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|08 November, 2018

Green investments have no consistent definition- analysts

ADGM'S Financial Development Centre head argues projects offering a "greening of brown industries" should be considered

Image used for illustrative purpose. Steam rises from the cooling towers of the coal power plant of RWE, one of Europe's biggest electricity and gas companies in Niederaussem, Germany, March 3, 2016.

Image used for illustrative purpose. Steam rises from the cooling towers of the coal power plant of RWE, one of Europe's biggest electricity and gas companies in Niederaussem, Germany, March 3, 2016.

REUTERS/Wolfgang Rattay/File Photo

A lack of consistent definition or a clear explanation of what makes an investment sustainable or green is posing a challenge to the industry in the region and globally, two analysts have said.

“There is a lack of consistent definition,” Steve Barnett, the head of Abu Dhabi Global Market Authority’s Financial Centre Development said during a panel discussion at the Institute of International Finance’s MENA Financial Summit in Abu Dhabi on Wednesday. The financial centre helps set the strategy and business development for the authority’s financial activities and services.

Green and sustainable investments are often used to refer to debt or equity investments in projects or companies that use less energy or cause less pollution than conventional projects.

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Regionally, Dubai announced a clean energy strategy in 2015, seeking to increase its energy requirements from clean resources to 75 percent by year 2050.  Last year, the emirate announced a 100 billion dirhams ($27 billion) green fund to invest in environmentally-friendly projects, but it has not yet released the fund’s full target list and timeline.

“One of the challenges I see is that we find investors that they are trying to differentiate between green and brown projects. So if it is solar, it is green. If it is hydrocarbons, it is brown and we won’t invest in it. We  actually are not going to meet the climate change goals if we only look at it in that matter of sense,” Barnett said.

Barnett said a pro-environment investment opportunity could also exist in efficient hydrocarbon–related projects that have low carbon footprints and use clean coal technologies, as opposed to conventional coal power production.

He called such process a “greening of brown industries”.

Andrew Steel, managing director and the global head of sustainable finance at Fitch Ratings, said that a definition that is generalised across one country could be a good starting point for broader international adoption.

“If you can agree on a country basis it is a good start,” Steel said. speaking on the same panel.

(Reporting by Yasmine Saleh, Editing by Michael Fahy)


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