Major banks in the United Arab Emirates (UAE) have collectively allocated around AED190 bn ($51.6 bn) to green financing in 2022. These include First Abu Dhabi Bank, Emirates NBD, Dubai Islamic Bank, Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, and Mashreq.
The financing spanned various green sectors, including renewable energy, waste-to-energy, and green technology. This was revealed by the UAE Banks Federation (UBF), which is the sole representative and voice of banks based in the UAE.
Supporting UAE’s sustainability goals
This giant leap for green financing aligns with the sector-wide sustainability goals and the guidelines of the Central Bank of the UAE’s Sustainable Finance Working Group. Subsequently, all of these endeavors support the country’s “Year of Sustainability” initiatives and the UAE’s hosting of COP28.
According to Jamal Saleh, director general of UBF, “sustainability is a top priority.”
UAE is a trailblazer in incorporating sustainability standards and principles into its banking and finance sector. In 2016, it introduced the Abu Dhabi Sustainable Finance Declarations. The iteration for Dubai followed in 2019. Additionally, the Guiding Principles for Sustainable Financing was introduced in 2020, while 2021 saw the launch of the National Sustainable Finance Framework.
The country also requires publicly listed companies to disclose sustainability reports.
Three strategic sustainability goals
Saleh revealed three strategic areas through which UBF member banks would propel the UAE’s financial sector to sustainable heights.
The first involves providing funding and issuing bonds to support green projects. Meanwhile, the second focuses on cultivating green practices among customers, small and medium-sized enterprises, suppliers, and vendors. The federation encourages them to observe environmentally friendly operations and lifestyles.
The third entails meticulous carbon footprint measurement and management across all UBF members. In addition to that, reports on sector-wide emissions reductions will also be generated.
The UBF acknowledges the role that the banking sector plays in fighting climate change. With green financing commitments and climate-focused undertakings, banks can help achieve not just the UAE’s sustainability objectives but the region’s as well.
Working with the UAE Central Bank
UBF works closely with the Central Bank of the UAE to help create a path to a more sustainable economy.
“Together with our member banks, we are working under the direct supervision of the 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,” stated Saleh.
In recent years, UAE banks and financial institutions have issued green sukuks and bonds amounting to AED62.4 bn. Through these, investors get access to institutional financial sources that help curb environmental impact, all while gaining attractive returns.
In a bigger context, it forms part of the country’s strategy to achieve net-zero emissions.
Recently, the United Nations has convened a Net-Zero Banking Alliance, gathering banks that represent over 40% of global banking assets. The goal is to align their lending and investment portfolios with net-zero emissions by 2050.
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