UAE Banks Prioritize Green Financing to Tackle Climate Change

Six major banks accounted for nearly $51 billion in green financing by the end of 2022


The UAE Banks Federation (UBF) has disclosed that six major banks, including the First Abu Dhabi Bank, the Abu Dhabi Commercial Bank, the Emirates NBD, the Dubai Islamic Bank, Mashreq, and the Abu Dhabi Islamic Bank, have collectively channeled over AED190 billion (~$51.72 billion) into green financing for projects involving renewable energy, waste-to-energy, and green technology as of 2022.

The Federation emphasized that the issuance of green-focused funds and the provision of green finance have emerged as potent mechanisms for fulfilling the sustainability commitments of diverse entities within the UAE and the broader region.

The banks in the UAE have pledged to synchronize their lending and investment portfolios with the objective of achieving net zero emissions by the year 2050.

Speaking on green financing, Jamal Saleh, Director General of UBF, said: “Sustainability is a top priority for us. While the 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. ”

Saleh outlined three primary domains through which the members of the Federation will steer the evolution of the financial sector. Firstly, they will advance environmentally friendly initiatives by extending funding and releasing green bonds to support green projects. Secondly, the focus will be on fostering environmentally conscious behaviors among clients, small and medium-sized enterprises, suppliers, and vendors. Lastly, efforts will be directed towards quantifying and effectively overseeing the carbon footprint of each UBF member while also reporting on the reductions achieved collectively by the sector.

The Federation has established a highly skilled environmental, social, and governance (ESG) steering committee composed of experts in the field to propel the ESG and green finance domain. This committee operates under the guidance of the Central Bank of the UAE’s policy framework, which is set to incorporate sustainability principles in managing reserves and monetary operations. The ultimate aim is to enhance the foundations and structures supporting green finance.

The UAE has been leading the way in implementing sustainability principles and criteria within the realm of banking and finance.

Furthermore, the UAE holds a distinctive position as one of the early adopters in requiring sustainability reports as mandatory disclosures for publicly listed companies on the stock exchange.

The nation’s banking institutions have also taken the initiative to issue green sukuk and bonds, which have recently garnered a combined market value of approximately AED62.4 billion (~$16.99 billion).

These endeavors aim to access institutional funding sources that mitigate adverse climate and environmental effects, thereby reinforcing the sector’s involvement in realizing a comprehensive framework for sustainable development. These efforts also offer attractive returns for investors.

The United Nations has organized the Net-Zero Banking Alliance, an assembly of banks on a global scale, collectively representing more than 40% of the total assets within the global banking sector.

Last month, Abu Dhabi Future Energy Company Masdar completed its inaugural green bond issuance, raising $750 million by issuing 10-year senior unsecured notes. The issuance of the bond was coordinated and offered through a syndicate of joint lead managers and book runners, which included BNP Paribas, Citi, First Abu Dhabi Bank, HSBC, SMBC Nikko, Société Générale, and Standard Chartered.

Earlier, the United Arab Emirates Cabinet had approved the updated UAE National Energy Strategy, which aims to triple the contribution of renewable energy by 2030, mitigate the effects of climate change, and achieve climate neutrality.