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QNB outperforms global peers in ESG ranking

QNB outperforms global peers in ESG ranking

QNB, the largest financial institution in the Middle East and Africa, has emerged numero uno in the MSCI ESG ranking, out performing the world’s top 10 Big Banks.

The global index provider MSCI’s ESG rating history of QNB shows that the bank’s rating grew steadily from “BB” in October 2015 to “BBB” through September 2016 and September 2018 hitting the top notch “A” ranking in August 2019. QNB stood out from its global peers and the banking giants like China Merchants Bank, HSBC Holding, Agricultural Bank of China, China Construction Bank Corporation, JPMorgan Chase etc. in the ESG rating.

“QNB’s “A” rating means that it is very strong on its leadership side. Its strong position for meeting digital challenges drives the upgrade”, Raman Aylur Subramanian, Global Head of Equity Applied Research, MSCI, said while addressing the ‘MSCI Qatar ESG & Climate Change Forum’, here yesterday.

QNB’s is a fantastic story. This rating trend is very critical for companies, he said. “The improvement in rating will drive the stock prices of a company upward immediately. The ESG trend momentum is critical for companies. If a company is downgraded in ESG terms, the stock prices will go down more rapidly than anything else”, Subramanian said.

Both in the industrial distribution and social side, QNB is top scorer. In the financial access side, the bank is best in the class. The MSCI ESG score card shows QNB grabbed top position in segments like financing and environmental, financial product safety, human capital development, access to finance, privacy and data security and corporate governance.

On the bank’s strength side of the financial system, Subramanian said this is one of the top ten Big Banks which have done so much on the side of social security and digitization.

“Overall, on the industry related score, QNB has scored of 5.8 out of 10, which is very high compared to the peers. That’s why we rated it ‘A’, compared to its global peers… QNB should be very proud of these achievements. Compared to global banking giants QNB is right on the top”, he said.

However, on the financial access, the MSCI feels that the bank should take little more action on the SME side. Gender diversity in the board is another issue the bank should be looked into, in terms of ESG.

Subramanian said the ESG ecosystem is expanding fast. United Nations Principles for Responsible Investing (UNPRI) has grown to over 1,500 signatories with $81,7 trillion in Asset under Management (AuM). Investors are becoming less tolerant of corporate ESG incidents. Thirty years ago, Exxon’s stock price barely moved when Exxon Valdez spilled huge volume of oil on the Alaskan shore. Today, investors are making companies accountable for their actions.

Subramanian, who said ESG is financially relevant, cited a MSCI ESG research study which found that companies with high ESG ratings had higher profitability, lower tail risk and lower systematic risk on average based on 10 years of data.

Subramanian said ESG is increasingly becoming part of fiduciary considerations. For instance, the UK Pension Fund Regulatory says that the Trustees of UK pension funds should consider ESG factors, when making investment decisions, where such factors are financially significant.