What the Mideast can learn from global circular economy trends
As governments across the globe scramble for ways to address the looming impact of climate change, the modern challenge is to ensure that the transition is economically viable.
Financial institutions have increasingly played a prominent role in the transition to a greener world — whether in facilitating clean energy projects or capturing the economic opportunities of the circular economy.
According to consultancy firm Opimas, environmental, social, and governance investments jumped to over $40 trillion in 2022 from $23 trillion in 2016. This rise strongly points to a paradigm shift in investment sentiment, where financial decision-makers gravitate to a more responsible deployment of capital.
There is a strong business case for investors, banks, and other financial services firms to tap into the promises of a circular economy.
According to a UK-based Ellen Macarthur Foundation report, a circular economy model could offer annual benefits amounting to $2.1 trillion in Europe alone. China, one of the biggest economies in the world, could also greatly benefit from circular economy practices — up to $10 trillion in 2040.
Need to embrace sustainability
These projections are essential in the ongoing conversation about balancing ESG commitments with value creation for corporations. The fight against climate change and environmental degradation could be lucrative, and this drives a strong impetus for governments and the private sector to build and rebuild their economies against sustainable practices.
Many institutional-level initiatives have provided frameworks for countries and domestic industries to adopt a circular economy. Legislation across Europe, South America, and the Middle East have accelerated this shift. In the UAE, the cabinet approved a circular economy policy which sets out a blueprint for the country’s wider sustainability push.
Governments across the region have acknowledged the need for emerging economies to create a more sustainable economic system — especially amid region-specific challenges such as water security and income diversification.
In addition, influential companies such as Saudi Arabia’s Aramco, the world’s biggest oil producer, have joined the pledge to adopt circular economy practices.
The Kingdom has pledged billions of dollars to fund a region wide adoption of solutions geared towards significantly cutting down solutions.
The transition is happening — the more important question is how do we keep it going?
Challenge to keep the momentum
Governments and businesses will have to get unwavering support from financial actors —particularly those with the scale, reach, and expertise — to further stimulate the transition and ensure no one is left behind.
Inclusivity is key to this economic transformation, and in our experience at Standard Bank, we have seen a positive trend toward empowering the continent of Africa in achieving both its environmental and economic goals.
The continent is poised to continue recovering from the impact of COVID-19, and experts and government leaders have triggered new conversations about rebuilding the economy influenced by ESG-related policies and initiatives.
Although structural reforms could be underway, a lot is still to be done from a financial perspective.
The financial sector needs to create internal systems that could facilitate the creation of circular economy-focused products and services. The Ellen Macarthur Foundation report showed a promising trend of debt and equity instruments related to the transition. Financial regulators, banks and governments have identified specific areas of opportunity to further reflect the advantages of a circular economy to their operations and the way they intend to support businesses in the wide adoption of these principles.
Moving forward, one of the most effective ways to promote the circular economy is by making it economically viable. The global transition will remain a delicate balancing act between economic prosperity and social and environmental responsibility.
The key is to remember that both principles are not mutually exclusive.
Policy makers in the Gulf region as well as private sector leaders are very aware of those dynamics. With its forward-looking business environment, the region could offer wide opportunities to navigate this transition in the most optimal way.
• Rassem Zok is the CEO of Standard Bank MENA.