Tap into UAE Green Business Financing Today
UAE Banks Lead the Way in Green Business Financing
The world is heading towards sustainability globally and regionally. According to a joint report by KPMG and Emirates NBD, the banks of the UAE are playing an essential role in transforming the economy to be greener and sustainable. The banks of the UAE are bringing changes in the GCC region by launching green finance projects. Also, the climate-resilient practices have been incorporated in their operational activities. In addition, ESG has become a major part of their investment. UAE banks are investing in projects like encouraging renewable energy, energy efficiency, sustainable transportation, sustainable green construction, and many more. They set their net-zero targets and are working out to implement those plans. They are also introducing green loans, sustainability-linked bonds, blended finance, and transition finance. In this case, Islamic finance products are crucial to supporting investment and getting enough funds.
UAE's Eco-financing for the Future
The Banks of the UAE are actively working with their clients to encourage them to adopt sustainable practices. They offer ESG advisory services and push the clients to implement sustainable business operations. The UAE Banks Federation announces to mobilization of AED 1 trillion in sustainable finance by 2030 during Finance Day at COP28 on 4 December 2023. In 2023, USD 310 billion was issued, accounting for 59% of the total Global Sustainable Bond Market (GSSSB) within the first 6 months. In the Middle East, the UAE is contributing around 30% to the total bond Insurance. Most of them are initiated by the Government towards eco-financing and sustainability.
Role of DIFC and ADGM towards Sustainable Financing
The role of two financial free zones, such as Dubai International Financial Centre ( DIFC) and Abu Dhabi Global Market (ADGM), is worth mentioning. Though the UAE central bank and the UAE Banks Federation play a vital role in promoting sustainable solutions. The UAE committed to investing USD 30 billion in green financing. This a an outcome of COP28 named as the announcement of ALTÉRRA, which is a climate investment fund in the ADGM.
The KPMG-Emirates NBD Study
The KPMG-Emirates NBD study shows that banks invented many innovative and creative ways to make themselves environmentally sustainable and to support sustainable practices. Banks are bringing huge change by pioneering green finance initiatives and incorporating climate-resilient strategies into their operations. The supportive hand of Dubai International Financial Center (DIFC) and Abu Dhabi Global Market (ADGM) is acting as a regional hub for sustainable financing. The Emirates NBD is actively engaged with sustainability, and its initiatives are bringing change both locally and globally. Their focus is aligning with the UAE's Nationally Determined Contributions (NDCs) under the Paris Agreement. All these initiatives are a commitment towards the nation's ambitious climate goals.
Major Concerns for Banks
Many positive developments and factors drive the green financing, but still, there are some risk factors regarding rules and regulations, framework, and reporting requirements.
What is a Green Loan and Green Bond?
A green Loan is a form of loan that enables borrowers to use the funds for projects to contribute to the environment. It is sometimes similar to a green bond that raises capital for green or sustainable projects. A green loan is smallar than a bond and use for personal operation. Green bonds have sometimes high transaction cost and has large volume. The green loan and green bond has different but consistent principles.
Green Loan Requirements
A loan must be structured by maintaining the rules and principles of a green loan. These are based on some international standard-based core components -
Use of Proceeds: The loans for green projects should have a clear description of environmental benefits, which will be further assessed and measured, and evaluated by the borrower.
Process for Project Evaluation and Selection: The loan borrower must be aware of the Organization and projects to proceed with further operation. Also, the borrower must be liable to describe how it will be managed for environmental and social benefits.
Management Proceeds: The procedures must maintain transparency and accountability. So, these must be maintained by a dedicated account.
Reporting: The reporting includes checking the qualitative performance indicators and a feasibility test. These considerable factors are energy capacity, electricity generation, GHG (Greenhouse Gas) emission, etc.
Benefits of Green Loans and Bonds
Green Loans can not only benefit the environment but also benefit individuals and save businesses money.
Green loans reduce energy consumption and carbon footprint and contribute to a cleaner environment.
Opportunities of Green Loan
In 2023, the UAE created a significant amount of insurance from various entities. Moreover UAE gained first position in the green bond market and reached $10.7 billion, accounting for 45% of the total ENA Insurance. Green and sustainable bonds are essential to drive sustainable development. With these bonds country's sustainability can be achieved and enhance competitiveness and global compliance. Companies that maintain the UAE's rules and regulatory framework will enable them to green and sustainable future.
Banks Embracing Green Initiatives and Sustainable Financing in the UAE
First Abu Dhabi Bank (FAB)
Emirates NBD
Abu Dhabi Commercial Bank
Dubai Islamic Bank
Conclusion
With the advancements of technology and the industrial revolution, the world faces new challenges every day. The UAE is considered a global business hub, but with advancements in today's world, it needs to be conscious of its society and surroundings. Many modern, conscious international clients are now aware of not only only benefits but also beyond that. Consequently, the demand for a holistic approach made the businesses and banking sector embrace the concept of sustainability. This is beneficial for both society and the personal wallet. So, overcoming the challenges businesses need to adopt green financing in the future is the most expected thing these days.
This is for all business owners, financial consultants, brokers, entrepreneurs, legal consultants, or individuals seeking to finance their business or start a new company. Seek professional help, by reaching out to the contact below, you can get in touch with the author of this blog: WASIQ SUHAIL.
Contact: +971505053319
Email: abz.wasiq@gmail.com
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