New report sheds light on sustainable financing in Arab region and provides policy recommendations

20 January 2021

A new UNEP FI report provides the first in-depth analysis of  sustainable finance practices in a part of the world most vulnerable to the effects of climate change: the Arab region. Issues such as water scarcity, rising sea levels, drought, land degradation and desertification will have serious repercussions for food, energy and water security in this area. Implementing the Sustainable Development Goals – in particular those that help deal with the interlinked water-energy-food challenges – will be key to build resilient, fairer economies.

Promoting Sustainable Finance and Climate Finance in the Arab Region” concludes that the adoption of sustainable finance practices can provide numerous benefits to financial institutions and wider access to finance for climate-vulnerable communities. The study also emphasizes the importance of sustainable finance resources to transition from mainstream economic systems to responsible and resilient ones. It highlights the reform measures that financial sector governance bodies would need to consider in order to scale up sustainable finance and provides policy recommendations to tackle the challenges.

The report investigates the most prevalent sustainable finance practices in six countries in the Arab region: Egypt, Jordan, Morocco, Bahrain, the United Arab Emirates (UAE) and the Kingdom of Saudi Arabia (KSA). It provides insight into developments in this area over the past two decades and consolidated data on how all six countries have adopted green growth strategies. It also includes insights from policy makers, as well as feedback from practitioners in the focus countries. Policy recommendations include:

  • Strengthening governance, legislative and regulatory frameworks including issuing and enforcing green finance guidelines, building capacity and incorporate gender awareness in sustainable and climate financing;
  • Raising awareness of the merits of sustainable finance and strengthening the capacity of financial sector stakeholders;
  • Developing a pool of bankable green projects
  • Raising national readiness for climate change and finance reform measures to address institutional weaknesses, planning gaps as well as technical capacity and expertise constraints.

“Only by understanding the barriers that are inhibiting the financing of sustainable business activities in the region will we be able to change policy and practice”, said Eric Usher, UNEP FI Head. “This is the first research to consolidate this kind of information in the region and contributes to narrowing the data gap on sustainable and climate finance. It will be an essential tool for policymakers and financial institutions in the MENA.”

In Arab countries, the financing gap for achieving the SDGs is estimated to be at least USD 230 billion annually (AFED 2018). That is why it is important to enhance the role of the financial system in the region to support their transition towards sustainable development by bridging the green financing gap, mobilizing resources, and re-directing financial flows towards more sustainable and responsible investment.

Sustainable finance practices in the Arab region are still in the early development phase but are expected to deepen in the years ahead. The report also assesses the status and the development in national strategies for climate finance in four countries in the Arab region: Egypt, Jordan, Iraq and Tunisia. It includes recommendations for policy makers, financial institutions and financial regulators on strategies to achieve the SDGs.

This report was conducted under the auspices of two ongoing UNEP FI projects in the region with the League of Arab States and with the UNDP. The latter being the SDG Climate Facility Project: Climate Action for Human Security to which the League of Arab States is also a partner agency.

Download a copy of the report

 

About UNEP Finance Initiative

United Nations Environment Programme Finance Initiative (UNEP FI) is a partnership between UNEP and the global financial sector to mobilize private sector finance for sustainable development. UNEP FI works with more than 350 members—banks, insurers, and investors—and over 100 supporting institutions– to help create a financial sector that serves people and planet while delivering positive impacts. We aim to inspire, inform and enable financial institutions to improve people’s quality of life without compromising that of future generations. By leveraging the UN’s role, UNEP FI accelerates sustainable finance.

About the League of Arab States

The League of Arab States (LAS) is a regional intergovernmental organization established on 22 March 1945. The main goal of the organization is to “Draw closer relations between member States and coordinate collaboration between them, to safeguard their independence and sovereignty, and to consider the interests of the Arab countries“ with a focus on developing the economy, resolving disputes and coordinating political issues. The League of Arab States aims at improving the standards of living of the Arab citizens through developing and enhancing economic and social policies to achieve Arab integration within the framework of the Arab conventions, charters, and strategies adopted in all areas. In response to the Sustainable Development Agenda 2030, the Secretary-General of the League of Arab States issued resolution 91/1 in April 2016 to establish the Sustainable Development and International Cooperation Department (SDIC) within the structure of the Secretariat to support Arab efforts in implementing the sustainable development goals 2030. LAS-SDIC main challenges in achieving sustainable development are water scarcity, climate change, high rates of illiteracy, increased population rates, low level of infrastructure, and conflicts.

About SDG Climate Facility Project: Climate Action for Human Security:

Focused on the nexus between climate action and human security, the SDG Climate Facility Project: Climate Action for Human Security seeks to enhance the capacity of regional and national institutions in the Arab States to effectively take climate action in a way that brings benefits across SDGs and for crisis prevention/recovery efforts, including support to scale-up climate finance for innovative local solutions. The objectives of the project are to i. conduct regional level assessments to produce evidence-based data on the impact of climate change on vulnerabilities, and their implications for regional strategies and policies aimed at meeting the SDGs, thereby increasing the awareness of key stakeholders on the benefits of a nexus approach, ii. design innovative tools and approaches to integrate climate action into crisis recovery and development responses at the country level, and iii. mobilise and scale up climate finance—public and private—to enable countries to put in practice the integrated approach. Underlying these objectives is the intention to establish an SDG-Climate Facility, which will take forward to nexus approach and agenda beyond the life-cycle of the project. The project, which runs until December 31, 2021 brings together multi-lateral institutions in the region such as the League of Arab States (LAS) and the Arab Water Council (AWC), and leading UN system partners active on climate actions in the region, including the UN Development Programme (UNDP), the UN Environment Programme Finance Initiative (UNEP FI), the UN Human Settlement Programme (UN-Habitat), the UN Office for Disaster Risk Reduction (UNDRR), and the World Food Programme (WFP).

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