A mixed bag of updates on the finance front: Day 6 of COP28 provided a deluge of updates from across the climate finance sector. Let’s jump right in.

BIG GREEN FINANCE MOVES-

Abu Dhabi Commercial Bank extends AED 1.8 bn green bridge loan to Masdar: The Abu Dhabi Commercial Bank (ADCB) said it will extend an AED 1.8 bn (USD 500 mn) short-term green loan to UAE renewables giant Masdar to finance the latter’s operations while it secures permanent payments for ongoing projects, according to a statement. Details on where the capital from the “’Bridge to Bond’” facility will be channeled was not provided. Masdar plans to expand its renewables portfolio to 100 GW by 2030.

And another AED 2.1 bn to Acwa Power + Aldar Properties: ADCB will also provide an AED 1.1 bn green equity bridge facility (EBF) to Saudi renewables developer Acwa Power, according to a separate statement. Details on what Acwa Power will allocate the financing for were not disclosed. The Abu Dhabi lender also said it will extend AED 1 bn in ESG-linked loans to UAE real estate developer Aldar Properties to support its corporate sustainability targets. Abu Dhabi’s Aldar Investment Properties (AIP) — a unit of Aldar Properties — raised USD 500 mn through its debut 10-year inaugural green sukuk back in May.

FAB injects a whopping AED 500 bn in green finance by 2030: First Abu Dhabi Bank (FAB) will lend, invest, and facilitate over AED 500 bn (USD 135 bn) in sustainable and green financing by 2030, according to a statement. This marks an 80% increase from FAB’s 2021 commitment of AED 275.4 bn, making it the largest sustainable finance commitment by any regional lender. The new commitment is equivalent to around half of the total AED 1 tn green financing pledge made by the UAE Banks Federation on Finance Day at COP28.

And partnered with Engie to advance financing tools for green projects: The lender also signed an MoU with France’s energy company Engie to explore financial solutions for private sector decarbonization projects, according to a statement. The two will collaborate on financing solutions related to “energy, carbon, renewables, battery energy storage systems, green products, and credit risk management in relevant derivative transactions and payment facilities,” the statement outlines. They also plan to start spot trading or long-term forward purchase agreements for carbon credits, renewable energy certificates, and other environmental products.

UAE’s Mashreq pledges USD 30 bn in climate finance by 2030: As part of the UAE Banks Federation’s target of mobilizing AED 1 tn (c. USD 272 bn) in green funding by the end of the decade, Emirati banking group Mashreq has committed to allocating AED 110 bn (c. USD 30 bn) for climate financing from now till 2030, according to a statement. The company’s planned funding will be channeled toward adaptation projects including water projects in Egypt, the UAE, Qatar, KSA, and Bahrain, the statement notes. The company will provide more direct green loans to individuals and developers as well as list climate-aligned bonds and sukuks in the next seven years, Mashreq’s Group CEO Ahmed Abdelaal told Asharq Business. The company facilitated some USD 20 bn in ESG finance and adaptation-related investments in the UAE, Egypt, India, Bahrain, and Qatar during 1H 2023.

The Arab Coordination Group commits USD 10 in green finance by 2030: The Arab Coordination Group (ACG) — an alliance of regional development funds — pledged to mobilize USD 10 bn toward development of renewable energy projects in low and middle-income countries, Wam reports. ACG’s financing strategy will involve new green bond issuances, blended finance tools, and risk mitigation mechanisms. Last year at COP27, ACG and the OPEC Fund for International Development committed to channeling USD 24 bn in climate financing by the end of the decade.

IRENA’S ACCELERATOR IS SPEEDING ALONG-

Irena’s green accelerator program now has USD 4 bn in pledges: The European Bank for Reconstruction and Development (EBRD) and the International Finance Corporation (IFC) have each pledged USD 1 bn towards the International Renewable Energy Agency’s (Irena) Energy Transition Accelerator Financing (ETAF) platform, while HSBC pledged USD 200 mn, according to a statement. The Jeddah-based Islamic Development Bank (IsDB) also pledged USD 250 mn earlier this week, and the OPEC Fund signed a supplementary agreement committing USD 400k in grants to be used for technical assistance, the statement added. The new commitments bring the total of the platform’s financial pledges — which stood at USD 1.25 bn before COP — to USD 4 bn.

ETAF secured other key partnerships: The World Bank’s Multilateral Investment Guarantee Agency agreed to provide guarantees and risk mitigation products for selected ETAF projects, the statement notes. Multilateral credit and political risk insurer the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC) will offer de-risking products for ETAF’s renewable energy projects in developing countries.

About ETAF: The platform — supported by the UAE government — was launched in 2021 at COP26 to catalyze investments toward transitioning developing countries toward low-carbon resources. It surpassed its initial target of amassing USD 1 bn by 2030 by some USD 250 mn back in July. The platform is planning to provide financing of 5 GW of projects by 2030.

MORE SUPPORT FOR SDRs-

Qatar joins France + Japan’s support for AfDB’s special drawing rights: Qatar has joined France and Japan’s support for the AfDB’s facility to leverage special drawing rights (SDRs) for climate and development. The AfDB developed a proposal to channel SDRs to multilateral development banks which SDR-rich countries were expected to support at COP28. More Africa-focused SDR pledges need to be committed during COP28 to meet the financing needs of climate vulnerable countries, COP28 President-Designate Sultan Al Jaber said earlier this week.

What are SDRs?Special drawing rights (SDRs) are units of account for international reserves created by the International Monetary Fund (IMF). SDRs do not function as currencies, but are designed to act as a supplement to IMF member countries’ reserves.

AND DEBT-FOR-NATURE SWAPS-

MDBs + climate funds launch a debt-for-nature task force: A group of top multilateral development banks (MDBs) and climate funds have launched a global task force to upscale the number and size of debt-for-nature swaps — a financial tool that allows developing countries to erase some of their debts in exchange for launching environmental protection projects, Reuters reports. The task force — which will kick off in January — will initially focus on establishing a stock take of the agreements signed to-date, as well as creating a toolkit that governments and multilaterals could use when entering a swap agreement.

Who are the members? The task force will be led by the Inter-American Development Bank and the US International Development Finance Corporation. Other members include The Asian Development Bank, the African Development Bank, the French Development Agency, the European Investment Bank, the Green Climate Fund, and the Global Environment Facility.

CARBON MARKETS-

Dubai launches its pilot carbon trading platform: The Dubai Financial Market (DFM) launched its maiden voluntary carbon market (VCM) at COP28 yesterday and will keep it operational through to next Monday, according to a statement (pdf). The offsetting will end on 10 January, 2024. The clearing and settlement of the trading processes will be handled in USD by Dubai Clear and the Dubai Central Securities Depository (DCSD), with global daily price reference provided by leading pricing agencies like Dow Jones’ OPIS, the statement notes.

Who’s supplying the carbon credits? A portion of the CO2 offsets will be sourced from two UAE clean energy projects developed by the Dubai Water and Electricity Company (Dewa), and 5 other international renewables projects implemented by the First Abu Dhabi Bank and MyCarbon, the statement notes. The carbon credits will be verified by Verra and the UN Clean Development Mechanism, the statement adds.

Who’s buying? 24 UAE-based companies — including DP World, Tabreed, Dubai Municipality, Majid Al Majid Al Futtaim, and Emirates NBD — will participate in the VCM’s pilot, the statement notes. That is 7 more companies than what was previously reported.

The DFM platform is supported by several regional banks: The credits will be traded on DFM’s platform via Al Ramz Capital, Arqaam Securities, BHM Capital, EFG Hermes, and Emirates NBD Securities.

Enertec partners with Rwanda on carbon credits: Kuwait’s Enertech Holding company signed an agreement with Rwanda to establish a carbon framework and accelerate the spread of renewable energy, AlKhaleej reports. The agreement will see Rwanda provide Kuwait with two types of carbon credits; nature-based and non-nature-based carbon credits. The former will be owned by Rwanda and available for direct sale, while the latter is backed by the government’s commitment to be the number one protective buyer in its carbon market.

Nature vs. non-nature: While nature-based credits are derived from initiatives such as afforestation, non-nature-based credits encompass a range of technological solutions including renewables, carbon capture and sequestration, direct air capture, and even sequestration-in-place (legal mechanisms to stop the extraction of fossil fuels). 90% of the current voluntary carbon market comes from nature-based solutions, however that is predicted to decrease dramatically to 30% by 2030.

GREEN BONDS AND ISSUANCES-

Dubai waives regulatory fees for ESG-linked security issuances until 2025: Effective immediately, the Dubai Financial Services Authority (DFSA) is waiving all regulatory fees on sustainability-linked debt security listings on Nasdaq Dubai throughout 2024, according to a statement. All types of green notes — whether they be sukuks, ESG bonds, or climate adaptation and climate transition notes — will be exempt from regulatory fees. Nasdaq Dubai is the world’s largest ESG sukuk market, comprising over 60% of global US-denominated shariah compliant ESG notes and close to 50% of all-currencies ESG sukuk, the statement notes.

OTHER STORIES WORTH KNOWING ABOUT THIS MORNING-

  • ADIA greenlights USD 100 mn repo facility: The Abu Dhabi Investment Authority (ADIA) agreed to a USD 100 mn repo transaction with the Liquidity and Sustainability Facility and the African Export-Import Bank to increase the liquidity of African Sovereign Eurobonds and boost sustainable development goals-related investments. An initial USD 50 mn transaction was closed relating to a basket of seven African countries under the facility. (Statement, pdf)
  • IDB + IFC launch Amazon Finance Network: The International Finance Corporation (IFC) and IDB Invest (IDB) have launched the Amazon Finance Network to increase investment flows, mobilize capital, and share financial solutions to support sustainable growth in the Amazon region. (Statement)
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