At the Strategic Forum for Enhancing Environmental and Social Governance Standards, Dr. Bino Calls on Financial Institutions for More Sustainable Future Financing to Enhance Social Impact and Green Finance on Society and the Economy

Dr. Adel Bino, Chairman of the Jordan Securities Commission, called on financial institutions to pursue more sustainable future financing, given the profound impact of the social dimension of sustainability on the social fabric, and to enhance the social impact and green finance on society and the economy.

This came during his keynote address at the Strategic Forum, organized by the Union of Arab Banks, which opened in Amman. The two-day forum, held under the patronage of the Governor of the Central Bank of Jordan, Dr. Adel Sharkas, is titled "Enhancing Environmental, Social, and Governance Standards: Supporting Financial Measures to Achieve Sustainable Development." More than 65 specialists from Jordan, Palestine, Oman, Kuwait, Germany, France, and the UAE are participating.

Dr. Bino stated... He emphasized that financial and investment institutions should direct an increasing proportion of their investment portfolios towards new instruments such as green bonds to finance renewable energy and infrastructure projects that enable them to address climate change. This would enhance transparency, mitigate risks, and attract investors, contributing to the transition to an environmentally sound economy.

He further explained the importance of companies integrating sustainability standards, including issues such as governance, environment, and society, into their corporate strategies. He also highlighted the pivotal role that banks and financial markets can play in driving a more sustainable world.

Regarding governance, he affirmed that it comprises legislative and technical frameworks that ensure our sustainability practices are sufficiently robust to safeguard the use of finance and investment channels, and that these efforts are deeply embedded in operations, procedures, and aspirations. Without effective governance frameworks, environmental and social initiatives become mere embellishments for banks and financial institutions, serving only as marketing tools and reputation enhancements.

Concerning the efforts of regulatory bodies in the Hashemite Kingdom of Jordan to adopt legal and legislative frameworks for environmental, social, and governance (ESG) standards to achieve transparency and accountability, Dr. [Name] explained... The Jordan Securities Commission, in partnership with the Central Bank of Jordan, the Ministry of Planning, the Ministry of Environment, and other official institutions, has taken serious and ambitious steps in this area. We are fully aware that our choices impact not only our present and our businesses, but also the future of generations to come. However, our responsibilities today extend beyond simply establishing the regulatory framework; they also include ensuring the effective implementation of these standards. This will enable companies to achieve a balance between profitability, environmental protection, and community service. The first step in implementation was the issuance of rules for preparing sustainability reports for companies listed on the ASE20 index of the Amman Stock Exchange, more than half of which are banks. These reports include an assessment of the impact of the company's activities on the environment, the economy, and society, including the level of carbon emissions, social justice, support for women and people with disabilities, and other topics that the company deems to have a significant impact. Because standardization is essential to ensure consistency and uniformity among companies' reports, the principles and standards of the Global Reporting Initiative (GRI) have been adopted, and a transparency component has been added to the report to align it with the Sustainable Development Goals (SDG) Impact Standards.

The report has also been updated to reflect this. The Chairman of the Authority added that, in a subsequent and pioneering step to enhance transparency and sustainability in financial markets, a guide for disclosing information related to climate change was launched, along with the regulatory framework and policy for disclosing this information. This was done in cooperation with the International Finance Corporation (IFC) and Ernst & Young (EY), and includes a set of standards and principles that help companies listed on the Amman Stock Exchange develop financial and non-financial climate disclosures that comply with International Financial Reporting Standards (IFRS). This enhances investor confidence and improves companies' ability to address environmental challenges. The guide aligns with global best practices, specifically the sustainability disclosure standards issued by the International Sustainability Standards Board (ISSB), such as IFRS S1 and IFRS S2.

Dr. He noted that, as a culmination of all these efforts, and to unify the regulatory frameworks for companies in the capital market, the esteemed Cabinet approved last July the agreement between the Securities Commission, the Ministry of Planning, and the International Finance Corporation (IFC) to develop regulations related to the environmental, social, and governance (ESG) framework for securities. This aims to bring these regulations more in line with international standards in this area, support the performance of companies listed on the Amman Stock Exchange, including Jordanian banks, in complying with and implementing international best practices, and ensure the integration of environmental and social factors into business strategies. This supports the Sustainable Development Goals, contributes to addressing the challenges of climate change, and ultimately leads to a strong, sustainable, and investment-friendly national economy.

He stated that the Securities Commission, in agreement with its partners, has decided to proceed with adopting the standards issued by the ISSB Council, established within the framework of the International Financial Reporting Standards Foundation (IFRS). These standards focus on financial significance and investor needs, aligning with financial reports prepared under International Accounting Standards, thus ensuring that Jordanian companies' reports are global in scope and comprehensive. He further noted that the Securities Commission joined a group of 31 member countries last month in the GEMC (Growing Markets Committee) under the International Organization of Securities Commissions (IOSCO), which is part of the ISSB Council.

The Financial Stability Board (FSB) will support the adoption and use of sustainability disclosure standards. Members will collaborate to build local capacity in each country to implement the standards' requirements, and the group will provide a platform to enhance information exchange at the regional level.

He noted that this forum was convened to explore the intersections of environmental, social, and governance (ESG) principles with financial and banking services. It stems from the Authority's recognition of the need for investors, clients, and local communities to join forces to elevate our achievements beyond our expectations. He stated, "Therefore, we do not view ESG principles merely as commitments and statements to be disclosed and reported periodically, but rather as fundamental values integrated into institutional systems. As regulatory bodies, our role in shaping a sustainable future is not limited to choosing the framework; it extends to choosing the approach our companies and banks will take to engage with the world. These practices must resonate deeply with investors who hold the keys to global capital flows, which our emerging Arab markets seem most eager for and receptive to." For his part, Deputy Governor of the Central Bank, Dr. Ziad Ghanma, delivered a speech on behalf of Governor Dr. Adel Al-Sharakis, in which he referred to the National Financial Inclusion Strategy and the Green Finance Strategy launched by the Central Bank of Jordan. He noted that environmental, social, and governance (ESG) standards have gained significant momentum in recent years, and investments in this field have flourished. The aim of these investments is no longer solely to generate profits, but rather to invest funds to create societal change, expand the use of clean energy, and mitigate the effects of climate change on the economy and financial stability. He reviewed the achievements, events, and activities in which the bank participated and which it organized to promote the adoption of ESG and sustainability standards.

On another note, the Director General of the Association of Banks in Jordan, Dr. Maher Al-Mahrouq, delivered a speech on behalf of the Chairman of the Board of Directors, Engineer Basem Al-Salem. He emphasized the importance of ESG standards, but pointed out that they face a number of challenges, most notably the limited availability of measurement tools and standardized criteria, as well as the challenges of "greenwashing" and companies issuing exaggerated reports on their environmental and social performance without achieving tangible results. He also mentioned the costs of implementing standards in the case of long-term investments, and companies' concerns regarding the difficulties related to translating social and environmental indicators into clear numerical or financial metrics. To overcome these challenges, Dr. Al-Mahrouq believes that international efforts are necessary to harmonize international standards, improve transparency and accountability governance, incentivize government entities to transition towards a green economy, and work collaboratively to strengthen national policies and encourage public-private partnerships.

On another note, Mohammed Masoud, Director of Forums and Conferences at the Union of Arab Banks, delivered a speech on behalf of the Secretary General of the Union of Arab Banks, Dr. Wissam Fattouh. He stated that the role of environmental, social, and governance (ESG) standards as a comprehensive framework enabling financial institutions to integrate environmental and social responsibility into their strategies, ensure sustainable growth, and enhance long-term value stems from the rapid changes and unprecedented challenges facing the world today, whether environmental, economic, or social. These challenges, however, also present tremendous opportunities, as banks and financial institutions play a pivotal role in directing capital towards responsible and sustainable investments, making them an essential part of the required solutions. The report revealed that the economic and social repercussions of environmental crises on the global economy exceed $160 billion annually. Conversely, studies indicate that transitioning to more sustainable practices could generate an additional $26 trillion in economic value by 2030. However, these opportunities face numerous challenges, most notably that less than 45% of Arab financial institutions fully integrate environmental and social governance (ESG) standards into their strategies. This necessitates a redesign of our vision for the future of the financial sector, linking economic returns to a profound positive impact on society and the environment.

The sessions of the first day of the forum discussed the relationship between green finance and the transition to sustainability. They reviewed the various types of sustainable finance, how to align banking institutions with the Sustainable Development Goals (SDGs), and the challenges and opportunities for financing the transition to sustainability in the banking sector. Mohammad Al-Amayreh, Executive Director of the Financial Stability Department at the Central Bank, addressed these topics, emphasizing the importance of collaboration with stakeholders and integration with civil society organizations when developing a green finance strategy. He stressed the need to ensure that financing and financial inclusion projects are free from any money laundering activities and that ESG standards are applied. The sessions also discussed the role of the Union of Arab Banks in activating the integration of environmental, social and governance standards in Arab banks, integrating governance standards into bank strategies, the vital role of boards of directors and specialized committees in this aspect, and clarifying how to determine priorities in this context to promote strategic decision-making that enhances and supports sustainability. This was discussed by Yasser Akawi, founder and president of Capital Concept, Sameh Sawafteh, head of supervision of payment services companies and sustainable finance officer at the Palestinian Monetary Authority, and Mert Dedebas, an expert in sustainable finance and financing of small and medium enterprises at Frankfurt University.