DINAR REVALUATION REPORT : Al-Alak Signs Agreement with the International Finance Corporation on Banking Sustainability Roadmap IRAQ 2024, 24 SEPT

Al-Alak Signs Agreement with the International Finance Corporation on Banking Sustainability Roadmap IRAQ 2024

Overview

On September 23, 2024, a significant milestone was achieved in the Iraqi banking sector as Ali Al-Alak, the Governor of the Central Bank of Iraq (CBI), signed an agreement with the International Finance Corporation (IFC), a member of the World Bank Group [2]. This agreement aims to develop environmental and social risk management guidelines for the banking sector and launch a seven-year Sustainable Finance Roadmap [2]. The roadmap, covering the period from 2023 to 2029, is designed to enhance the performance of Iraqi banks in various areas, including environmental and social risk management, encourage the availability of sustainable banking products, and increase the competitiveness of the banking sector [2].

Objectives of the Agreement

The Sustainable Finance Roadmap and Environmental, Social, and Governance (ESG) Code, launched as part of this agreement, are crucial steps towards improving sustainable financing for the banking sector and strengthening Iraq's financial infrastructure [2]. The objectives include: Enhancing the performance of Iraqi banks in environmental and social risk management. Encouraging the availability of sustainable banking products. Increasing the competitiveness of the banking sector. Supporting financial stability. Reducing environmental and sustainable risks. Promoting social development [2].

Key Highlights

1. ESG Code Development: The new ESG Code sets specific standards and practices that Iraqi banks can integrate into their business strategies and investment decisions, paving the way for greater mitigation of ESG risks across the banking sector [2].
2. International Commitment: IFC's partnership with the CBI represents a significant milestone in Iraq's strategic approach towards sustainable finance, demonstrating IFC's commitment to strengthening the country's financial infrastructure and increasing the competitiveness of its banks [2].

Impact and Significance

The signing of this agreement and the launch of the Sustainable Finance Roadmap are significant for several reasons: Global Demand for Sustainable Finance: The global demand for sustainable financial products highlights the need for banks to consider ESG issues in their risk management framework to attract investments [2].Role of the Central Bank: As a Central Bank, the CBI plays a key role in sustaining the development, growth, and financial stability of Iraqi banks, ensuring their ESG performance matches international standards [2]. Sustainable Economic Pathways: The agreement is particularly important as Iraq faces challenges posed by climate change, requiring approximately $233 billion by 2040 to address the developmental gaps necessary for pursuing sustainable economic pathways [1].

Conclusion

The agreement between Al-Alak and the International Finance Corporation marks a pivotal moment for the Iraqi banking sector, setting a strategic course for sustainable finance and environmental, social, and governance standards. This collaboration not only aims to strengthen the banking sector's resilience and competitiveness but also supports Iraq's broader goals of financial stability and sustainable development in the face of environmental and social challenges.