ADGM head: financial institutions key to funding region’s sustainable projects
The financial sector can play a key role in funding the needs of sustainable development in the Middle East and North Africa region, where $163 billion is already invested in clean energy, according to the chairman of Abu Dhabi Global Market.
“An unprecedented level of investment is necessary to develop sustainable energy sources, environment …. to achieve long-term sustainability and prosperity for all,” Ahmed Al Sayegh, who is also a UAE minister of state, said yesterday at the Abu Dhabi Sustainable Finance Forum.
“To achieve the right results, we need to harness the energy and resources of both public and private investment [for sustainable development].”
The UAE has been actively addressing the UN sustainable development goals, with the socially responsible investing market growing 200 per cent in the past decade to almost $23 trillion in value globally.
The G20 finance ministers and central bank governors in 2016 agreed to find ways to raise about $90tn in funds over the next 15 years to be invested in achieving sustainable development targets.
The UAE’s Vision 2021 and its Green Agenda already call for using resources to support green projects and develop innovative financing tools.
Masdar, the UAE’s clean energy company that has invested more than $8.5bn in global projects, has also taken initiatives including announcing its green revolving funding facility last October.
First Abu Dhabi Bank, the leading UAE lender by assets, has also set aside $10bn for financing green businesses over the course of 10 years, Mr Al Sayegh noted.
Oil producers in the six-member GCC economic bloc, in particular, have increasingly pivoted towards developing renewables capacities to meet power generation needs to free up more oil for export.
The UAE, which was the earliest in the region to develop a renewables strategy, is targeting increasing the contribution of clean energy to 50 per cent by 2050. It is expected to see investment of around Dh600bn by the targeted timeline to bring onstream additional renewable capacities.
“The financial community is now comfortable lending to renewable energy projects especially those with long-term, predictable cash flows administered by credit-worthy counterparties and governed by transparent regulation such as [that of] Saudi Arabia and the UAE,” Mohamed Al Ramahi, the chief executive of Masdar told delegates at the forum.
“All these developments are good news for the entire Middle East and North Africa, where an estimated $50bn to $100bn will be needed to meet the region’s requirements in the next decade or so.”
Signs from the global debt markets are encouraging as green bond issuance surpassed $180bn in 2018. They have grown by 50 per cent in each of the past three years while green loans amounted, to $40bn in 2017, a year-on-year increase of 20 per cent, he said.
The scale of the financing is huge, but developers of renewable projects are still reluctant to use green funding tools due to the higher cost of funding, Paddy Padmanathan, chief executive of Saudi Arabia’s Acwa Power said at the event.
“Green financing still has the problem of higher cost of funding,” he said, adding that it is presently financing its developments through various sources.
“Green financing does expand the pool of liquidity, so yes, there is that advantage.”