UAE has brought energy to climate change agenda, top IFC official says

Makhtar Diop, managing director of the International Finance Corporation, has lauded the “energy” that has been brought to the climate agenda by the UAE as it prepares to host Cop28.

In an exclusive interview with The National, Mr Diop expressed his “thanks to the UAE authorities” and added: “I think that His Excellency Dr Sultan Al Jaber’s role as leading the effort for Cop28 will be very good.”

He went on to explain: “We have seen already the energy that has been put by the UAE authorities by His Excellency Dr Al Jaber [Minister of Industry and Advanced Technology], and we believe that with his leadership, we will be able to really accelerate [our] partnership” with entities such as the International Renewable Energy Agency and the International Energy Agency, but also “countries which are supporting the energy transition”.

Mr Diop discounted questions about having Dr Al Jaber, who is also Group CEO and Managing Director of Adnoc, as the Cop28 president designate, saying: “The reality is that today, the UAE is one of the countries that invests most in renewable energy. That's a reality, that is a fact. So one can say a lot of things, but facts are here.”

What we have experienced is that anytime we put $1, we are able to mobilise not only our own capital at the IFC but to mobilise a lot of investment from the capital market, private investors, fund managers and pension fund managers

Makhtar Diop,
managing director of the IFC

“I do think that the commitment that we have seen, from the UAE, in accelerating that transition by having companies like Masdar, which are investing in the world, by having the Abu Dhabi Development Fund investing in the energy transition, speak for itself,” he added.

“For me, the dialogue that we have been having with Dr Al Jaber has been a very strong dialogue. And I'm very confident that he will do a great job.”

Speaking to The National during his visit to Dubai to attend the World Government Summit, Mr Diop also stressed the importance of public-private partnerships in dealing with climate change.

Getting the money to fight climate change

One of the biggest challenges facing climate action is that of finance. Raising the needed $100 billion per year, as agreed in Cop15 in 2009, has been a challenge for developed countries.

Ensuring climate investment in developing countries will be vital to mitigate climate change and help countries adapt to its ramifications.

The IFC invests in particular areas to encourage private investment.

“The way we are structuring deals to invest in the energy transition … is that we try to bring people into the frontier markets, also to invest in technology which are expensive, which are not yet totally profitable,” Mr Diop said. “So to do that, we need to bring some grant money and which allows investors to do risky investments.”

With the IFC committing funding, it is able to reduce the risk to private investors and gives a dose of confidence to an industry or field.

“What we have experienced is that anytime we put $1, we are able to mobilise not only our own capital at the IFC but to mobilise a lot of investment from the capital market, private investors, fund managers and pension fund managers … [who] are much more comfortable,” Mr Diop said.

“When we put $1 of grant money, it allows us not only to put a significant amount of money but to mobilise a large amount of money from the capital market. And the ratios that we have found so far are one to 10.”

Among the investments that the IFC was able to scale up and that will be critical to the energy transition is the scaling of solar power.

Mr Diop explained that by investing in solar, the IFC brought “standard contracting, transparency and at times competition” to the market, allowing others to invest.

“And the combined factors have really cut the cost significantly and attracted more and more investment — so that was 10 years ago,” he said.

Wind is now another source of power that is attracting investment, with the IFC and the UAE having recently invested in Egypt.

World Government Summit 2023 — in pictures

Water resource management, hydrogen development and solar panels

Hydrogen is another power source attracting investment and attention.

“We are seeing a lot of excitement in hydrogen and green hydrogen … but we know that it's important to ensure that it's part of the supply chain,” Mr Diop said.

“So what can be done for ammonia, to be used also for fertilisers, and how we can be integrated in that chain.”

Hydrogen is difficult to transport, so it is generally used locally. Mr Diop said it is important to look at water in a number of ways, as it “is much less developed and important to look at” for the coming Cop28 in the UAE.

Water resource management, hydrogen development and cleaning solar panels all require the use of water and are among the areas the IFC plans to look into.

“More and more, we need to really to focus on the technology which allows us to reduce the cost of desalination to allow us to use maybe ocean water,” Mr Diop said. More investment will be crucial in water, he added.

Adapting to climate change remains underfunded, especially as returns are often lower, and Mr Diop said the private sector will be crucial for it.

He explained that “investing in adaptation is fighting poverty … because if we look at most of the interventions which are related to adaptation, they are really helping the poorest”.

Mr Diop named “smart agriculture and coastal erosion” as two important fields that are also related to fighting poverty.

This week, the IFC signed an agreement with Abu Dhabi Fund for $1.5 billion to invest in emerging markets.

Dr Sultan Al Jaber and IFC managing director Makhtar Diop witness the signing of the agreement by Masdar chief executive Mohamed Al Ramahi and IFC vice president Mohamed Gouled on February 14. Photo: Abu Dhabi Media Office

The roots of the deal started a year ago when Mr Diop visited the UAE “and it actually went very fast”.

“What we are bringing is a portfolio of investment, the countries that we know very, very well, areas that we have been doing a lot of work with upstream teams, and new business development teams, and all that we bring them into the fund and say the $1.5 billion that you want to deploy in those countries, we can do co-financing,” he said.

Mr Diop stressed that there are a number of priorities in tackling the climate crisis, explaining that “the solution will not be mainly a public sector solution, because of the limitations that we are seeing in public funding”.

He added that “PPP [public-private partnerships] will be an important part of it”.

“And the first P, which is a public site, needs to be funded,” he added. “Often we have PPP, but the counterpart funding that is needed by the government is not really available.”

While the International Monetary Fund can be brought in to help, the IFC works at bringing in private-sector investment. Mr Diop also spoke of his organisation’s work with the International Energy Agency and Irena, saying of the latter: “We have been working with them for a long time and continue working with them.”

The need for investment comes at an economically difficult time for public sector financing in major global economies.

However, there is “capital available” that should be deployed, according to Mr Diop.

“Institutions like the IFC are critical at this time because we are in a unique place to be able to make that connection, to be able to talk with our colleagues from the World Bank Group to help put in place policies that are conducive to investment for the private sector,” he said.

“We are proud to work with the private sector; it is our raison d’etre to be able to move to mobilise capital.”

Mr Diop said the IFC would be doing much more work on climate change and added: “We have just closed our half-year numbers and half of our investment has been 50 per cent climate change-related.”

The IFC has beaten its own target, as it had committed to 35 per cent of its total annual investments to be climate-related.

However, Mr Diop said the work is only possible by working with others, from philanthropies to the UN Environmental Programme.

“We need to bring people working on macro policies, like our colleague from the IMF, the World Bank Group is working on, all the sectoral policy that needs to be done,” he said.

“And we are working with partners like Irena, international energy agencies and Unep. We are working also with them very closely. So this is a time where it's impossible to do anything if you don't work in partnership with others.”

Masdar projects — in pictures

World record transfers

1. Kylian Mbappe - to Real Madrid in 2017/18 - €180 million (Dh770.4m - if a deal goes through)
2. Paul Pogba - to Manchester United in 2016/17 - €105m
3. Gareth Bale - to Real Madrid in 2013/14 - €101m
4. Cristiano Ronaldo - to Real Madrid in 2009/10 - €94m
5. Gonzalo Higuain - to Juventus in 2016/17 - €90m
6. Neymar - to Barcelona in 2013/14 - €88.2m
7. Romelu Lukaku - to Manchester United in 2017/18 - €84.7m
8. Luis Suarez - to Barcelona in 2014/15 - €81.72m
9. Angel di Maria - to Manchester United in 2014/15 - €75m
10. James Rodriguez - to Real Madrid in 2014/15 - €75m

if you go

The flights

Air Astana flies direct from Dubai to Almaty from Dh2,440 per person return, and to Astana (via Almaty) from Dh2,930 return, both including taxes.

The hotels

Rooms at the Ritz-Carlton Almaty cost from Dh1,944 per night including taxes; and in Astana the new Ritz-Carlton Astana (www.marriott) costs from Dh1,325; alternatively, the new St Regis Astana costs from Dh1,458 per night including taxes.

When to visit

March-May and September-November

Visas

Citizens of many countries, including the UAE do not need a visa to enter Kazakhstan for up to 30 days. Contact the nearest Kazakhstan embassy or consulate.

Infiniti QX80 specs

Engine: twin-turbocharged 3.5-liter V6

Power: 450hp

Torque: 700Nm

Price: From Dh450,000, Autograph model from Dh510,000

Available: Now

Company%C2%A0profile

%3Cp%3E%3Cstrong%3ECompany%20name%3A%20%3C%2Fstrong%3Eamana%3Cbr%3E%3Cstrong%3EStarted%3A%20%3C%2Fstrong%3E2010%3Cbr%3E%3Cstrong%3EFounders%3A%3C%2Fstrong%3E%20Karim%20Farra%20and%20Ziad%20Aboujeb%3Cbr%3E%3Cstrong%3EBased%3A%20%3C%2Fstrong%3EUAE%3Cbr%3E%3Cstrong%3ERegulator%3A%20%3C%2Fstrong%3EDFSA%3Cbr%3E%3Cstrong%3ESector%3A%20%3C%2Fstrong%3EFinancial%20services%3Cbr%3E%3Cstrong%3ECurrent%20number%20of%20staff%3A%20%3C%2Fstrong%3E85%3Cbr%3E%3Cstrong%3EInvestment%20stage%3A%20%3C%2Fstrong%3ESelf-funded%3Cbr%3E%3C%2Fp%3E%0A

Which honey takes your fancy?

Al Ghaf Honey

The Al Ghaf tree is a local desert tree which bears the harsh summers with drought and high temperatures. From the rich flowers, bees that pollinate this tree can produce delicious red colour honey in June and July each year

Sidr Honey

The Sidr tree is an evergreen tree with long and strong forked branches. The blossom from this tree is called Yabyab, which provides rich food for bees to produce honey in October and November. This honey is the most expensive, but tastiest

Samar Honey

The Samar tree trunk, leaves and blossom contains Barm which is the secret of healing. You can enjoy the best types of honey from this tree every year in May and June. It is an historical witness to the life of the Emirati nation which represents the harsh desert and mountain environments

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

Tamkeen's offering

Option 1: 70% in year 1, 50% in year 2, 30% in year 3
Option 2: 50% across three years
Option 3: 30% across five years

Avatar: Fire and Ash

Director: James Cameron

Starring: Sam Worthington, Sigourney Weaver, Zoe Saldana

Rating: 4.5/5

Lexus LX700h specs

Engine: 3.4-litre twin-turbo V6 plus supplementary electric motor

Power: 464hp at 5,200rpm

Torque: 790Nm from 2,000-3,600rpm

Transmission: 10-speed auto

Fuel consumption: 11.7L/100km

On sale: Now

Price: From Dh590,000

The specs: 2018 Nissan 370Z Nismo

The specs: 2018 Nissan 370Z Nismo
Price, base / as tested: Dh182,178
Engine: 3.7-litre V6
Power: 350hp @ 7,400rpm
Torque: 374Nm @ 5,200rpm
Transmission: Seven-speed automatic
Fuel consumption, combined: 10.5L / 100km

The specs

Engine: 2.0-litre 4cyl turbo

Power: 261hp at 5,500rpm

Torque: 405Nm at 1,750-3,500rpm

Transmission: 9-speed auto

Fuel consumption: 6.9L/100km

On sale: Now

Price: From Dh117,059

ENGLAND SQUAD

Eoin Morgan (captain), Moeen Ali, Jonny Bairstow, Sam Billings, Jos Buttler, Tom Curran, Alex Hales, Liam Plunkett, Adil Rashid, Joe Root, Jason Roy, Ben Stokes, David Willey, Chris Woakes, Mark Wood

India squad

Virat Kohli (captain), Rohit Sharma, Mayank Agarwal, K.L. Rahul, Shreyas Iyer, Manish Pandey, Rishabh Pant, Shivam Dube, Kedar Jadhav, Ravindra Jadeja, Yuzvendra Chahal, Kuldeep Yadav, Deepak Chahar, Mohammed Shami, Shardul Thakur.

'The Lost Daughter'

Director: Maggie Gyllenhaal

Starring: Olivia Colman, Jessie Buckley, Dakota Johnson

Rating: 4/5

How to get there

Emirates (www.emirates.com) flies directly to Hanoi, Vietnam, with fares starting from around Dh2,725 return, while Etihad (www.etihad.com) fares cost about Dh2,213 return with a stop. Chuong is 25 kilometres south of Hanoi.

While you're here

Aya Iskandarani: Debates on sovereignty and neutrality alive in Iraq and Lebanon

Robin Mills: Iran's deeper partnership with China is not all that it appears to be

Thomas Harding: US military ready for redeployment of troops to the Gulf

The specs

Engine: 5.0-litre supercharged V8

Transmission: Eight-speed auto

Power: 575bhp

Torque: 700Nm

Price: Dh554,000

On sale: now

ETFs explained

Exhchange traded funds are bought and sold like shares, but operate as index-tracking funds, passively following their chosen indices, such as the S&P 500, FTSE 100 and the FTSE All World, plus a vast range of smaller exchanges and commodities, such as gold, silver, copper sugar, coffee and oil.

ETFs have zero upfront fees and annual charges as low as 0.07 per cent a year, which means you get to keep more of your returns, as actively managed funds can charge as much as 1.5 per cent a year.

There are thousands to choose from, with the five biggest providers BlackRock’s iShares range, Vanguard, State Street Global Advisors SPDR ETFs, Deutsche Bank AWM X-trackers and Invesco PowerShares.

COMPANY PROFILE

Name: Kumulus Water

Started: 2021

Founders: Iheb Triki and Mohamed Ali Abid

Based: Tunisia

Sector: Water technology

Number of staff: 22

Investment raised: $4 million

UAE has brought energy to climate change agenda, top IFC official says

Makhtar Diop tells The National that the UAE is one of the countries that invests most in renewable energy

Getting the money to fight climate change

World Government Summit 2023 — in pictures

Water resource management, hydrogen development and solar panels

Masdar projects — in pictures

World record transfers

if you go

Infiniti QX80 specs

Company%C2%A0profile

Which honey takes your fancy?

Al Ghaf Honey

Sidr Honey

Samar Honey

Tamkeen's offering

While you're here

Kareem Shaheen on Canada

Killing of Qassem Suleimani

While you're here

Avatar: Fire and Ash

Lexus LX700h specs

The specs: 2018 Nissan 370Z Nismo

The specs

ENGLAND SQUAD

India squad

'The&nbsp;Lost&nbsp;Daughter'

How to get there

While you're here

The specs

ETFs explained

COMPANY PROFILE

'The Lost Daughter'