Sustainable Finance and Investment Banks: ESG Adoption and Implementation Challenges: A Case Study of Saudi Arabia

Abstract

The research examines environmental and adoption of Environmental, Social, and Governance (ESG) practices in Saudi Arabian investment banks, which are fast economic diversifying as part of the Vision 2030 framework. The proposed study closes an important gap in the established literature because it focuses on the ESG integration in a developing country with a hydrocarbon-based economy. It aims to examine how the ESG principles are understood, applied, and affected by the Saudi investment institutions, in line with the international standards and national policy goals. Using a qualitative case study approach, the study collected primary information by means of semi-structured interviews conducted among 12 respondents who had experience in various ESG-related activities at commercial and investment banks. These interviews offered qualitative data on the presence of the ESG policies, their enactment, regulation, and reward structure, which was examined through the prism of the Stakeholder Theory, Institutional Theory, and Resource-Based View. The findings reflect that, even though there is high awareness of ESG, its practice is irregular, and the application focuses mostly on compliance as opposed to implementation as a strategy. Concerns of governance are placed first over the environmental and the social aspects, and the Vision 2030 is much more symbolic than of a strategic nature. This paper also identifies some crucial constraints, such as a lack of standardized reporting, regulatory uncertainty, and an inadequate institutional capacity. All the respondents underscored the necessity of financial incentives, green finance, and tax relief as some of the key tools aiding the development of ESG adoption. The research suggests improving ESG competencies in the banking sector, a mandatory reporting system, incentive-based approaches to compliance, and making the sustainability goals formulated under Vision 2030 convertible to policies with enforcement ability. The given actions are likely to enhance the integration of the ESG strategy, as well as enhance the institutional responsibility, and make Saudi Arabia a credible participant on the sustainable finance stage.