In the past few years, a new trend in investment has emerged and taken the world by storm, leaving many enterprises scrambling to embark on a journey that is dubbed as ESG investing. Environmental, Social, and Governance (ESG) practices and standards have significantly changed the landscape of investment and the way it is allocated, based on environmental performance, social impact, and governance issues.
Essentially, incorporating ESG methodologies into any enterprise yields long-term sustainability. Therefore, Lebanese enterprises that have been floating without a strategic direction towards success and sustainable growth must adapt in the face of the current financial and economic crises. The crises negatively impacted the business environment and disrupted its smooth operations. The lack of liquidity affected the ability of companies to operate and secure their basic working capital needs, which led them to either function at minimum capacity or even freeze their operations.
Enterprises, and in turn their survival, are vital to the economic recovery and in the current global trends and climate, they are forced to explore alternative funding solutions from individuals and organizations wanting to utilize their investments to generate positive social outcomes.
In today’s fast paced world, Lebanese enterprises are required to adapt with the inevitable business changes that are occurring on the global level. Adherence to ESG criteria has become a necessity and not a mere endeavor practiced by thoughtful business owners.
This is where the role of the United States Agency for International Development (USAID) Lebanon’s Trade and Investment Facilitation (TIF) project becomes essential. TIF is a multi-year project focused on facilitating trade, import substitution, investment, and policy reform. Under TIF, on behalf of USAID, we are pioneering innovative development approaches to economic growth. We are conscious of this necessary transformation and decided to prompt, prepare, and support local Lebanese enterprises with all the requirements to adhere by ESG standards. Despite the challenging situation, we were able to spearhead the initiation of the ‘Lebanon ESG Stewardship Program,’ supporting the country in remaining at the forefront of the business and investment enabling environment and being among the very few countries in the MENA region to achieve this.
Towards this end, we partnered with Capital Concept S.A.L. to implement the Lebanon ESG Stewardship Program. The methodologies of said program were developed in collaboration with the International Finance Corporation, the European Bank for Reconstruction and Development, and the UN agencies in Lebanon.
The Lebanon ESG Stewardship Program addresses several world class concerns for companies across all sectors, encourages them to comply with responsible business practices, to grow and improve, as well as achieve market advantages and competitiveness, thus leading them to become more lucrative for investors. It will also provide them with guidelines developed in a common language to help them address and manage organizational risks in a cost-effective way.
TIF’s engagement will promote sustainable growth benefiting both companies and investors. As USAID TIF, we will support the first 100 eligible companies which will enroll in Capital Concept’s stewardship program. It will be used as a tool to guide the selected companies to become more socially responsible, environmentally compliant and to run sustainable businesses, making them safer, stronger performers and more attractive for investors. It will also help address the economic challenges by preparing the grounds for these companies, providing them with support, mentorship, and guidance all the way to receiving the ESG certifications. This extensive program will lead to strengthening the supported entities and making them investment ready. In fact, it will improve exports, management practices, create business linkages and new economic opportunities for all the sectors in the Country.
Along with advancing the national economy, having a solid ESG Program will attract both individual and institutional investors who are willing to pay for shares of well-governed companies, in addition to paving the way for future growth and diversification. The program will set specific guidelines developed in a communal language to help improve their business environment while addressing and managing organizational risks in a cost-effective way.
This partnership is of strategic importance to the Lebanese economy, given that it is the basis for future growth. As ESG is becoming imperative for investment decisions, funding, and support, it is essential to prepare local entities and guide them through the detailed requirements to become ESG certified by embarking on this scalable and sustainable stewardship program.