sustainability-linked loans totaled US$71.3 billion in the first three quarters of 2019.[12]
  5. The quest for data. Sustainable investments require data based on ESG metrics. However, companies lack adequate and useful data to quantify and measure the impact of their investments, leading to potential inefficiencies. Early this year, Refinitiv launched the Future of Sustainable Data Alliance with the objective of accelerating capital inflows into sustainable finance by providing investors and governments the data needed to assess and identify sustainable investments and products.[13]
  6. The quest for taxonomies, regulations, and legislations. Regulations and legislations are considered key drivers to sustainable finance in emerging markets. Until 2018, sustainable financing was regulated in China only.[14] Increased attention has been given to establishing and standardizing regulations and guidelines that foster capital inflows to sustainable finance. Examples of measures taken by some emerging markets include Indonesia’s Green Finance Roadmap, the Banco Central Do Brasil’s voluntary requirements for banks to monitor environmental risks, and the UAE’s first set of guiding principles on sustainable financing.[15]
  7. Refocusing sustainable financing post COVID-19. The recent pandemic has shifted the nations’ focus to acute social risks such as health and employment. There is no doubt that economic recovery is a priority for all nations with sustainability and building resilience at its core. It is crucial to keep in mind that the comeback from COVID-19 will take years –the same years that are crucial to ensuring we meet our SDGs and climate change targets and prevent an irreversible catastrophe.

[1] UNIDO. 2020. Coronavirus: The Economic Impact. https://www.unido.org/stories/coronavirus-economic-impact-4-may-2020

[2] The Global Commission on the Economy and Climate. 2016. The Sustainable Infrastructure Imperative: Financing for Better Growth and Development. https://www.un.org/pga/71/wp-content/uploads/sites/40/2017/02/New-Climate-Economy-Report-2016-Executive-Summary.pdf

[3] Hallegatte, S., Rentschler, J. and Rozenberg, J.. 2019. Lifelines : The Resilient Infrastructure Opportunity. Sustainable Infrastructure. Washington, DC: World Bank. https://openknowledge.worldbank.org/handle/10986/31805

[4] Morgan Stanley. 2015. The Business Case for Sustainable Investing. https://www.morganstanley.com/ideas/business-case-for-sustainable-investing

[5] UN Environment. 2019. Emission Gap 2019 Global Progress Report on Climate Change. https://www.unenvironment.org/interactive/emissions-gap-report/2019/

[6] HSBC. HSBC Real Economy Green Investment Opportunity Global Emerging Market.  . https://www.assetmanagement.hsbc.co.uk/en/institutional-investor/investment-expertise/fixed-income/regio

[7] Kell, G. 2018. The Remarkable Rise of ESG. Forbes. https://www.forbes.com/sites/georgkell/2018/07/11/the-remarkable-rise-of-esg/#5c97a3f51695

[8] Khan, S. 22 April, 2020. “DFM Launches Index to Gauge UAE List Companies’ Commitment to ESG”. The National. https://www.thenational.ae/business/markets/dfm-launches-index-to-gauge-uae-listed-companies-commitment-to-esg-1.1009774

[9] Cooper, S. 05 February 2019. The Evolution of Sustainable Finance. https://www.sc.com/en/feature/the-evolution-of-sustainable-finance/

[10] ECD Impact Bond Innovation Fund. Innovation Edge. https://innovationedge.org.za/project/ecd-impact-bond-innovation-fund/

[11] Majid Al Futtaim. 15 May, 2019. “World’s 1st Benchmark Corporate Green Sukuk”.  https://www.majidalfuttaim.com/en/media-centre/press-releases/2019/05/majid-al-futtaim-lists-world-s-first-benchmark-corporate-green-sukuk–on-nasdaq-dubai

[12] Guzman, D. 21 October, 2019. Growth in Sustainability-linked loans boosts ESG rating firms. Reuters. https://www.reuters.com/article/growth-in-sustainability-linked-loans-bo/growth-in-sustainability-linked-loans-boosts-esg-ratings-firms-idUSL2N27615Y

[13] Evans, M. 29 January, 2020. New data alliance to drive sustainable finance. Better Society Network. https://bettersociety.net/future-data-sustanable-alliance.php

[14] Meskin, M. 04 Fenruary 2020. Give us regulation say MENA green leaders. https://www.globalcapital.com/article/b1k62slw8c0zz8/give-us-regulation-say-mena-green-leaders

[15] Berensmann, K. et al. 23 January, 2020. Fostering sustainable global growth green finance- what role for G20? G20 Insights. https://www.g20-insights.org/policy_briefs/fostering-sustainable-global-growth-green-finance-role-g20/