“Today’s consumer wants access to a highly personalised experience”

How is the Covid crisis shaping the demand for sustainable finance? What is the impact of this on the issuance of green bonds and sukuks, as well as banks’ desire to introduce these products?

Even before the onset of the Covid-19 pandemic, sustainable finance had already begun to gain significant traction in the region, with sustainable and ESG considerations playing a crucial role in various national strategies, such as Saudi Arabia’s Vision 2030 and the UAE’s Towards the Next 50 strategy. These initiatives have seen a number of large-scale projects that look to further accelerate a movement towards renewable energy sources. Standard Chartered has played a role in many of these projects, including that of the lead arranger of the Noor Energy 1 project, the world’s largest concentrated single-area solar power plant with a capacity of 5,000MW by 2030. Companies are also taking part in this growing agenda in their own efforts to innovate. A clear recent example being Etihad Airway’s Transition Sukuk, which was a world first on a number of levels with Standard Chartered acting as Joint Sustainability Structurer.

This bodes well for green financing. Interestingly, the volume of debt issuances has remained robust in 2020, despite market disruptions caused by the pandemic. We initially saw a surge in social bond issuances in the first half of the year, with the proceeds from Covid response bonds going towards areas such as healthcare or other business support measures, such as the Islamic Development Bank’s $1.5 billion issuance in June. However, green bond issuances have picked up over the second half including in the region — Qatar National Bank and Saudi Electric Company both coming to market with first-ever green transaction for each respective country. We expect to see further sustainable issuances as banks in the region continue to lend to sustainable projects and companies take advantage of opportunities presented by the energy transition.

Covid-19 has accelerated the pace of digitisation in banking and altered consumer behaviour with greater adoption of digital technologies. Do you think these behaviours will outlast the pandemic? How is Standard Chartered planning to address these changes?

From wealth management to personal banking, we have been experiencing a shift to digital for years. It was a conscious choice for Standard Chartered to adopt a mobile-led digital strategy and to invest in an affordable, easy to roll out end-to-end digital bank offering but that choice was also driven by changing consumer behaviours and preferences. The pandemic served as a large-scale, abrupt test-drive of these technologies, further confirming the importance of championing digital. Consumer behaviours have also undergone a shift as a recent survey conducted by Standard Chartered found that two thirds of consumers in the UAE expect the country to become fully cashless by 2030. The apparent shift will eventually spur a reconfiguration of physical branches, which are evolving from being transaction-oriented to being focused on advisory services.

As an international bank that is deeply rooted in this country, we are investing heavily in technology as we want to help position the UAE as a beacon of technology for the wider region.

What has been Standard Chartered’s response to fintech innovations?

We have embraced technology with open arms. From retail and mobile banking, to digital-only banks, technology has its hand in seemingly every aspect of the industry and, the quicker banks adapt and implement technology within their operations, the further ahead they’ll be. In my opinion, the influence of technology will only increase and further launch banking into a digitised future.

We also vigorously monitor trends across our markets, in order to effectively address consumer demands. A great example of this is the launch of our digital banks across Africa, first launched in Côte d’Ivoire in 2018. Since then, we have rolled out eight digital-only banks across key African markets, providing easily accessible and convenient banking services. This marked the most extensive digital rollout of its kind in Africa by an international bank.

Moving ahead, we will continue to invest in technology to keep up with the rapidly evolving needs of our clients. We’re committed to magnifying our position as a market leader in fintech through the introduction of first-of-their-kind services and offerings across the markets we operate in.

What’s the top digital priority for the region over the next few years?

The banking industry has evolved over the past few years, underpinned by disruptive technologies. We are seeing significant demand from consumers for a more comprehensive suite of offerings, in addition to products and services that deliver frictionless experience. Today’s consumer wants access to a highly personalised and inclusive experience, as well as access to a wide variety of services from the comfort of their homes.

The greatest potential lies in disruptive technologies that make banking more accessible, efficient and convenient. Open banking, for instance, allows the financial services sector to seamlessly integrate with that of the retail and lifestyle sector, providing consumers with a dynamic blend of services through a singular platform.

What considerations should be made concerning fundraising through debt instruments in the current economic climate?

Accessing capital has traditionally been a challenge for private sector participants. Since the coronavirus outbreak, liquidity has become even more tight and an urgency for working capital is widespread. As a result of mounting investor worries, the bond market has experienced the deepest sell-off since the 2008 financial crisis, withdrawing over $34 billion (Dh124 billion) during the second quarter of 2020. However, companies that wish to access the credit market are able to explore an array of viable financing options, including leveraging lower borrowing rates through traditional credit providers or considering alternative funding sources such as private debt.

Tell us about the demand dynamics between international and local investors around green bonds. What is demand like from local investors for green bonds?

International demand has been a significant driver for the market, with European investors in particular offering dedicated green funds that are providing a new source of demand. Yet many investors in green bonds are from conventional funds who are interested in the credit story of the company and see the green element as an added extra — the additional governance and transparency around a green bond can only be a positive.

While the sustainable debt market has been growing rapidly, with volumes remaining strong this year despite the current pandemic due to the increase in social bond issuance in response to this crisis, there is still much more demand than supply and therefore a lot of competition for quality green debt.

How has Standard Chartered fared so far in 2020? How will the growth trajectory look like in 2021?

Globally, the group delivered a resilient performance beating analyst expectations in 2020, despite challenging macroeconomic conditions. In the Africa and Middle East, we continue to have a good operating performance, coupled with our strong capital position to help weather the challenges resulting from low interest rates, which are likely to remain low for the foreseeable future. As economies and businesses emerge from the disruption caused by the pandemic, we are committed to continue helping our clients, colleagues, and the communities navigate the uncertainties ahead. The next few months will also see a reduction in operating expenses, which will help us increase investments in our digital capabilities as well as in our affluent business.

With over six decades in the UAE, the bank has committed its portfolio of proficient financial resources to reinforcing the country’s position as a thriving investment hub.

The UAE will always play a major role in achieving the growth strategy for the bank, being a major trade hub and gateway to Africa and the Middle East.