Hossam Abdel Nabi (Dubai)
Banks and financial institutions in the UAE play a major role in supporting sustainability efforts and liberalizing the financing needed to adapt to climate change and implement the decarbonization agenda, according to bankers and experts in financial institutions.
They assured Al-Ittihad that banks operating in the country have expanded in offering banking products and services to meet the desires of investors and companies to invest surplus funds in deposit accounts, which aim to support financing environmental and social projects, such as renewable energy, energy efficiency, sustainable transportation, and green buildings. infrastructure deployment.
They pointed out that investing in climate adaptation and sustainable projects can be attractive and commercially viable for the private sector, as 54% of investors in the UAE expect to increase their sustainable investments by 2023, while individual investors can direct 367 billion dirhams to finance the transition to zero emissions, as well as This reflects positively on the growth of the overall economy, as studies show that investing 10 billion dirhams in climate adaptation contributes 100 billion dirhams to the UAE’s GDP by 2030.
climate adaptation financing
Rola Abumaneh, CEO of Standard Chartered Bank in the UAE, said that the banking sector plays a critical role in unlocking the financing needed to adapt to climate change, along with the global decarbonization agenda. She said: The bank estimates that investing 10 billion dirhams in climate adaptation to withstand the expected climate damage could contribute more than 100 billion dirhams to the country’s gross domestic product by 2030.
And she emphasized that if the minimum investment amounting to 110 billion dirhams is not provided, across 10 global markets including the UAE, India, China and Pakistan, the expected damage, including lost growth in gross domestic product, may reach more than one trillion dirhams, pointing out that the investment The required adjustment of AED 110 billion represents just over 0.1% of the combined annual GDP of the 10 markets.
Abu Manneh indicated that the UAE is at the forefront of countries combating climate change, and has shown a strong commitment to achieving climate neutrality by 2050 to set an example not only at the regional level, but also at the global level as a whole. She stated that adapting to climate change is a common necessity at the international level, as any failure to combat this change will create a common societal burden of increasing cost. She added that the financial sector plays a crucial role in directing capital towards adapting to climate change and establishing support points to prove that investment in climate adaptation can be attractive and commercially viable for the private sector, which will reflect positively on the growth of the overall economy, revealing that according to the results The “Adaptation Economy” report, which includes 10 global markets and also includes 150 bankers, investors and asset managers, 59% of the participants plan to increase their investments in climate adaptation during the next 12 months, and adaptation financing is expected to increase “on average” from 0.8% of assets globally in 2022 to 1.4% by 2030.
Abu Manna stated that, in light of the high pace of sustainable development throughout the UAE, companies are working hard to find different ways that are in line with their systems to participate in their application, so Standard Chartered Bank has added innovative solutions through the sustainable Islamic account that provides customers with the opportunity to solidify their surplus balances. cash to participate in sustainable financing and projects financed by the bank, such as solar energy projects, water utilities, etc., indicating that deposits in sustainable Islamic accounts that are compatible with Islamic law will be used to finance sustainable projects, based on the framework of green and sustainable products from Standard Chartered Bank, which is in line with United Nations Sustainable Development Goals.
In addition, First Abu Dhabi Bank launched the new current account linked to sustainability for corporate clients, in a step that consolidates its environmental leadership at the level of the banking sector in the country. The sustainable account supports clients in achieving environmental, social and corporate governance goals, by making sustainable development activities part of their day-to-day cash management. First Abu Dhabi Bank corporate clients can use the sustainable account to maintain the daily liquidity necessary for business requirements, and pay and receive dues, while First Abu Dhabi Bank, in turn, will ensure that the amounts deposited in the accounts are used to finance sustainable projects, in line with the bank’s sustainable financing framework.
For his part, Stephen Bonvino, Head of Institutional and General Sales, Trade and Treasury Solutions, Emerging Markets in Europe, the Middle East and Africa at Citibank, said that the bank offers sustainable deposits in order to help companies invest excess funds in deposit accounts, which aim to support financing Environmental and social projects, such as renewable energy, energy efficiency, sustainable transportation, green buildings, and the deployment of basic infrastructure and services at reasonable prices. He stressed that the bank’s customers place sustainability at the top of their main priorities, and therefore the deposit strategy is one of the innovative ways to show the bank’s commitment to helping customers in the UAE achieve their sustainability goals through banking products and services, noting that Emirates Global Aluminium, which is the largest industrial company in the UAE Outside the oil and gas sector, she announced the opening of a sustainable bank account in cooperation with the Bank to promote sustainability and we look forward to supporting her in her sustainability journey.
Sustainability loans and financing
HSBC Bank announced motivating customers to preserve the environment by granting a home loan to own a sustainable home, while taking advantage of the low interest rates on an environmentally friendly home loan, noting that this loan is part of the bank’s commitments related to climate change. , and the ambition to align the financing portfolio with the goals of the “Paris Agreement”, in addition to supporting the UAE government’s vision for sustainable environment and infrastructure for the year 2021 and the Dubai 2040 Master Plan. The bank also announced a discount on fixed interest rates when financing environmentally friendly cars, whether fully electric or hybrid cars, as well as a personal loan to protect the environment to help customers pay the costs of solar panels for the home, while saving the value of the electricity bill.
For her part, Shelly Trench, managing director and partner in the Boston Consulting Group, said: The total issuance of debt related to sustainability in the Middle East region witnessed an increase of more than four times during 2021 compared to 2020, as the issuance of green and sustainable debt instruments grew. Accelerating despite the relative lack of regulation of green financial instruments, explaining that, according to a report titled “Green Finance for a Zero-emissions Middle East,” regulatory pressure in most Middle Eastern countries is not strong enough to force banks to take immediate action on climate issues. Although climate change imposes a range of risks on its investment portfolios.
Trench indicated that given the role that development banks and funds can play in supporting green investments, the Boston Consulting Group report presents three basic recommendations. The first is to provide financing for green projects that are not bankable by banks with lower adjusted returns or higher investment risks. Such as supporting the research and development of innovative technologies, including renewable energy and carbon capture and storage technologies. She added, “Private capital investments in green projects must also be strengthened, by improving their risk-adjusted returns by using various tools to mitigate risks, stressing the need to harness expertise to provide support and advice to policymakers and regulatory bodies regarding the necessary reforms to expand the scope of financing projects to address climate change.
According to the results of the “Sustainable Banking Services for the Year 2022” report, which explores investment opportunities in the field of environmental, social and governance priorities, the UAE has great potential to achieve growth in sustainable investment, estimating the amount of money that individual investors in the UAE can direct towards environmental and social governance priorities. and corporate governance, exceeding 367 billion dirhams, especially in financing the climate transition to net zero, pointing at the same time to the possibility that this capital also plays an important role in bridging financing gaps in other priorities that fall within the environmental, social and governance priorities of the UAE, Including food and water security, in addition to pollution and waste management.
In addition, the Wealth Outlook report issued by Standard Chartered Bank, which examines the changes in investor decisions and their impact on the main investment asset classes in more than 14 countries, including the UAE, reveals that sustainable investments continue to receive the attention of investors and their capital. Greenwashing concerns persist, however, announcing that 54% of UAE investors expect to increase their sustainable investments in 2023 compared to 52% of global investors.
future investment trends
In turn, Rishi Kapoor, Co-CEO of Investcorp, a global investment management company, said that the results of the third edition of the annual survey of Investcorp in partnership with the International Institute for Management Development showed that there are 5 main trends for future investment in terms of current importance, which will increase in the future. The next three decades, which are digitization and artificial intelligence, renewable energy, and energy security, followed by the aging of the world’s population, then electric vehicles and energy storage batteries, noting that cash flow, capital demand, market expectations and sectors, in addition to the regulatory environment, are among the most basic elements. When considering future investment topics.
private sector investments
Walid Sheta, President of Schneider Electric in the Middle East and Africa, spoke about activating private sector investments in the energy transition within the Abu Dhabi Sustainability Week 2023. He said: The UAE is investing heavily in environmentally friendly energy projects and witnessing significant increases in clean energy production. It is a commitment embodied in its pioneering initiatives, such as the launch of the UAE Energy Strategy 2050, and the progress it has made so far in launching 11 environmentally friendly energy projects worth $43 billion (159 billion dirhams), revealing that sustainable financing solutions enjoy global and local interest, while major companies By adapting to sustainability, as one of the basics of work, as a government report estimates the value of the UAE market for climate-friendly green bonds and sukuk at about $17 billion now.
Sheta stressed that major companies, especially in the private sector, have the ability to contribute effectively to accelerating the achievement of their commitments related to climate neutrality, issuing green projects, and establishing bonds related to sustainability. He stated that over the past few years, Schneider Electric has been committed to helping customers reduce and avoid carbon dioxide emissions, noting that during the “Covid-19” pandemic in 2020, Schneider Electric launched the first convertible bond linked to sustainability at a value of 650 million. Euro, where one of the key performance indicators was to reduce and avoid carbon dioxide emission for customers by 2025.