- The Murabaha facility is designed with a syndication feature allowing additional banks to join and gain exposure to this attractive asset class
Saudi Arabia: The Arab Petroleum Investments Corporation (APICORP), an energy-focused multilateral financial institution, today announced the signing of a USD 75 million Murabaha agreement in favor of Hartree Partners Power & Gas Company (UK) Limited, an affiliate of Hartree Partners LP, a global energy and commodities firm.
The first-of-its-kind facility in the MENA region will fund high-quality voluntary carbon offsets, which will be used to develop environmentally friendly projects worldwide. Each carbon offset represents the ownership of one ton of carbon dioxide equivalent (CO2e) which offsets corresponding emissions by the holder.
Khalid Ali Al-Ruwaigh, CEO of APICORP, said, “Financial innovation plays a crucial role in ensuring a sustainable energy ecosystem. This Murabaha facility was created as part of our commitment to provide innovative financial solutions to enable a balanced energy transition, as well as support Arab countries' aspirations to reach net zero carbon emissions in line with the Paris Climate Agreement. The precedent-setting transaction serves as a major milestone for our vision of supporting the MENA region in its journey to sustainability.”
Every year, it is estimated that more than 50 billion tons of greenhouse gases are emitted into the atmosphere. Robust voluntary carbon markets, where carbon credits are purchased voluntarily, have emerged as a cost-effective asset class enabling governments and corporations to immediately begin decarbonizing their footprints in line with the global effort to reach net zero emissions by 2050. This particularly applies to sectors and industries where emissions are not yet fully abatable due to technological or cost feasibility. For investors, carbon offsets can also mitigate risks associated with energy transition by making their investment portfolios more resilient to evolving climate regulations.
Regulators and rating agencies are also increasingly taking interest in climate finance and sustainability reporting disclosures by banks.
“Banks and other financial institutions play an important role in the efforts to meet the Paris Agreement target because financing remains one of the most crucial challenges in the decarbonization chain. The facility’s Shariah compliance and syndication features can have major implications because they make it convenient for the regional market to adopt and enable additional banks to join and gain exposure to this asset class,” added Al-Ruwaigh.
APICORP’s facility will fund carbon offsets that are registered with the non-profit platform Verra, the largest global registry for nature-based offsets.
Stephen Hendel, Founding Managing Director of Hartree, said , “Robustness, reliability and integrity are at the heart of Hartree’s investments in the Carbon markets, and we thank APICORP for its expertise and leadership in structuring this unique Islamic facility.”
Voluntary carbon markets are particularly relevant to the Arab region. On a per capita basis, carbon emissions are substantially higher in MENA compared to peer economies. The region is also one of the most affected by climate change impact according to the United Nations Framework Convention on Climate Change (UNFCC) as it strains its already scarce water and agricultural resources.
The Public Investment Fund (PIF) recently announced the establishment of the Regional Voluntary Carbon Market Company with Saudi Tadawul Group Holding Company to support businesses in the region in their transition to net zero. The company helped facilitate the largest carbon credit auction in the world involving one million tons of carbon credits as regional businesses accelerate their quest for net zero emissions.
Norton Rose Fulbright’s Dubai office acted as lender’s counsel; and Reed Smith LPP’s Dubai office acted as borrower’s legal counsel. Shape Knowledge Services provided Shariah advisory services, including the issuance of an operating Fatwa. DD&Co Limited will supply London Metals Exchange approved non-ferrous base metals required to enter into each Shariah-compliant Murabaha transaction.
The Arab Petroleum Investments Corporation (APICORP) is an energy-focused multilateral financial institution established in 1975 by the ten Arab oil exporting countries. APCIORP’s mission is to support the sustainable development of the region’s energy sector and related industries through a range of financing and direct equity solutions, as well as energy research and advisory services. APICORP applies best-practice ESG principles across all operations, with environmental and socially-linked projects comprising 13% of its nearly USD 4 bn loan portfolio which encompasses leading public and private sector partners in 25 countries. APICORP is also the only energy-focused financial institution in the MENA region rated ‘Aa2’ by Moody’s, ‘AA’ by Fitch and ‘AA-‘ by S&P.
View APICORP’s ESG Policy Framework here
For more information about APICORP, please visit: www.apicorp.org
For more information, please contact:
ABOUT HARTREE PARTNERS LP
Hartree Partners, LP (“Hartree”) is a leading global merchant commodities firm specializing in energy and associated industries. Owned by its management and Oaktree Capital, Hartree specializes in proprietary trading and arbitrage, structured transactions, refinement, principal investments, and transportation services. Hartree has in excess of $10 billion in assets, including over $2 billion in midstream and downstream assets in key markets (refining, storage, shipping, transportation, renewable power). Hartree operates on all continents through 16 offices with more than 600 dedicated employees serving businesses, governments and institutional investors from around the world. Hartree’s unified investment philosophy, built upon deep fundamental research and robust proprietary risk controls, has enabled the Company to generate superior investment results since its founding in 1997.
For more information on Hartree, please visit www.hartreepartners.com