In this episode of the FinTech Times News and Views podcast, Mark Walker, Editorial Director and CEO at the FinTech Times, engages in a compelling conversation with Vijay Bains, Group Chief Sustainability Officer for Emirates NBD. They explore the integration of sustainability in finance, the role of digital transformation, and the impact of AI in enhancing ESG data accuracy. Vijay shares insights on sustainable finance projects, the importance of green buildings, and the growing interest in green bonds and sukuks. The discussion also covers the challenges and opportunities in ESG investing and the future of sustainable finance.
Takeaways
Sustainable finance is crucial for renewable energy projects. Emirates NBD is a leader in financing electric vehicles. Green buildings reduce emissions and energy costs. Digital transformation enhances ESG data accuracy. AI chatbots handle sustainable finance inquiries efficiently. Green bonds are integral to corporate sustainability strategies. Transition finance is key for hard-to-abate sectors. Carbon trading is essential for achieving net zero. Sustainable sukuks offer diverse funding opportunities. ESG investing aligns with long-term market trends.
Sound bites
"Sustainable finance is any finance allocated towards a sustainable project." "Green buildings are really important for us." "Digitalization is key for ESG data accuracy." "AI chatbots handle 500 inquiries a month." "Green bonds are a growing part of our portfolio." "Transition finance is key for hard-to-abate sectors." "Carbon trading is essential for achieving net zero." "Sustainable sukuks offer diverse funding opportunities." "ESG investing aligns with long-term market trends." "AI enhances our understanding of customer needs."
Mark Walker (00:14)
Welcome to the FinTech Times News and Views podcast. Established in 2016, the FinTech Times is a global multimedia news outlet centered around the world's first leading FinTech newspaper. We report on the latest and brightest ideas from the FinTech world. Follow the conversation using #TFTNewsandViews and follow @thefintechtimes
Mark Walker (00:32)
Hi my name is Mark Walker I'm the Editorial Director and CEO at the Fintech Times and today I have with us Vijay Bains, Group Chief Sustainability Officer for Emirates NBD Pleasure to meet you Vijay.
Vijaypal Bains (00:46)
Pleasure to meet you, Mark, and all your listeners and watchers as well.
Mark Walker (00:49)
obviously
Emirates NBD is continuing to integrate sustainability across all of its operations. I just wondered if we could start off with a little bit of what does sustainable finance sort of mean for you?
Vijaypal Bains (01:03)
Perfect. So for us,
sustainable finance is any finance allocated towards a sustainable project. So by that, it could be renewable energy. So we finance a lot of solar within the region. We finance solar as well globally. It could even mean waste of energy. On the other side is why I think EVs. So we are also the largest financier of EVs in the region as well. I'm hoping, Mark, you and the viewers have EVs as well financed by Emirates NBD
On the other side as well, green buildings are really important for us. So within the region as well, green buildings are really important because one, they're more energy efficient. So our bills come down. Two, that produces less emissions, but also has less of a stress on the grid as well. So there's quite a few different use approaches as well in areas where we look for sustainable finance. We focus on one level, corporate clients.
whereby we do also offer discounts to our clients as well for sustainability. So if they hit those KPIs and they align to our net zero trajectory, we can give that discount as well. We'll also give sustainable finance advisory because increasingly this is a language that our clients and investors want to see as well. So often we also advise our clients as they IPO as well on sustainable finance and on sustainability readiness as well.
Mark Walker (02:24)
see
as you're sort of talking there, I was interested to see obviously over the last few years digital transformation has been a really big theme and obviously you guys as ⁓ one of the traditional banks in the sector have a lot of partnerships. How do you find that digital transformation and fintech partnerships play out in enhancing sustainability and ESG data accuracy in a way?
Vijaypal Bains (02:51)
mean, absolutely crucial.
I think for us, digitalization is key. If I take a back as well, the amount of data around sustainability is huge. When we're talking about emissions, we're talking about scopes one, two, and three emissions. When we're talking about ESG data, it could be 500 different data points. The reporting burden is quite heavy. So actually, we need to automate and digitize as fast as possible. And without that digital automation, it's quite hard for us to see the wood from the trees as well.
Now, we've also partnered with a number of fintechs as well in order to help us on that automation journey as well. And again, otherwise would be, I mean, it's almost counter sustainability to print stuff out, to have an analysis of it. So actually using those automated tools, we can see where our emissions are increasing, where they're decreasing. First as well, the other side of it is as a bank, we're concentrating on our finance emissions. What that means is how we lend to different industries.
Are we lending to industries that are decarbonizing? Are we de-risking our books? Again, we use a lot of automated and digital tools for that.
Mark Walker (03:55)
I guess,
obviously, we can't get more than two minutes into a conversation without bringing up the word AI. And obviously, emerging technologies are kind of one of the key areas that are obviously helping to improve access to things like sustainable finance for SMEs. How do you find that those technologies are playing out in actual practical use?
Vijaypal Bains (04:18)
Yeah, I mean, very, very practical. think you're right, AI is the buzzword. I think it will be the buzzword for the next few years as well. So for us, actually, we've already put a use case on our website. We got about 500 or so inquiries a month around sustainable finance, around sustainability. Actually, we've now got an AI chatbot that actually handles all of those inquiries. Now, that isn't just to support the customer. It's also for us to understand what our customers are asking for as well.
And often we found quite simple data on our reporting, on our missions, on our products. So actually, if someone's asking me late in the evening in UAE time, actually UK clients asking that question, the chat bot's able to handle that and then do a nice handover as well.
On the other side as well, using the AI, we now get to see the analysis or the questions that people are asking. So imagine it's one of my favorite restaurants, Mark I call it restaurant in loose terms as McDonald's.
Now, the McDonald's terminal can see obviously what we order and what we don't order. The interesting thing, I McDonald's did some analysis where they said people order very differently from when they do in person.
We've also noticed this with the AI chatbot. People ask a lot more wider questions around actually what we do as a bank, how sustainable we are, what's our future plans. On the other side as well for AI, we also have a look at, we are looking at integrating a chatbot.
to explain sustainable finance, some of those terms I was mentioning earlier. So we have probably about 600 to 800 sustainable finance KPIs. One of the things we're looking at with AI is how to put that in our relationship managers' hands and our customers' hands so they can understand when their financing is coming up, what will apply to them, what kind of discounts we can give, what kind of products we can offer as well, to put that power and speed in their hand. And then finally with AI, the energy demand is high.
So actually we have built out a new data center. We have integrated the GPUs as well from NVIDIA into our data center. So we encourage all of us, all of us in senior leadership to use AI throughout the bank. We also offset our emissions for that using nuclear and renewable energy as well. So that it is less guilt on the emission side there as well.
Mark Walker (06:36)
I guess as you sort of alluded to there it's kind of all about the personalisation of the experience isn't it? You want your customers, your investors or anybody that's interacting with you to have the experience that they want from you rather than you talking to them in one standard language as it were.
Vijaypal Bains (06:55)
That's exactly it.
So we want to be able to tailor ⁓ exactly the way in which our clients are speaking to us. A lot of them are asking on reporting, a lot of them on our ESG ratings. We really also want to speed that up as well. So sustainability ESG can seem like a bit of an alphabet soup. And we found using the AI engines, it's simplifying it, explaining it in a human language that we can all understand. And it's in real time as well.
Mark Walker (07:19)
And I guess thinking sort of a little bit more about ESG. Obviously ESG as a term has taken a little bit of a heat recently and I think you know
When I'm going ask this question about ESG investing, it's not necessarily ESG investing that we're talking about, but more using that framework as a key for what investing looks like. How do you think that sort of investment landscape is changing over the coming years and how did it get to where it is now?
Vijaypal Bains (07:48)
Yes,
I think with ESG investing, was a term that was coined about six or seven years ago. ESG investing really, really underwent a transformation during COVID. So where there weren't a lot of pools of capital, ESG was seen as a safe haven. So some of the, I would say, the change in the market dynamics is as a result of us coming back to normal market economics. There's also obviously political
elements as well of ESG and net zero as a whole. For me, ESG investing is sustainable investing. So actually thinking very, very simple terms where we look 10, 20, 30 years from now for which industries will still be here, what industries are growing, and where do we need to align to as part of our global regulations. So if I take the biggest example, our energy demand is increasing because of AI. Our energy demand is increasing because of actually
global living standards are increasing, and actually, population is increasing. So actually, renewable energy is a really safe bet there. As quickly as we see renewable energy being added or any energy, that demand is taken up. So actually, if you align that to net zero, that's a great example of sustainable investing. Also, you can see asset managers from Europe really piling into sustainable investing and actually providing a cheaper
pool of liquidity and a more stable pool of liquidity as well.
And what I mean by sustainable investing in that return is basically ensuring that you have access to the most capital. During the credit crunch, those of you old enough to remember, know, 10 or so years ago now, it wasn't just because of capital, but having access to capital. Sustainable financing is probably now 20 % of financing in some jurisdictions. So doing a sustainable finance transaction
really make sure you've got access to that ESG investing pool as well. And actually you're more liquid and your credit profile is stronger as well. Finally, sustainability is increasing. I think we've seen in every country in every jurisdiction, regulations increasing despite political changes. know, green building standards are getting stronger, renewable energy is getting stronger, those net zero pathways are getting stronger and stronger. We've seen all demand from the IEA being predicted to have peaked as well.
in the next 10 or so years and then start to fall off as well. So actually, we are now starting to see a change in the market economics. So for me, ESG investing ⁓ is more around that future demand than where we need to go.
Mark Walker (10:21)
I think that's kind of an interesting one because again, I think I have always seen ESG investing as a long term sort of offering. But obviously there's a lot of short term requirements for people with financial performance, expectations and things like that. Do you think ESG investing has any place in that short term market return?
Vijaypal Bains (10:44)
Yeah,
it most definitely does. If I take a step back, I'm a climate scientist, a Raman scientist. So I look at a lot of the climate models. I look at a lot of the commodity prices as well. And look, we always hear about Bitcoin and other crypto coins as well. I actually have a look at the climate change models that are going to happen. And actually, you can predict which commodity is going to peak. So we've seen rising prices for cocoa because of challenges in West Africa because of climate change.
We've also seen oranges futures increase as well last year, as well as coffee futures as well, because of climate change shifting some of the precipitation patterns as well, which is now affecting commodity prices around the world and having an inflationary impact. Actually, that's a short-term benefit. And I wrote a paper about a month or so ago that actually some of these commodities are outpricing gold for some months as well. So actually, there is a lot of short-term benefit and upside there as well in the commodity trading.
On the other side of kind of sustainability linked loans, as clients come to update their loans, their banks are now asking for their transition plans. So actually it's affecting their short term liquidity as well and their revolving credit facilities. On the other side for your retail bank, I'd recommend talking to obviously Emirates MBD, as well as other banks as well, on what retail banking products there are on offer as well. Because often you'll see promotional offers there.
Mark Walker (12:10)
You sort of touched on the idea of loans and everything else. One thing that the UAE has really seen a growing interest in at the moment is sort of green bonds, sukuks etc. How do you assess their potential in sort of properly mobilising private capital towards sort of the UAE's overall sustainability goals?
Vijaypal Bains (12:31)
Yeah,
I see Greenbond Drive being really, really fast. We've seen ⁓ real growth in the market in last three years and also in sustainable sukuks as well. So in the global market with a capital of sustainable sukuks it's a great way to get into the market, particularly if you're doing a large transaction because you can tap up a diverse range of funding. Also, you can tap up discounted funding at certain periods of time as well.
And if you've got a specialist products, let's say if you're doing blue financing or you're doing something with AI, there are specialist investment vehicles that will come in and be very interested in that. We've seen real interest in blue finance as well in the last few years, and that will increase as well. So often the pricing is quite advantageous as well. Also, if I take a step back with the green bonds, it helps with that corporate strategy. So a lot of CFOs and lot of CEOs have asked, what are you doing around your sustainability strategy?
The green bond is a great way of doing it because actually you issue a bond, you'll do a road show, and then actually what you do is you explain to the investors and clients your pathway for the next five years, how you've integrated sustainability and green considerations. So actually you can kind of sort out a lot of it and resolve a of your corporate strategy questions that a lot of investors and regulators have as well. And then for us at Emirates NBD, green bonds are a growing part of our portfolio.
⁓ A lot of our clients are now coming to us for it as well. They're also a lot more easier to access as well. So we support an instruction pair as well.
Mark Walker (14:02)
Yeah,
I guess they have a better general understanding in the investment world. It's almost like it says what it does on the tin and everything when it's a green bond, as you say, because it leads into that strategy and connects in very nicely. Do you think that ease of understanding and relatability is the thing that's driving the interest of
Vijaypal Bains (14:24)
Yeah,
I think so. I green net zero, I think they're tones which are now being around for about 10 to 15 years. I think we all understand that emissions need to decrease. So that means actually as a corporate strategy understanding, you can say, actually, if I add some more renewable energy in, that will qualify for this. Or if I build a greener building, that will qualify. Or have a desalination plant that uses renewable, that will qualify.
So I think that will continue. think at the moment, green bonds account for around 70 % of sustainable bond markets as well. We are also now seeing a bit of transition into social bonds as well. So social considerations. But that market will increase as some of standards there become standardized.
Mark Walker (15:10)
Well that's interesting because I was going to ask you to get your crystal ball out and give me some idea of what you saw from your perspective as the new financial products or partnerships that will be coming out which hold the greatest promise for expanding sustainable finance generally.
Vijaypal Bains (15:28)
Yeah, no, great.
I'm really dying to look at the crystal ball or the sustainable crystal ball as it were. Yeah, no market predictions But I think for me,
Mark Walker (15:33)
No market predictions, no market predictions. We're not giving financial advice here.
Vijaypal Bains (15:41)
green bonds would continue to grow. Blue bonds generally, I think, will grow. ⁓ We're seeing a lot of market interest in the UE. We've got the conference for ocean and water in December of next year as well. I think in our region as well, freshwater access
Freshwater access is absolutely crucial. So for me, that's a really critical one for a lot of customers to integrate. And again, it's a really topical issue. There's a term called orange bonds, which is around gender, which we're going to see increase as well. And that's really around having greater gender diversity, senior leadership and management as well. But for me, I would say what's called transition is key. So what transition is, is kind of...
not deep dark greens from renewable energy, but how do you transition conventional industries? So if we look at oil and gas industry, methane abatement is really important to reduce emissions. That actually can become a transition bond product. How to transition some of those hard to abate sectors like steel, like aviation, those become transition finance. And actually, we don't all drive EVs, but actually a lot of us would drive, let's say, hybrid vehicles. If you do that on a corporate lens,
That's probably 90 % of the market. So the next five to 10 years, the big theme is going to be transition for our heaviest industries as well. Because I think everyone understands green, as you mentioned. Everyone understands renewable energy But actually transitioning those hard to obey sectors is absolutely key.
Mark Walker (17:11)
Yeah, because
I think there's a lot of, well wouldn't say misconception, but people are a little bit naive if they think that you can go from 100 % emissions to zero in such a small amount of time. There has to be a transition in any major shift or any major change. So I think that's kind of a really interesting one. And you think that, as you say, you can actually produce a bond around that, which actually then is ⁓ helping not only the transition, but also helping the company as well.
Vijaypal Bains (17:21)
Yeah.
Mark Walker (17:39)
align its strategy I guess in a similar way as the green bonds do.
Vijaypal Bains (17:43)
Exactly that.
And what we've seen in the last few weeks is the International Capital Markets Association, the LMA, produced transition finance principles. So we, and that will kind of start to decarbonize most of the economy there. And I think for me, that was going to be less finger pointing and more saying we need to get in this together and see what we can decarbonize and what we can't. I think the final one is probably the carbon market. So carbon trading as well. So.
We amongst others have carbon trading desks Integrating that into your financing is absolutely key as well. And we also buy offsets for our own emissions. We simply can't reduce to zero. And we will reach a point where actually a lot of our clients, a lot of us will say, we can't reach net zero without credible offsets as well. So I think that debate on carbon trading is gonna come back as well.
Mark Walker (18:34)
I guess that carbon trading kind of almost links into those transitional and transformational bonds as well, because understanding that you need more time to reduce emissions properly and effectively therefore needing to use the carbon credit system to be able to give you that extra time to then focus on really making an impact.
Vijaypal Bains (18:57)
Yeah,
exactly right. think having credible carbon offsets, which are kind of science-based and approved, is the only way for us to kind of offset some hard-to-abate setters. And actually, know, some of the standards have really increased. So from COP last year and BACU, we've really seen the standards and transparency really improve.
Yeah, and I think some of the other areas that people are looking at is water offsets, nature offsets as well. Some really interesting products. I think carbon makes the most sense because actually if I emit in one area, I should be able to offset globally because it's becoming global emissions as well. So I think finally, I think you're right, the industry has had a few wobbles.
around verification, around the few standards. But actually, if I have a look at it, Mark, I've been in sustainability for around 20 years. It's really welcome scrutiny. If you said you were in sustainability 20 or so years ago, you weren't very popular at parties, not to say I'm popular now, there's a lot more understanding of sustainability. And I think with that comes more criticism and feedback as well.
Mark Walker (20:07)
Thank you very much Vijay for that insightful conversation. Really interesting to hear some of those main points. Thank you so much for taking the time to speak with me here at the Fintech Times.