NBAD talks about sustainable finance
The National Bank of Abu Dhabi is the first bank in the region to set up a Sustainable Business team, with Nathan Weatherstone at the helm. Here, he talks to Business Review Middle East about sustainable finance.
Why was the decision taken to set up a Sustainable Business team at NBAD?
We are committing to supporting sustainable business because we think that environmental considerations and sustainability will be one of the enduring forces shaping the business world of the future and we can see significant opportunities for the bank. The data from NBAD’s Financing the Future of Energy report and our own analysis tells us that there is a large pool of profitable business to target in renewable energy alone, and sustainable business is much wider than clean power generation. In addition to that, over 20 percent of our large corporate clients are already active in sustainable business. Establishing a team dedicated to promoting sustainable business is our institutional response to the challenges and opportunities of one of the major issues of our time.
What is the ultimate goal for the team?
NBAD set a target of financing, investing or facilitating US$ 10 billion of sustainable business over the next ten years. This serves as both a statement of strategic intent and a direction of travel for the bank, and it is the Sustainable Business team’s responsibility to ensure that we achieve this target. We will do this through generating new business opportunities for new and existing core clients by seeking so far untapped but promising sources of business. At NBAD, we are positioning sustainability as one of our core focuses. We want to be the leading regional bank in sustainable business and have developed the architecture to be so.
Is there anything similar like it elsewhere in the UAE?
We are not aware of any other regional bank with a similar target or business focus. We are happy to commit to a long term target and join a platform shared by a handful of internationals banks - such as Citibank and Bank of America Merrill Lynch - that have done so elsewhere.
How is the department structured?
The team is growing and working across all banking sectors in order to maximise the impact. Sustainable Business banking is not confined to one team. It is here to generate business across the whole spectrum of the bank’s activities and product offerings. My team will bridge between our client-facing coverage teams and our product specialists and over time, we will build up a deeper understanding of the sector to enhance the bank’s execution capability for the benefit of our clients.
What are the types of projects that you are investing in and financing?
We are generally adopting the sustainable definition set out in the Green Bond Principles issued by the International Capital Market Association (ICMA). They include energy efficiency programmes such as retrofitting energy management systems to make buildings operate more sustainably; green real estate development with reduced power and water consumption; clean transportation that promotes modal shift from road to rail; sustainable water management; sustainable waste management; decarbonising technologies; climate change adaptation; as well as renewable energy projects. The USD 10 billion target is based on financing, investing or facilitating finance in the sustainable business arena. The most obvious form of financing will be direct lending for projects that are eligible. But it is also about facilitating finance from others where we underwrite and distribute via our syndications practice, advising on eligible project financings to raise debt and equity or taking bookrunner or lead manager positions on eligible bond transactions.
How does the team decide what constitutes a ‘sustainable’ project?
Our approach will be client driven and that is why our definition is relatively wide. We do not have a preference of one type of sustainable business activity over another. The team will become involved where our core clients have a touch point with one of these activities.
Is the team working in partnership with any other institutions?
NBAD partnered with the University of Cambridge and PricewaterhouseCoopers to produce the Financing the Future of Energy report. The management of the bank’s own sustainability footprint has been at the forefront of the region’s evolution in sustainability which has been recognised by a number of third parties. For example, NBAD was ranked among the top three organisations in the S&P/Hawkamah ESG Pan Arab Index for the 4th consecutive year, reflecting NBAD’s strong environmental, social and corporate governance practices and robust standing among publicly-traded MENA companies. Our Sustainability Report in 2015 aligned to international best practice in accordance with Global Reporting Initiative’s guidelines and we are to date the only regional bank to report our annual climate and carbon emissions data using the Carbon Disclosure Project. In future, the Sustainable Business team will be engaging a lot more with our core clients to full understand their needs and requirements and frame our institutional response.
How do you think the UAE (and the Middle East more widely) is positioned to make an impact on sustainable development?
We think the potential in the region is enormous. The demand for energy is huge and we know already that renewables will form a material part of that: the UAE government alone has committed to AED 72 billion to renewable energy by 2021 and we have other initiatives to promote sustainability in examples such as the Estidama real estate rating system in Abu Dhabi. We foresee planned clean transportation schemes such as metros and rail networks which will facilitate modal shift from cars and trucks to public transport and freight rail. And lately we have seen the ambition of solar projects in the GCC stepped up significantly. At our ‘Global Financial Markets Forum’ (GFMF) in Abu Dhabi in March 2015, we had the CEO of Kuwait Petroleum Company explain why renewable was an important driver of his company’s future thinking. We think that the scale of sustainable business will only snowball going forward.
How do you think NBAD can encourage further sustainable investment from the business community?
As the world is changing, our core clients are also changing. We now have a large universe of clients who want and need a specialist capability in sustainable financing. At NBAD, we are now positioning sustainability as one of our core focuses. As the leading bank in this region, we want and must show leadership in this sector. The good news is that we now see economically viable projects supported by strong government policy commitments and our core clients transacting more sustainable business on a commercial basis across the West to East Corridor. Of course, the US$ 10 billion commitment is not a promise to support every piece of sustainable activity that the bank is asked to consider and NBAD will always continue to uphold the highest standards of credit risk management. But the data from the Financing the Future of Energy report and our own analysis tells us that there is a large pool of profitable business to target.
Could you describe your background and why you were chosen to lead the team?
As a project financier for the best part of the previous two decades, evaluating the social and environmental aspects of major capital projects has always been a feature of my previous work, particular with respect to the Equator Principles (which is the international benchmark for identifying, measuring and managing social and environmental risks in projects – and I’m pleased that NBAD was the first bank in the UAE to sign up to the Equator Principles). Given that my team will bridge between our sector relationship teams and our product and lending specialists, the bank required somebody who had seen all aspects of the business cycle. We have also imported some environmental consultancy skill sets into my team to augmented our technical competencies.
Can you describe the engagement programme you have undertaken with key regulators and policy makers?
NBAD has always had a very strong corporate sustainability practice. We have maintained a top three position in the Hawkamah sustainability index for the last four years and our Corporate Sustainability colleagues pay a lot of attention to keeping our own house in order. We were also the first UAE bank to commit to the Equator Principles, the global benchmark that obliges us to follow international best practices when it comes to environmental and social analysis and risk evaluation.
Which areas of sustainability do you think offer the best opportunities for NBAD?
The regional sustainable business market is characterised by government-sponsored initiatives at the current stage of its evolution and because of this, our banking response tends to be focused on tailored financial products for our clients, meaning our initial focus will be on serving our large corportate clients. Again, wherever our core clients have a touch point with one or another of these activities our team will become involved. In time, we would also expect an enterprise-driven culture to develop which will be more inclusive of the SME sector, particularly when the trend for subsidy removal matures further. The $10 billion target will apply across our full product range and is not geographically constrained. This is a bank-wide target so where the bank transacts, the target will apply. We operate across 5 continents in 18 countries and have defined a West-East Corridor as our primary target, a super-region stretching from the west coast of Africa through to South East Asia, including MENA, the GCC and India. Our strategy remains focused on supporting economic growth and financing transformative projects across this Corridor although we would expect a significant proportion of the US$10 billion to happen locally in the first few years.
Read the May 2016 issue of Business Review Middle East magazine
Why we need more female CFOs (and how to reach that goal)
The number of women in CFO positions in Fortune 500 companies reached a record high late last year, hitting 90, up from 65 just a few years ago. It’s not surprising given the increased focus in recent years on C-suite and board parity by investors such as Blackrock, as well as other institutions including the Nasdaq, which recently stated that companies listed on its US exchange will need to have a minimum of two non-white or female Board members. And if they do not, they must publicise the reasons as to why.
The picture is similar in the UK. According to Julia van den Bosch Wazen, CFO Practice consultant at Odgers Berndtson, The Financial Conduct Authority in the UK is now looking to the London Stock Exchange listings framework as to whether similar measures ought to be implemented, while for City firms, “there are already ongoing discussions about potentially using wider FCA powers, such as denying regulatory approves to drive diversity on Boards”.
But while there’s certainly been improvement, the under-representation of women in executive finance positions remains less than rosy, with van den Bosch Wazen admitting that “whilst much has been done, we are still of the view that progress is too slow”.
Still too few women make CFO
According to the government-backed Hampton-Alexander Review, of which Odgers Berndtson are active contributors, while women now make up one third of all board positions in the UK’s FTSE 100 companies, up from 12.5% less than a decade ago, there remains a concerning lack of female representation in senior leadership and key executive roles in FTSE companies, with just 15% of finance directors bring women.
“One of the Big Four partners informed me that their annual graduate intake split is around 52% women, 48% men. By the time this age group reaches their early thirties, the number goes down to 34% women,” explains van den Bosch Wazen. “Since many CFOs of listed businesses in the UK take the audit route, before moving into industry, the disparity of diverse talent coming into the market starts early and is not able to catch up later.”
Recent McKinsey research for its Women in the Workplace report for North America backs this up. While research shows that women and men in financial services begin their careers making up roughly equal portions of entry-level staff, once you get higher up the ladder, women account for only 19% (one in five) of positions in the C-suite.
The research suggests that as women advance through their careers, they steadily lose ground to their male peers at every stage, suggesting the pathway to the CFOs office is not as clearly illuminated for female candidates.
Why women make good CFOs
And yet the evidence suggests that when women do make it to CFO, the payoff for organisations is positive. Companies with female CFOs and CEOs prove more profitable than those led by men, with women-led firms generating US$1.8 trillion more in gross profit than the sector average, according to a report by S&P Global.
Furthermore, as van den Bosch Wazen points out, according to McKinsey’s latest Diversity Wins report, companies with more than 30% of women executives are more likely to outperform companies where this percentage ranged from 10-30%.
“The benefits speak for themselves and I’m thrilled that investors are pushing harder for this,” states van den Bosch Wazen. “The more diverse your management team, the more engaged your workforce, and the better your customers are looked after. You are better informed of the world, you tend not to miss trends, making your balance sheet strong and your organisation run more efficiently.”
Cristina Catania, Partner at McKinsey & Company agrees that gender diversity “enriches decision-making and so has a positive impact on companies’ performance and sustainability”, however more specifically, and in the context of the finance function, she points out that studies have found that “women have higher risk aversion than men and that can be a good thing”.
Maggie Xu, Principal of Greater China Financial Services Practice at Oliver Wyman, agrees suggesting research shows that female CFOs are more risk averse and tend to adopt more conservative accounting policies. And for “those companies/industries with higher litigation risk, default risk, systematic risk, or management turnover risk, who are more focused on accounting conservatism, female CFOs may well do a better job”.
Arguing that women are “equally qualified to effectively address current and future challenges and disruptions”, Hanady Khalife, Senior Director of MEA & India for the Institute of Management Accountants further points out that beyond operations, inclusive working cultures where women leaders exist have been known to attract and retain top talent.
“No matter how you look at it, women leaders are good for business and for building more sustainable, self-sufficient and increasingly shockproof businesses, even economies,” asserts Khalife.
In our roundtable, we talk to these four female financial leaders to identify the barriers facing women and discover how organisations and leaders can facilitate their advancement.
International panel discussing women as CFOs
Julia van den Bosch Wazen
Consultant, Odgers Berndtson’s CFO Practice
Principal, Greater China Financial Services Practice, Oliver Wyman
Partner, McKinsey & Company
Senior Director, MEA & India Operations, Institute of Management Accountants
Why are women under-represented in senior financial positions, and the CFO role specifically?
Julia van den Bosch Wazen, Consultant, Odgers Berndtson’s CFO Practice: Women in key financial management roles tend to have a shared set of challenges, such as balancing home/work life, which is overcome by having the right support and an engaged sponsor at work. Sponsors are often men in senior management positions. Men are essential in furthering the development of all strands of diversity in the workplace, and the more informed diversity and inclusion allies there are, the better the company performs. COVID has forced the majority of companies to work from home and highlighted to many employers the dual nature of a working woman’s careers. That said, pre-pandemic, many female CFOs said to me that their life was a constant balancing act of whom to disappoint more – their partners, kids, or friends. Senior women rarely disappoint their employers, just like their male peers.
During the executive search processes we run, Boards will actively seek diversity, though in a risk adverse hiring market, like the one that we are in, many end up choosing proven Board experience over and above stepping up talent. It is widely publicised that there are more men in those roles than there are women, and so the balance is again not restored, further facilitating the lack of Board experienced women.
Cristina Catania, Partner, McKinsey & Company Unfortunately, this under-representation of women in senior roles isn’t exclusive to finance – it’s a similar picture in business management and strategy. But, prior to COVID, concentrated efforts were making some gains. Across all industries, we’ve seen women’s representation in the C-suite increase by 24% since 2015, including some notable appointments in the financial sector, like Jane Fraser at Citi. There is, however, a broken rung at the very bottom of the corporate ladder that is stalling progress.
Our annual Women in the Workplace study of women in North America shows that for every 100 men, just 72 women are promoted and hired to manager. Women get stuck at the entry level and fewer become managers. Not surprisingly, men then end up holding 62% of manager-level positions, while women hold just 38%. The number of women decreases at every subsequent level, so despite improved hiring and promotion rates for women at senior levels, they aren’t able to catch up.
Hanady Khalife, Senior Director, MEA & India Operations, Institute of Management Accountants One would assume this is a problem most prevalent in the Middle East but it is global. A National Bureau of Economic Research study from Denmark found that even at the height of their careers, women tend to spend more time raising children, and so work fewer hours, take longer breaks from full-time employment, and are more likely to move into less demanding jobs with lower growth and less pay.
Other reasons include the pay gap, lack of mentorship and coaching, and aggressive competition by male colleagues, as well as lack of female C-suite role models. When women don’t see role models or potential paths towards executive-level leadership, they are more likely to deselect themselves out of such roles.
Maggie Xu, Principal, Greater China Financial Services Practice, Oliver Wyman In research, we identified four critical barriers for women seeking leadership. Firstly, men and women define effective leadership differently, while women leadership candidates tend to be evaluated by men. This misalignment in key leadership traits between the genders creates obstacles to women rising to leadership roles. In China, although significant increase in the ratio of companies with female executives has been observed during the decade, extensive research indicates that the rate for female CEO remains very low, and CEOs are critical in assessing the performance of CFO candidates.
Secondly, women’s focus or predisposition toward results, along with a dislike of ‘networking for networking’s sake,’ may cause them to miss an important dimension of what ultimately impacts leadership promotion decisions. We also discovered that qualified women are unintentionally left on the sidelines, partly because women are simply not top of mind, and so are less likely to self-advocate and must battle inaccurate assumptions related to their willingness to take on more intense roles.
Also, men and women perceive their readiness for the next role very differently, and most companies do not actively mitigate that bias at play. A woman often won’t apply to a job unless she feels she meets 100% of the described qualifications, while for men, it’s more like 60% and as we all know, raising one’s hand does not necessarily equate with capability.
Finally, research shows women are more likely to have ideas mis-attributed to others, be talked over in meetings, receive vague or unconstructive feedback, and be viewed negatively for visibly demonstrating the same confidence that is valued in male leaders. Many high potential women, weary of bias, exit the talent pipeline, either opting out of the workforce or choosing a different career.
How can organisations and leaders motivate, empower and facilitate women in reaching CFO status?
Julia van den Bosch Wazen Mentorship from senior colleagues is vital in helping women to navigate the mid-point of their career. Our philosophy in the CFO Practice facilitates that same ethos: we want to help advise women early on to help build careers toward the three-stage interview process they will face when stepping up to their first Main Board role. A financial management career for a listed CFO role needs to be built to answer the questions a CEO will pose (do you have commercial and operational P&L experience to be my partner in setting strategic goals); the Audit Chair (will you give me comfort in your technical financial management skills to assure that the business will not have to restate its numbers); and the Chair (do you keep my CEO ‘in check’, and will you let my Audit Chair rest easy at night).
There are a number of roles within the finance function I strongly encourage women to take en route to Board, to gather experience against the above criteria. I also urge women to do more external networking. I’ve set up bi-annual women’s networking lunches giving senior female talent the opportunity to hear how experienced finance leaders have successfully developed their careers. These have been well-received and have now broadened out to both our Regional CFO and Financial Services Practices to help deepen the advice shared.
When selecting a headhunting firm, I would urge that you ask what they are doing to support the D&I agenda during the pitch process. Your candidate list might well be diverse, but if you see that those who are looking likely to be shortlisted are all non-diverse, check why, and what can be actioned based on feedback.
Cristina Catania Talent attraction is the first step to sustaining a pipeline to fill CFO roles long term. For finance, there is a need to create multiple role model examples to inspire young women to join this career path, which is increasingly at the centre of key company decision-making. We know from our study that when employees believe that their company offers both fairness and opportunity, they are three times more likely to remain at the company, be fully engaged and recommend the company to a peer. What we know about the experiences of women at entry levels in financial services indicates that a perceived lack of fairness and opportunity could be contributing to the steep drop-off in female representation between entry-level and middle management roles.
Specifically, women early in their careers are less likely to aspire to top positions. This could be due to a lack of female role models, but women also report less interest in executive roles due to concerns about balancing work and family and the perceived pressure that accompanies top jobs. Even when women do aspire to the top positions, they typically do not receive the sponsorship support that would enable them to succeed.
Our 2017 Women in the Workplace research shows that women who receive advice from senior leaders on career advancement are more likely to be promoted, and yet earlier-tenure women receive less encouragement and support from senior leaders than do their male counterparts.
The programmes that are showing impact in creating a sustainable pipeline of women start with the creation of a more ‘inclusive’ workplace, created through HR parental policies (applicable also to fathers, which in turn allows for shared parental responsibilities) and doubling-down on additional welfare services like in-office daycare.
Other measures include removing gender biases in assessing criteria for being eligible for a promotion, flexibility arrangements, leveraging maternity as an upskilling moment, the introduction of sponsorship programmes, and measuring and publishing target setting. And all steps need to be truly sponsored and promoted by the CEO and cascaded throughout the whole organisation.
Hanady Khalife Increasing opportunities for women to advance to leadership roles in the organisation begins with understanding the internal pipeline to identify barriers and obstacles to advancement and in turn, establishing measurable goals for building equity.
Organisations need to develop corporate cultures that support women who wish to achieve a healthy work/life balance, rather than breed cultures that penalises them for attempting to balance priorities. But while firms need to focus on more affirmative action to ensure gender equality, whether through quotas or recruitment programmes, they also need to pay more attention to how women can be mentored better to keep pace with new and emerging industry requirements.
Maggie Xu Organisations can be more purposeful in levelling the playing field for women, and by changing the emphasis from fixing things bottom up to top-down, effects will take place faster. We believe there are three core elements in this effort: inclusive leadership starts at the top, so educate your existing leadership and motivate them to be change agents; target D&I like a business to get more results; and double down on sponsorship, improving the effectiveness of senior leaders’ sponsorship of the women.