Dubai Islamic Bank has boosted the nascent sustainability-linked loan financing bond market with its second framework from a Gulf issuer, which also marks the first from an Islamic financier. 

Owned 28% by the emirate government’s main investing vehicle, Investment Corporation of Dubai, DIB will offer sharia-compliant sukuk and other financial instruments under its new “sustainability-linked finance facilities financing framework”.

These issues – which may be public transactions or private placements, in bearer or registered format, and senior unsecured or subordinated debt – will fund the bank’s sustainability-linked loans to its Middle Eastern and other borrowers in eight eligible sectors.

These comprise automobiles, aviation, education, energy, manufacturing, real estate, telecommunications and utilities, according to the framework. DIB requires auto and telecoms borrowers to include Scope 3 emissions in their SLLs’ key performance indicators, while energy credits must include sold product Scope 3 “irrespective of the share of these emissions compared with total Scope 1, 2 and 3 emissions”.

DIB is committed to sharia-compliant sustainable finance, the framework affirms. The bank aims to reach 15% of its lending in sustainable finance formats by 2030 and says it is “in the process of analysing portfolio decarbonisation target setting and further portfolio level sustainable finance targets”.

The additional targets are to align with the United Arab Emirates’ net zero 2050 plan.

In a statement, group CEO Adnan Chilwan called the new framework "an important step in our ESG journey”, noting that DIB launched its first sustainable finance framework back in 2022. It also launched an asset-based sustainable finance framework last year that it has now renewed.

Its most recent ESG bond was a US$1bn sustainable sukuk a year ago.

Standard Chartered advised DIB on the new framework, while ISS provided a second-party opinion. The agency affirmed that the document is “consistent” with the bank’s overall sustainability strategy and that eligible SLLs are aligned with the Loan Market Association’s most recent Sustainability-Linked Loan Principles at the time of their signing.

DIB was preceded into the SLLB market by local peer Emirates NBD in September. ENBD issued its first SLLB under its framework a couple of months later.

Before the Gulf pair only Nordea, the instrument’s pioneer, and Credit Agricole had previously endorsed SLLBs – though Bank of China also experimented with an earlier variation of the format.

Source: IFR