The UAE Banks Federation, which represents 56 lenders in the country, pledged Dh1 trillion ($272 billion) in sustainable financing by 2030 during the Cop28 UN climate summit in Dubai.
The commitment is aimed at fulfilling the country's ambitions of reaching its goal of net zero by 2050, Abdulaziz Al Ghurair, chairman of the UAE Banks Federation, said on Monday during a finance-themed day at Cop28.
“Cop28 has provided the UAE Banks Federation with a remarkable platform, empowering us to unite and deliver on a sustainable finance objective,” he said.
“We are a catalyst for action, inspiring and urging our banking institutions to pledge their commitment, financially and strategically, to propel us towards 2050 net-zero milestone.
“Our aim aligns seamlessly with the UAE government's climate agenda and Year of Sustainability, urging us all to forge a path that aligns finance with a greener future.”
Eleven UAE banks were highlighted during the announcement, including First Abu Dhabi Bank, Mashreq Bank, Abu Dhabi Commercial Bank, Emirates NBD, Dubai Islamic Bank, RAK Bank, National Bank of Fujairah and Abu Dhabi Islamic Bank.
The move “underscores the significant efforts in the UAE and globally towards sustainable finance mobilisation”, UAE Central Bank Governor Khaled Balama said in a statement.
“As we navigate the challenges posed by climate change, it is imperative that the financial sector plays a pivotal role in fostering innovative solutions and ensuring resilience.”
The commitment also signals a “proactive approach in setting ambitious targets for redirecting financial resources into green, responsible and sustainable solutions and technologies”, said Dr Sultan Al Jaber, Cop28 President.
“This bold initiative sets a strong precedent for other global actors to step up and do the same. Collaboration on this scale is pivotal in creating the necessary momentum to confront the challenges ahead.”
The move adds to the series of climate finance pledges made by the UAE during the Cop28 summit, which it is hosting until December 12.
The announcement was made during the day dedicated to finance at the summit, when officials addressed the vast gap between the money available and the need for support in the fight against climate change.
The finance-focused day at Cop28 brought together leaders from key international financial institutions to address climate action and the need for sustainable finance.
'Pledge more,' IMF chief says
Governments must remove fossil fuel subsidies, which reached $7.1 trillion last year, but this can only be done “if we build social protection” for the most vulnerable people in societies, said Kristalina Georgieva, managing director of the International Monetary Fund.
The IMF chief called for higher pricing on carbon, which would be “the biggest possible incentive for decarbonisation”.
“We are here at Cop to say the following: we are coming promising more [and] we will next year show that we delivered,” Ms Georgieva told a gathering of policymakers and financial institution representatives at a panel titled “Global climate action through fostering sustainable finance”.
“Pledge more, do more, and when u do more, step up once again.”
Bigger role for private finance
Central banks globally must ensure that financial systems are resilient to climate shocks in terms of both physical damage from climate change and climate-related risks facing financial institutions, said Ravi Menon, managing director of the Monetary Authority of Singapore.
Bank regulators should also plan for and support “an orderly” green transition by taking into account the impact of climate change on gross domestic product and inflation, he said.
They can do this through stress-testing their balance sheets under different climate scenarios, Mr Menon added.
Central banks have a role to play in “mobilising the private capital” that is necessary to solve the problem of climate financing, he said.
“There is no international consensus on this: some central bank regulators see it as just a bit beyond their mandates, others see it as an essential part of their mandates because it is everybody's business and everyone needs to weigh in,” Mr Menon explained.
The IMF is working with countries to identify the policy obstacles facing climate finance, the policies needed to attract private investors to fund the climate transition and bringing together private financiers and the large multilateral banks “so we can identify how we can get the collective to act”, Ms Georgieva said.
There is an urgent need to direct more financing towards emerging economies and developing countries, the panelists said.
“I cannot stress enough how critical it is that money goes to emerging markets and developing economies,” Ms Georgieva said.
This is where the emissions are growing, and if we want to be successful in the fight against climate change, then we have to get really excited about a big river of capital flowing in the developing world.”
The battle against climate change needs to be brought mainly to developing and emerging economies, where “the real pain points”, Mr Menon said.
Asia will be particularly “decisive” for that fight as it accounts for half of global greenhouse gas emissions and millions of people do not have access to electricity, he added.
“You need to solve Asia's energy transition problem, provide electricity, not retarding growth and development and giving the vulnerable an opportunity, at the same time decouple growth from greenhouse gas emissions,” he said. “You need technology and financing.”
However, the cost of capital is too high to attract investment, creating a funding gap, he said.
“There is no pathway to net zero without blended finance to bring down the cost of capital.”
The IMF chief said the world needs to views climate action in a more positive light rather than as bad news.
“This is an opportunity not to be missed. If you don’t move fast, you will be left behind. It's time for a mindset change,” Ms Georgieva said.
“In this Cop, I finally see the beautiful face of climate action: it is wonderful, it is good news.”