Green Finance Is On The Rise
This year, the global green bond market is expected to hit $200 billion, with a 20% growth rate compared to 2018, according to a report by Moody’s. However, green finance is still in its nascent stages in MENA.
The U.A.E. is leading the way in green finance, tapping into green bonds, loans and Sukuk. First Abu Dhabi Bank (FAB) issued the first green bond in the region for $587 million in March 2017. Then Abu Dhabi's Masdar signed the first green revolving credit facility (RCF) for $75 million in September 2018, and most recently U.A.E. giant, Majid Al Futtaim, issued the region's first corporate Green Sukuk, valued at $600 million. Dubai Electricity and Water Authority also launched a $27 billion Green Fund in 2016 to finance sustainable projects.
Meanwhile, green finance has the potential to play a bigger role in funding the GCC's ambitious pipeline of green projects. The U.A.E. and Saudi Arabia are ahead of other countries in this area, according to an S&P report expectation.
The U.A.E.'s Energy Strategy 2050 aims to cut carbon dioxide emissions of power generation by 70%, increase the contribution of clean energy in total energy mix from 25% to 50%, and improve the consumption efficiency of households and corporates by 40% by 2050. Such a transition will require an investment of $163.3 billion over the next 31 years, which requires $4.6 billion in investments annually.
Saudi Arabia has announced plans to pick up to $50 billion of new investment in renewable projects by 2030. Since the first green bonds were issued in 2007, the issuance has reached $521 billion globally, led by developed countries—the U.S. with $118.6 billion, China with $77.5 billion and France with $56.7 billion, according to the Climate Bonds Initiative.