Green bonds, project finance on focus as Dubai drives Middle East's green economy

The green bonds market, used increasingly for financing sustainable projects, has grown to around $200bln today

Image used for illustrative purpose. Stock Market Exchange on a skyscraper in dubai background.

Image used for illustrative purpose. Stock Market Exchange on a skyscraper in dubai background.

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Dubai is slowly and steadily pursuing its ambition to strengthen its position to be a hub for sustainable investments worldwide.

At the 2019 World Green Economy Summit (WGES) in Dubai, experts discussed the various achievements and challenges so far to the emirate’s ambitious goal.

The latest government-backed initiative, Dubai Sustainable Finance Working group announced in July, was jointly launched by Dubai International Financial Centre (DIFC) and Dubai Financial Market (DFM).

The new group focuses on developing green financial instruments, promote responsible investing, grow sustainable finance, and increase diversity and inclusion.

Diako Makhmalbaf, Sustainable Finance Lead, HSBC MEANT said: “Government is doing a lot in the space,” noting, more regulations that push companies to invest in green bonds could be a key driver.

In 2018, Dubai ports operator DP World secured a $2 billion green Shariah-compliant loan which had an interest rate linked to the company’s carbon emission intensity.

“We always look at where liquidity is, we know that there is high liquidity in the space,” Redwan Ahmed, Head of Investor Relations at DP World said.

Green bonds are used more and more in financing sustainable projects and the global green bond market has grown to roughly $200 billion today, from nothing five years ago.

Dubai-based developer and operator of malls, Majid Al Futtaim, has hired banks to arrange a potential issue of dollar denominated green sukuk, Reuters reported.

In May, Majid Al Futtaim issued over $500 million-worth of 10-year, dollar-denominated green sukuk. The proceeds of the sukuk will back environmentally-friendly projects in areas such as renewable energy and sustainable water management.

The Dubai Electricity and Water Authority (DEWA) in 2016 also established the 100 billion dirhams ($27 billion) Dubai Green Fund to stimulate investment in clean energy and other green projects by providing seed financing.

Experts also highlighted the need for a regulatory framework to help develop green or sustainable project financing.

Franck Nowak, VP MENA Fixed Income and Global Sukuk at Franklin Templeton said: “Policy formation and definition is definitely key,” adding that implementation is also important and is one of Dubai’s strengths.

Many UAE-based financial institutions signed the Dubai Declaration on Sustainable Finance, supporting the sustainability goals of the UAE’s Vision 2021 and the government’s commitment to the United Nations’ Sustainable Development Goals and the Paris Climate Agreement.

(Reporting by Gerard Aoun, editing by Seban Scaria)


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