By Todd Wilcox

As mns of words will likely be written over the next two weeks to variously scrutinize and analyze, cheer and chide the discussions that take place at the UN COP27 climate conference, I want to be as clear as possible with mine ⁠— businesses and investors are at a critical juncture.

It is essential for business leaders to adopt a proactive approach to integrate environmental, social and governance (ESG) principles into their business planning, management and delivery, and to understand the ESG risks in their own operations and their supply chains.

Managing the transition to a net zero carbon economic model as part of this ESG commitment is becoming more pressing as climate change challenges become more pronounced.

Our clients recognize how important it is that they transition their business models.

A full 97% of capital markets issuers in the Middle East who responded to the HSBC 2021 Sustainable Finance and Investing Survey said they had increased the attention that they pay to ESG issues over the past year.

Some 45% of issuers said that they were already seeing the impact of climate change on their business or activities, and 78% of issuers said they were actively working on their net zero commitments.

This is positive news, but rest assured investors will be looking for more, especially with the goal of the Egyptian presidency of COP27 being to accelerate the global decarbonization drive, while also achieving a ‘just transition’ that factors in the needs and responsibilities of all countries and peoples.

A successful COP27 will result in an acceleration of climate policies ⁠— unlocking incentives for investment to reduce emissions as well as building resilience. This would drive more disclosure, more targeted regulation, and the integrity of corporate climate strategies.

The UN’s own estimate of the scale of investment required is daunting: USD 125 tn between now and 2050. Their analysis suggests that over 70% of this capital needs to come from the private sector, including the financial system. This is an immense and unprecedented challenge, which requires borderless solutions and action.

So what does this mean for you as businesses and investors?

According to the latest HSBC Navigator report, 38% of businesses working in Egypt are putting more than 10% of their operating profit towards becoming more sustainable.

We are seeing this happening on the ground as well through our conversation with our clients. I met with one of our clients in Alexandria earlier this year who manufactures textiles for European markets and I was impressed to witness firsthand how he is adjusting his operations to boost the sustainability of his business.

Meaningful change happens when government and the private sector ⁠— be it private finance or private industry ⁠— work together to agree solutions to the emerging challenges our planet is facing.

Transition risk is a reality for every business in the world. But it always has been ⁠— a business only succeeds if it can adapt fast to emerging challenges and trends in the marketplace. Climate change amplifies this transition risk because it is truly global, and requires globally-agreed and globally-accelerated solutions.

We have helped clients across Egypt navigate changing market conditions for many years. Now, as Egypt welcomes the world to Sharm El Sheikh, we all have an opportunity to help the world rise to the climate challenge and mobilize the transition to a global net zero economy.

Todd Wilcox is CEO and deputy chair of HSBC Egypt. We last interviewed him on 2 June 2022 here. HSBC’s column on Enterprise appears every second Monday.