NBK launches sustainable financing framework

National Bank of Kuwait (NBK) launched its Sustainable Financing Framework as it continues to build a market-leading position in sustainable development, enabling and promoting responsible business practices to help steer the economy towards long-term value creation, as well as supporting Kuwait National Adaptation Plan (NAP) addressing climate change.

The framework details the four core components of the International Capital Market Association (ICMA) and Loan Market Association (LMA) principles, namely, Use of Proceeds, Process for Project Evaluation and Selection, Management of Proceeds and Reporting.

It is also aligned with the Green Bond Principles (GBP), Social Bond Principles (SBP) and Sustainability Bond Guidelines (SBG) published in June 2021 by the International Capital Market Association (ICMA).

Under the Sustainable Financing Framework, NBK can issue three types of instruments; First: Green Financing Instruments – the proceeds of which are exclusively allocated to Green Asset Categories. Second: Social Financing Instruments – the proceeds of which are exclusively allocated to Social Asset Categories. Third: Sustainability Financing Instruments – the proceeds of which are allocated to both Green or Social Asset Categories.

S&P Global Ratings provided its opinion on the alignment of NBK’s Sustainable Financing Framework with the components of the International Capital Market Association (ICMA) and the Loan Market Association (LMA), confirming that the “Use of Proceeds” is strongly aligned with the applicable principles.  Process for project evaluation and selection, Management of proceeds and reporting were also aligned with relevant principles.

Commenting on this development, Isam Al-Sager, Group Vice-Chairman and GCEO said: “The aim of establishing our sustainable financing framework is to integrate environmental and social governance standards into all our operations, in addition guides our transitions in support of a more sustainable and low carbon economy , all while supporting Kuwait’s sustainable growth enshrined in New Kuwait Vision 2035.

Emphasizing the importance of the framework, Al-Sager said that NBK’s sustainable financing framework is an important step bringing NBK closer to global capital markets, further strengthening NBK’s leading market position.

Al-Sager highlighted that NBK strives to embed  ESG practices into its long-term strategies, in addition to developing approaches  to assess climate change risk and integrating sustainability factors into NBK’s business plans.

He also pointed out that NBK has developed internal targets to reduce gross operational emissions by 25% by the year 2025. The Bank is also considering various technologies and R&D opportunities to expand its dependencies on renewable energy beyond 2025 with an aspiration to become net zero operationally by 2035.

Furthermore, NBK headquarters building has been designed and equipped with several environmentally- responsible aspects, “Being a certified LEED gold building, significantly improving all environmental factors that we collect, measure and report, including greenhouse gas (GHG) emissions and paper and plastic recycling”, Al-Sager said.

He praised NBK’s significant progress in terms of women’s participation in the labour force, as well as female board representation both in Kuwait,  and NBK’s international subsidiaries.

Additional governance measures included the restructuring of NBK Board Committees and the appointment of four independent members in the board of directors who bring with them extensive expertise in ESG practices. The Bank has also updated and published its policies to further enhance transparency, business ethics and integrity.

Al-Sager explained that NBK continues to focus on employee training and development, education, cybersecurity and data protection, in addition to the Bank’s commitment to labor and human rights practices.

NBK has expanded the scope of its sustainability disclosures and its commitment towards the principles of the Global Reporting Initiative (GRI) as a main framework for reporting, in addition to aligning its reporting to UN Sustainable Development Goals (SDGs), Kuwait’s National Development, and Boursa Kuwait’s voluntary sustainability disclosures.

It is worth mentioning that NBK is the first banking institution in Kuwait to issue a sustainability report highlighting the bank’s social, economic, and environmental initiatives and the implementation of corporate governance principles in accordance with the standards of Integrated Reporting (IR) Framework and the Global Reporting Initiative (GRI). The bank’s efforts in this regard over the past years were recognized by inclusion in the FTSE4Good Index and the Refinitiv AFE Low Carbon Select Index in MENA, in which NBK ranked first among regionals banks and Kuwaiti companies in terms of the index’s weight.