First Abu Dhabi Bank wants to lead the regional banking sector’s transition to net zero, the lender’s chief sustainability officer said, with the bank already slashing its carbon emissions by 47 per cent from 2017 to 2020.
Shargiil Bashir, chief sustainability officer at FAB and part of the UAE delegation to Cop26, said the bank, the UAE’s largest lender by assets, has a responsibility to lead by example and drive the shift to net zero.
The lender, which this year became the first Mena bank to issue a green bond, has financed more than $10 billion in sustainable projects.
“With size comes a responsibility and we do want to be a pacesetter within the region. We want to lead from the front,” Mr Bashir said.
“ESG [Environmental, Social, and Governance] is not about being the best, or about being the first, it is about leading others. It’s important that it's not just us, we need to get everybody on board.”
Mr Bashir said sustainability was a “core part” of the bank’s strength, with its programme to make its company greener starting in 2017.
“This is not something we have just started now because everybody's talking about it. This is a journey we started a long time ago. And now we just need to accelerate because this is accelerating on an international level," he said.
The Cop26 talks in Glasgow aim to secure enough national promises to cut greenhouse gas emissions to keep the rise in the average global temperature to 1.5°C, with a number of important pledges already made including commitments to phase out coal, slash methane gas emission and reduce deforestation.
Meanwhile, the UAE unveiled the Agriculture Innovation Mission for Climate, a joint initiative with the US that will mobilise $4bn to enhance the agriculture sector’s resilience to climate change. The Emirates also backed the Glasgow Leaders’ Declaration on Forests and Land Use.
The UAE's strategy to reduce carbon emissions by 2050 was unveiled last month, with Dh600bn ($163.35bn) invested in clean and renewable energy sources over the next three decades.
Four weeks ago, the lender committed to the Net-Zero Banking Alliance making it the first UAE and GCC bank to join the group of global financial institutions committed to aligning their lending and investment portfolios with net-zero carbon emissions by 2050.
Green financing linked to sustainability projects in the Middle East and North Africa region reached $6.4 billion in the first half of 2021, topping the amount raised through the whole of last year, Bloomberg’s H1 2021 Capital Markets League Table showed.
FAB has a two-pronged approach to hit its net-zero goals in line with the UAE commitments, Mr Bashir said, with the first examining how it can reduce its carbon emissions and water use.
The bank has already replaced plastic water and coffee cups with reusable cups and installed lights that turn off automatically when a room is empty. It is also considering sources of renewable energy to power its buildings, such as solar panels.
“We need to be much more resource-efficient company, so focusing on recycling will be important as well as how we can reduce our water and energy consumptions; how we can be smarter in our procurement and how we can use renewable energy,” Mr Bashir said.
FAB's wider net-zero strategy concerns supporting its customers, both retail and corporate clients, as they embark on their own transition journeys.
The volume of green funding in the first six months of this year is 38 per cent higher than the $4.7bn raised throughout 2020, with FAB taking a leading role in green bonds.
The bank last week issued its second Swiss Francs (CHF) denominated green bond of the year with a CHF200 million ($284m), five-year bond, which attracted strong institutional investor demand.
It followed the CHF260m five-year green bond issued in January, with the bank also issuing a five-year $30m green bond, bringing total green issuances to $1.36bn across multiple currencies.
Last month, FAB was the strategic partner, along with HSBC, for Etihad Airways' $1.2bn sustainability loan – a first in global aviation – linked to ESG goals.
The agreement – the airline's third sustainable financing transaction – saw FAB and HSBC act as joint ESG structuring banks and co-ordinators on the deal.
Mr Bashir said “the big transaction” was evidence of how FAB is already delivering sustainable finance solutions to customers, “but we need to do a lot more”.
While many of the UAE’s bigger companies, such as Etihad, have already made sustainable transactions, “the majority of companies in the country” have not started that journey of thinking about “what net zero means to them”, Mr Bashir said.
“Now that the government is committed, everybody will need to make their own plans on how to get there and this is where we can be the enabler by saying, ‘what kind of financing will they need in that transition’?" he said.
FAB is also planning to offer green products, such as green car loans and green mortgages, to its retail customers, with preferential interest rates for those that fit the criteria, such as someone buying an electric vehicle or a homeowner installing green energy solutions on their property.
"We have seen other international banks using some of those things and we are looking into how this can be done over time," Mr Bashir said.
On Friday, the UAE Sustainable Finance Working Group, made up of local regulators and exchanges chaired by The Abu Dhabi Global Market, pledged to create a road map of how sustainable financing can happen in UAE.
"It's still very new but once we have that road map, it will be much easier for us to align the products. But the endgame will see a difference between the pricing for a conventional loan and a green loan or conventional financing or a green financing," Mr Bashir said.
"If you're building a house and you decide to have solar panels or a more efficient cooling system ... that is something that will make it green. We're also seeing a lot of project developers focusing on new buildings, properties or developments [looking at] how they can be sustainable. We need to be there to support this transaction."
