Background

Climate change has become a real threat, posing significant risks to financial stability worldwide. From the increasing frequency of extreme weather events to long-term impacts on global supply chains, the financial sector is starting to understand the importance of proactively managing and mitigating these risks. Integrating climate risks into financial models and investment strategies has become essential for resilience and sustainability. Moreover, the financial sector is recognizing the importance of Environmental, Social, and Governance (ESG) factors. These factors, alongside climate risk considerations, have become crucial in the financial services industry, influencing investment decisions, risk management, regulatory compliance, and corporate governance. The growing significance of sustainable finance underscores the need for a comprehensive understanding of how ESG factors and climate risks affect financial services. ESG factors, along with climate risks, are no longer peripheral considerations but are integral to strategic decision-making within banks and financial institutions.

 Given that banks and financial institutions are uniquely positioned to drive the transition to a more sustainable and resilient economy, they can promote sustainable business practices and innovation by incorporating ESG standards into lending, investment, and risk management practices. Sustainable finance products, such as green bonds, ESG-linked loans, and sustainability-focused investment funds, are examples of how this transition can be supported. Simultaneously, the regulatory landscape is rapidly evolving, with new requirements and guidelines to ensure financial institutions appropriately address ESG and climate risks. Regulators are recognizing the systemic importance of these factors and are implementing frameworks that enhance disclosure, risk assessment, and management practices.

 However, the path to effectively integrating finance with ESG considerations and climate risks is not without challenges. It requires a thorough understanding of the complexities involved, robust data and analytics, and a commitment to transparency and accountability. Therefore, the Union of Arab Banks aims to hold a forum titled «Implementing Environmental, Social, and Governance Standards and Climate Risks in Financial Services» in Amman, Jordan, on July 29-30, 2024. The forum aims to provide a high-level platform to highlight the effective implementation of ESG and climate risk frameworks and their integration into investment and financing decisions. This forum will bring together representatives from the banking sector, regulatory bodies, and experts to discuss strategies, challenges, and best practices for implementing ESG and climate risk governance frameworks.