The UAE Banks Federation ( UBF ) has recently revealed how the banking and financial sector of the country is actively supporting the UAE’s efforts to reduce emissions and achieve climate neutrality by 2050, in line with the UN’s sustainable development goals.
A report published by the state news agency, WAM, highlighted the significant role played by the banking sector in combating climate change through commitments to green financing and climate-focused initiatives.
The report emphasized that the provision of green finance and the creation of environmentally-oriented funds have emerged as effective strategies to fulfil the sustainability targets of various organizations in the UAE and the wider region.
The Central Bank of the UAE (CBUAE) and all members of the UBF are collaborating to promote the shift towards a sustainable economy, according to Gulf Business.
As per information provided by UBF members, six major banks — FAB, ADCB, ENBD, DIB, Mashreq, and ADIB — have collectively allocated over AED 190B ($51.8B) towards green financing for diverse projects in renewable energy, waste-to-energy, and environmentally-friendly technology by the conclusion of 2022.
Banking Sector’s Crucial Role
The increase in green funding by UBF members is in line with the directives of CBUAE’s Sustainable Finance Working Group and broader industry sustainability goals, which endorse initiatives that coincide with the ‘Year of Sustainability’ and the UAE’s hosting of COP28.
The federation has established an ESG steering committee comprising experts in the field to facilitate collaboration between the ESG and green finance sectors, working in harmony with CBUAE’s policies.
Saleh, director-general of UBF, said, “We, at UBF, are committed to supporting its goals in delivering necessary changes in our UAE finance sector. And, in line with National Climate Change Plan of the UAE 2050 and United Nations’ SDGs, our financial sector is playing a pivotal role in helping the UAE achieve net zero emissions.”
The UAE has taken a leading role in introducing sustainability standards and principles within the banking and finance sector. It introduced the Abu Dhabi and Dubai Sustainable Finance Declarations in 2016 and 2019 respectively, along with the Guiding Principles for Sustainable Financing in 2020.
These efforts, as well as the National Sustainable Finance Framework, introduced in 2021, were aimed at promoting the growth of a green financial market. Additionally, WAM reported that the UAE is among the first countries to require sustainability reports as mandatory disclosures from publicly listed companies on the stock exchange, reflecting a regulatory emphasis on sustainability.
Green Finance Strategies
According to the UBF, banks and financial institutions in the country have initiated the issuance of green sukuk and bonds, amounting to a market of approximately AED 62.4B ($74B) in recent years.
This initiative seeks to access institutional funding sources that contribute to mitigating environmental impact and climate change, while also enhancing the sector’s role in achieving a comprehensive sustainable development system and offering attractive returns for investors.
The Director General of the UAE Banks Federation highlighted three main strategies through which federation members will drive the transformation of the financial sector. Firstly, by providing funds and issuing green bonds to support environmentally friendly projects.
Secondly, by promoting eco-friendly practices among customers, SMEs, suppliers, and vendors to encourage sustainable operations and lifestyles. Thirdly, by assessing and managing the carbon footprints of UBF members and reporting on the sector’s reduction achievements.
Saleh also underscored the partnership between UBF and the UAE’s Securities and Commodities Authority (SCA). This collaboration aims to mutually develop the financial sector and establish the UAE as a prominent hub for asset and wealth management in alignment with the government’s long-term goals for the next fifty years.
Regarding COP28, Saleh expressed that member banks and financial institutions will play a pivotal role in integrating environmental considerations into business and industrial advancements. Anticipating the upcoming COP28, Saleh believes it will provide a global platform for discussions and actions related to climate change.
“The UAE hosting the event will enable collaboration with international stakeholders, sharing best practices and building partnerships to accelerate the implementation of sustainable finance initiatives.”
