Banker Africa sat down for an inter- view with Hassan Abdalla, the chief executive officer of the Arab African International Bank (AAIB) to discuss sus- tainable finance, the overall concept of sustainability, and how Egypt is heading towards adopting new finance models that integrate important concerns into the banking sector’s practices, helping to ensure a more responsible approach for a better future for the country.
How do you define sustainable finance?
It is realising the inherent connection between economic growth and social, environmental, and governance (ESG) concerns. Sustainability is a rising mega-trend 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 the sustainable development concept in 1987. Nonetheless, it has been slow to gain momentum as the industry was growing and making handsome profits 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 huge 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, 60% of which are below age 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. Funding clean energy and energy efficiency is a new track that is becoming very relevant to Egypt.
How does AAIB promote sustainable finance best practices?
AAIB is a forerunner in realising the importance of sustainability in the banking business. It 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 (EP). 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”, to the banking industry in 2010.
We introduced “responsible lending”, becoming the first bank in Egypt and the 2nd in the Middle East to join the EP since 2009, and introduce social and environmental risk management. Besides publishing our first Carbon Footprint Report in Egypt during 2013, and hence assigned 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 is a platform 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 losing relevance…now we are heading towards “coopetition”. Some banks in Egypt have substantial potential and 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% of Egypt’s banking sector. We also introduced two more modules on renewable energy lending and SMEs lending in cooperation with Frankfurt School of Finance & Management.
Are any industries particularly ripe for sustainable finance development?
Definitely, the clean energy and energy efficiency industries will greatly assist in the promotion of sustainable finance development, as well as entrepreneurship, microfinance, and the establishment of SMEs.
What do you see for the future of sustainable finance for AAIB?
We are looking to ensure that all our internal business practices at AAIB are integrating the ESG into 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 levels towards enacting sustainable finance, and help the financial industry rejuvenate, creating economic growth with social and environmental impacts. 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.
