UAE financial sector ready to boost sustainable funding in sync with net-zero goals

Green financing to businesses will help sustainable economy development in the country, officials tell Abu Dhabi Sustainability Finance Forum

The Abu Dhabi Global Market on Al Maryah Island. Availability of green financing is key to the UAE's sustainable economic development. Victor Besa / The National

The UAE's financial sector is aligned with the country’s net-zero goals and boosting the availability of green financing to local businesses to accelerate sustainable economic development in sync with the Emirates' carbon neutrality ambitions, according to government officials.

Forty financial institutions are already pursuing sustainable finance initiatives, setting an example for others to follow and help to develop and diversify the country’s economy, Mohammed Al Shorafa, chairman of Abu Dhabi Department of Economic Development said on Wednesday.

“The UAE’s financial sector is committed to assisting the country’s delivery of its national climate goals and programme, most notably, the net-zero by 2050 strategic initiative,” he told the fourth edition of the Abu Dhabi Sustainable Finance Forum, a part of Abu Dhabi Sustainability Week.

“I do believe we have achieved steady progress and demonstrated the extent of our sustainable finance and economic diversification initiative.”

However, a lot needs to be done, including pushing innovation, broadening the sustainable economic base and driving public-private partnerships before the UAE reaches its goal of carbon neutrality by mid-century, Mr Al Shorafa said.

The department is already “facilitating and encouraging” provision of smart and greener financing to local businesses, which reflects the emirate’s approach to the future of finance and sustainable development.

Abu Dhabi’s Dh5 billion ($1.36bn) initial public offering fund, which will soon be managed by Added, is a step in that direction.

The IPO fund was launched by the Abu Dhabi government last year as part of the broader package of incentives and reforms to boost the emirate’s capital market and help local businesses raise money through listing on the Abu Dhabi Securities Exchange.

“Our mandate is to identify and invest in seven to 10 private companies, including family businesses and SMEs [small and medium size enterprises], and support up to 20 listings annually with advisory services,” he said.

Added will select the private sector entities for investment and listings based on various eligibility criteria including sustainability and prospects of their long-term contribution to the economy, as well as their potential to further deepen the emirate’s capital markets.

“Candidate firms will have a sustainable financial model, with a clear growth path and strong equity story,” he said. This will help in bringing the components of the national economy at a global stage in a “sustainable manner”, he said.

The UAE is pursuing aggressive goals to reduce its carbon footprint and last year became the first country in the Middle East to set a net-zero target. The country aims to achieve carbon neutrality by 2050 and plans to invest $160bn on clean and renewable energy sources alone over the next three decades.

Abu Dhabi Global Market, the emirate’s international financial centre and one of the fastest growing financial hubs in the world, is also committed to supporting the UAE in meeting its commitments on sustainability.

ADGM, which hosts the annual sustainable finance forum, has been strengthening its “regulatory framework, policies and services” as an international financial hub to promote sustainable investments.

“ADGM’s mandate is to provide a progressive financial platform and holistic ecosystem that support Abu Dhabi and the UAE’s long-term economic development and sustainable growth,” said ADGM chairman Ahmed Al Zaabi.

The financial centre on Wednesday also announced a cohort of 18 financial companies that joined the Abu Dhabi Sustainable Finance Declaration, bringing the total to 59. Launched in 2019, the voluntary, membership-based initiative seeks to foster sustainable financing activities and responsible investments in the UAE.

The new signatories include The Gulf Bond & Sukuk Association, Franklin Templeton, Deloitte, AirCarbon Exchange, Natixis, Libra Project, Think HQ, Apex Group, Carbon Credit Xchange and Ernst & Young Middle East, among others

Our mandate is to identify and invest in seven to 10 private companies including family businesses and SMEs and support up to 20 listings annually with advisory services

Mohammed Al Shorafa,
chairman, Abu Dhabi Department of Economic Development

The UAE, which has long been committed to protecting its environment and embracing clean energy, began financing clean energy projects more than 15 years ago, and has so far invested more than $40bn in the sector to date.

The country is still pursuing the goal of increasing its sustainable power generation capacity to decarbonise its grid and sustainable financing will play a major part in achieving that goal, Mohammed Al Hammadi, managing director and chief executive of Emirates Nuclear Energy Corporation told the forum.

“The UAE economy continues to grow rapidly, which means our energy demand is increasing too, specifically electricity demand,” he said.

“The UAE government has made clean electricity a strategic priority” and has invested heavily in nuclear and solar power generation capabilities to achieve its sustainability targets.

In 2017, the UAE launched Energy Strategy 2050, which aims to increase the contribution of clean energy in the total energy mix to 50 per cent by 2050 from 25 per cent. The country plans to reduce its carbon footprint of power generation by 70 per cent and seeks to increase the consumption efficiency of individuals and corporates by 40 per cent by the middle of the century.

The country is the only Arab nation that has a full-size operational nuclear power plant. The Emirates recently completed the construction of Unit 3 at Barakah Nuclear Energy Plant. Unit 1 is fully operational and Unit 2 was recently connected to the main grid and continues to undergo testing.