A new era of energy finance is emerging – and it is a greener one. Seismic shifts in nations’ low carbon plans are highlighted by China’s goal to become carbon neutral by 2060. In the Middle East, Saudi Arabia’s new Circular Carbon Economy roadmap has just received support from the G20, while Dubai said it cut CO2 emissions by 22 per cent in 2019. So, how does finance fit into this new picture? In short, it is a critical vehicle to help make the Middle East’s energy transition an economic and environmental success.
This means rethinking the traditional and linear investments in fossil fuels to create a melting pot of financing for fossil fuels, renewables and low-carbon growth projects. Regional appetite for green financial support is growing – loud and clear.
It has been a busy month, with many firsts for energy finance. For one, Saudi Arabia completed its first green bond sale. The world’s biggest oil exporter made its mark in green finance with state-controlled power giant Saudi Electricity Company’s $1.3 billion deal with regional and international lenders in September. To the west, Egypt secured the Middle East and North Africa’s first green sovereign bond last month. The Arab world’s most populous country pulled in orders of nearly five times the $750 million size – a coveted nod of global confidence in the region’s plans.
These recent deals are building on a foundation of significant progress in recent years. Last year, the UAE’s Noor Energy 1 secured $2.7bn to develop a 950MW concentrated solar plant and photovoltaic project south of Dubai. This marked the first certified deal under the Climate Bonds Standard in the Middle East. Other major energy projects in the region include the UAE’s Barakah nuclear power plant, the first in the Arab world, while Abu Dhabi’s Al Reyadah carbon, capture and storage (CCS) project is the world’s first for a steel production plant.
As more clean energy projects emerge, it is paving the way for the growth of green energy finance. In 2019, global green bond market issuances hit a record high of $258.9bn – up 51 per cent annually, according to the Climate Bonds Initiative. As this historically niche area of finance moves into the mainstream, the Middle East has an opportunity to position itself as an influential player. Potential certainly abounds. For one, Frost & Sullivan's recent analysis reveals that solar PV will generate $182bn in investments in the Middle East’s renewables market by 2025.
Of this rising demand, the Middle East’s influence so far is greatest in green sukuk or sharia-compliant bonds. Total green sukuk volumes worldwide more than tripled year-on-year to $4.3bn in 2019, the Climate Bonds Initiative said. The UAE and Saudi Arabia spearheaded this growth, followed by Indonesia and Malaysia. To give a sense of scale, the UAE’s volume roughly quadrupled that of Malaysia.
For now, the US, China and France are the leaders in the global green bonds market. Can a country from the Middle East – a region eager to become a leader in green energy – join the top 10 more active market participants this decade? With the right financial guidance, we believe so.
For that, it is necessary to focus on environmental, social and governance (ESG) when investing. A global study by Invesco revealed the value of ESG in investment processes is gaining strength in the Middle East, especially among regional sovereigns. The study found that 67 per cent of sovereign wealth funds in the region have an ESG policy – up from 30 per cent in 2017. Ramping up ESG in the investment environment – be it for fossil fuels or renewables – means quickly improving the quality of ESG data. More than half (57 per cent) of Middle East sovereigns cited this as their main hurdle.
However, green finance should not draw all the attention away from investing in the Middle East’s fossil fuel market. Despite increasing talk of peak oil within the next decade, giving fossil fuels a cold financial shoulder would seriously jeopardise global energy security – a cornerstone of our civilization. For now, financiers have a delicate balance to master: spur both green and traditional energy finance as the Middle East’s melting pot finds its feet.
Badar Chaudhry is senior vice president, sector head – energy at Mashreq Bank
COMPANY%20PROFILE
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Graduated from the American University of Sharjah
She is the eldest of three brothers and two sisters
Has helped solve 15 cases of electric shocks
Enjoys travelling, reading and horse riding
MATCH INFO
Wales 1 (Bale 45 3')
Croatia 1 (Vlasic 09')
MATCH INFO
Quarter-finals
Saturday (all times UAE)
England v Australia, 11.15am
New Zealand v Ireland, 2.15pm
Sunday
Wales v France, 11.15am
Japan v South Africa, 2.15pm
Sunday's games
Liverpool v West Ham United, 4.30pm (UAE)
Southampton v Burnley, 4.30pm
Arsenal v Manchester City, 7pm
The Bio
Favourite vegetable: “I really like the taste of the beetroot, the potatoes and the eggplant we are producing.”
Holiday destination: “I like Paris very much, it’s a city very close to my heart.”
Book: “Das Kapital, by Karl Marx. I am not a communist, but there are a lot of lessons for the capitalist system, if you let it get out of control, and humanity.”
Musician: “I like very much Fairuz, the Lebanese singer, and the other is Umm Kulthum. Fairuz is for listening to in the morning, Umm Kulthum for the night.”
Company profile
Name: Tharb
Started: December 2016
Founder: Eisa Alsubousi
Based: Abu Dhabi
Sector: Luxury leather goods
Initial investment: Dh150,000 from personal savings
The specs
Engine: 5.0-litre supercharged V8
Transmission: Eight-speed auto
Power: 575bhp
Torque: 700Nm
Price: Dh554,000
On sale: now
It's up to you to go green
Nils El Accad, chief executive and owner of Organic Foods and Café, says going green is about “lifestyle and attitude” rather than a “money change”; people need to plan ahead to fill water bottles in advance and take their own bags to the supermarket, he says.
“People always want someone else to do the work; it doesn’t work like that,” he adds. “The first step: you have to consciously make that decision and change.”
When he gets a takeaway, says Mr El Accad, he takes his own glass jars instead of accepting disposable aluminium containers, paper napkins and plastic tubs, cutlery and bags from restaurants.
He also plants his own crops and herbs at home and at the Sheikh Zayed store, from basil and rosemary to beans, squashes and papayas. “If you’re going to water anything, better it be tomatoes and cucumbers, something edible, than grass,” he says.
“All this throwaway plastic - cups, bottles, forks - has to go first,” says Mr El Accad, who has banned all disposable straws, whether plastic or even paper, from the café chain.
One of the latest changes he has implemented at his stores is to offer refills of liquid laundry detergent, to save plastic. The two brands Organic Foods stocks, Organic Larder and Sonnett, are both “triple-certified - you could eat the product”.
The Organic Larder detergent will soon be delivered in 200-litre metal oil drums before being decanted into 20-litre containers in-store.
Customers can refill their bottles at least 30 times before they start to degrade, he says. Organic Larder costs Dh35.75 for one litre and Dh62 for 2.75 litres and refills will cost 15 to 20 per cent less, Mr El Accad says.
But while there are savings to be had, going green tends to come with upfront costs and extra work and planning. Are we ready to refill bottles rather than throw them away? “You have to change,” says Mr El Accad. “I can only make it available.”
Essentials
The flights: You can fly from the UAE to Iceland with one stop in Europe with a variety of airlines. Return flights with Emirates from Dubai to Stockholm, then Icelandair to Reykjavik, cost from Dh4,153 return. The whole trip takes 11 hours. British Airways flies from Abu Dhabi and Dubai to Reykjavik, via London, with return flights taking 12 hours and costing from Dh2,490 return, including taxes.
The activities: A half-day Silfra snorkelling trip costs 14,990 Icelandic kronur (Dh544) with Dive.is. Inside the Volcano also takes half a day and costs 42,000 kronur (Dh1,524). The Jokulsarlon small-boat cruise lasts about an hour and costs 9,800 kronur (Dh356). Into the Glacier costs 19,500 kronur (Dh708). It lasts three to four hours.
The tours: It’s often better to book a tailor-made trip through a specialist operator. UK-based Discover the World offers seven nights, self-driving, across the island from £892 (Dh4,505) per person. This includes three nights’ accommodation at Hotel Husafell near Into the Glacier, two nights at Hotel Ranga and two nights at the Icelandair Hotel Klaustur. It includes car rental, plus an iPad with itinerary and tourist information pre-loaded onto it, while activities can be booked as optional extras. More information inspiredbyiceland.com
The specs
Engine: 2.0-litre 4cyl turbo
Power: 261hp at 5,500rpm
Torque: 405Nm at 1,750-3,500rpm
Transmission: 9-speed auto
Fuel consumption: 6.9L/100km
On sale: Now
Price: From Dh117,059
How to help
Send “thenational” to the following numbers or call the hotline on: 0502955999
2289 – Dh10
2252 – Dh 50
6025 – Dh20
6027 – Dh 100
6026 – Dh 200
HIJRA
Starring: Lamar Faden, Khairiah Nathmy, Nawaf Al-Dhufairy
Director: Shahad Ameen
Rating: 3/5
