Six major UAE banks (FAB, ADCB, ENBD, DIB, Mashreq, and ADIB) have collectively dedicated over AED190 billion ($51.8 billion) to green financing for various projects by the end of 2022. 

 

According to the UAE Banks Federation (UBF), the sole representative and unified voice of banks in the UAE, the financing was done in renewable energy, waste-to-energy and green technology.

 

The tremendous growth in green funding by UBF members aligns with the guidelines of Central Bank of the UAE's Sustainable Finance Working Group, and sector-wide sustainability objectives, all of which support the initiatives during the 'Year of Sustainability' and the UAE's hosting of COP28.

 

Sustainability top priority

Jamal Saleh, Director General of UBF, said: "Sustainability is a top priority for us. While Central Bank of the UAE leads integrating it into the regulatory frameworks and advancing Islamic sustainable finance in the UAE, we at UBF are committed to supporting its goals in delivering necessary changes in our UAE finance sector. And, in line with National Climate Change Plan of the UAE 2050 and United Nations' SDGs, our financial sector is playing a pivotal role in helping the UAE achieve net zero emissions."

 

The Director General identified three major areas through which Federation members will drive the transformation of the financial sector. First, propelling green projects by providing funds and issuing green bonds. Second, by inculcating green practices among customers, SMEs, suppliers, and vendors by promoting eco-friendly operations and living. And, last, by measuring and efficiently managing every UBF member's own carbon footprint and reporting the reductions achieved by the sector.

 

The Federation noted the proactive role of the banking sector in combating climate change through green financing commitments and climate initiatives and said that providing green finance and issuing green-oriented funds has emerged as a powerful mechanism to meet sustainability commitments of various organisations in the UAE in particular, and the region, in general. 

 

An active partner in UAE's sustainable pursuits, UBF works in close collaboration with Central Bank of the UAE and all UBF members to support establishing the groundwork for the transformation to a sustainable economy.

 

Net-Zero Banking Alliance

United Nations has convened a Net-Zero Banking Alliance that brings together a global group of banks representing over 40% of global banking assets, who are committed to aligning their lending and investment portfolios with net zero emissions by 2050. 

 

Meanwhile, UBF has built a top-notch ESG steering committee comprising subject matter experts to drive the ESG and green finance sector to work under the guidance of Central Bank of the UAE's policy, which will adopt sustainability principles in reserves management and monetary operation to work towards strengthening the principles and frameworks for green finance.

 

The UAE is a pioneer in introducing sustainability standards and principles in the banking and finance sector, having introduced the Abu Dhabi and Dubai Sustainable Finance Declarations in 2016 and 2019, respectively, as well as the Guiding Principles for Sustainable Financing in 2020 to promote the development of a green financial market, and the National Sustainable Finance Framework in 2021.

 

In addition, the UAE is one of the first countries to include sustainability reports among the mandatory disclosures of public companies listed on the stock exchange, reflecting the importance given by regulators to sustainability. 

 

Green sukuks and bonds

The country's banks and financial institutions have initiated the issuance of green sukuk and bonds, whose total market in the UAE has been around AED62.4 billion in recent years, with the aim of accessing institutional sources of financing that contribute to reducing the negative impact on the climate and environment and strengthen the sector's role in achieving an integrated system for sustainable development, as well as providing attractive returns for investors.

 

Saleh added: "Achieving net zero emissions requires the full participation of the financial sector to channel capital into environmentally sustainable and climate-resilient investments. In January 2020, the UAE published a set of guiding principles for sustainable finance to promote the development of a green financial market and ensure consistency across the sector. Together with our member banks, we are working under the direct supervision of Central Bank of the UAE to further advance sustainable finance in the region. Collaboratively defining a framework for accountability and best practices will encourage the transition to a climate-neutral, resource-efficient and resilient economy."

 

Flexible environment

Saleh also commented about the partnership which UBF has entered into with UAE's Securities & Commodities Authority (SCA), where SCA and UBF will join hands and make collective efforts to foster mutual cooperation in developing the financial sector, establishing the UAE as a major attraction for asset and wealth management in line with government's aspirations for the next 50 years, ensuring the sustainable growth of the national economy, and cooperating with all authorities to create a flexible environment that attracts foreign businesses and further motivates banks and financial institutions to set up local asset management firms and help support and promote local investment fund industry, including green and sustainable funds, at regional as well as international levels.

 

Talking about the upcoming COP28 and how it will impact the banking sector in the UAE, Saleh said: "Our member banks and financial institutions will play a critical role in integrating environmental values into business and industrial progress. We believe the upcoming COP28 will provide a platform for global discussions and action on climate change. The UAE hosting the event will enable collaboration with international stakeholders, sharing best practices and building partnerships to accelerate the implementation of sustainable finance initiatives."-- TradeArabia News Service