Qatar Islamic Bank (QIB) has become the first fully-fledged Islamic bank and the first Qatari bank to adopt the Equator Principles (EP), a framework for managing environmental and social risks in project financing.
“We are committed to sustainability in all our business activities, and becoming a signatory to the Equator Principles is a significant step forward in this regard,” Bassel Gamal, group CEO of QIB, commented.
QIB’s adoption of the principles follows First Abu Dhabi Bank (FAB)’s in late 2015. While not fully Islamic, FAB offers Islamic solutions.
According to QIB, the signing of the principles is in line with the bank’s business strategy to contribute to Qatar National Vision 2030 as well as the UN SDGs.
It will see the bank update its risk management framework to comply with the principles and monitor ESG-based risk exposure in new projects. It is also expected to contribute to enhancing risk-awareness among its customers through the bank engaging with its customers on risk mitigation.
According to Bassel, incorporating ESG risk analysis is essential to mitigate climate risks and support responsible risk decision-making for the bank.
The EP consist of 10 risk management principles to assess environmental and social risks in project finance. Based on the International Finance Corporation’s Performance Standards under the World Bank Group, the EP currently have 138 members across 38 countries.
While the signing of the EP is expected to enhance the risk management procedure for QIB, it may also limit its opportunities for providing project financing.
According to the EP Association’s governance rules, financial institutions who have adopted the EP shall not provide project finance, project-related corporate loans, project-related refinance or project-related acquisition finance to projects where the client is unable to comply with the principles.