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With Dubai hosting COP28 later this year, businesses are calling for a new green deal for the Middle East that includes some form of climate legislation, akin to the Inflation Reduction Act adopted by the US, with incentive packages to boost green growth in the region.
The finding is part of a new PwC Middle East survey, which polled business leaders from various industries across the region to determine the ESG (Environmental, social and governance) landscape and the challenges companies are facing in achieving this transformation.
According to the report, 64% of the survey respondents have adopted a formal ESG strategy in the last 12 months, while many are embedding ESG priorities across their organisations.
This has been described as a ‘seismic shift’ in policy according to Stephen Anderson, PwC Middle East’s Strategy and Markets Leader, with last year’s figures indicating that only 21% of the respondents had adopted an informal ESG strategy that was never documented.
The survey also revealed that more than 60% of businesses want leadership to increase the time they allocate to ESG-related issues, with risk management, compliance, and leveraging the circular economy featuring as top priorities for the year ahead.
Yet, even as companies are open to adopting an ESG framework, the report further indicates that green funding and sustainability skills continue to have the biggest impact on progressing an organisation’s ESG strategy in the region, with only 13% of businessesaccessing sustainable finance, with another 32% citing a lack of funding.
Meanwhile, 41% have cited a lack of internal skills and expertise as a key deterrent.
“Green funding continues to pose a challenge in today’s climate with 3 to 4 posing a hurdle,” said Anderson. “Regulation is a key issue and that directly links to available projects; how do you get projects attested that can qualify for green finance?”
While things were moving in the right direction, according to Anderson, awareness remains a key issue. “Many of the organisations we have spoken to aren’t aware of what is available to drive green finance. Plus, there's been a negative premium on green finance lately with the current inflation rate.”
Another 29% of respondents have cited lack of supportive government policies and regulations impacting an organisation’s ESG strategy in the region.
“One of the biggest takeaways from this year’s findings is that companies were still in a ‘startup’ mentality last year, due to a lack of awareness about ESG.
Today, companies in the region have moved on to a ‘scale-up’ mode, driven by climate risk awareness and regulatory compliance,” said Dr Yahya Anouti, PwC Middle East’s ESG Leader, adding that COP28 remained as one of the main drivers of this transformation.
Additionally, businesses are increasingly transparent about their environmental impact, with 70% reporting on their ESG impact according to the survey, while another 59% are having their reporting formally audited or assured.
The COP28 Effect
With Dubai hosting COP28 at Expo City Dubai from November 30 until December 12, the ESG transition cannot come fast enough, according to industry experts, with this year’s climate summit particularly significant because it marks the first ‘global stocktake’, a comprehensive assessment of progress against the goals set during the historical Paris Agreement.
The PwC survey asked respondents to share a wish list ahead of the annual climate summit, with respondents calling for better ESG-related infrastructure such as waste recycling facilities (41%), the greening of the electricity grid (34%), and government off-takes for nascent climate technologies (20%).
“The task is for governments to create financing and mechanisms that drive companies to get more aggressive with their ESG framework,” Anderson added.
The clock is already ticking with a study by the Global Carbon Budget citing that the world has a limited time to avert catastrophic warming. To keep a global temperature rise within 1.5 degree Celsius, no more than 380 billion tonnes of carbon dioxide can be released over the coming decades, an amount equivalent to nine years of emissions.
“Time is of the essence with only nine years left for us to make a significant change. Moving ahead from COP28, we need to ensure there is policy coherence from governments,” Dr Anouti said.
(Reporting by Bindu Rai; editing by Seban Scaria)
