The UAE’s decision to take on the mantle of global leadership on climate change by hosting the COP28 conference has galvanised the private sector to take action. Companies are aligning their corporate strategies with the country’s roadmap to achieve net zero in greenhouse gas emissions by 2050, and making their own commitments.
Banks have a pivotal role to play in supporting clients on their journey towards a sustainable future. Abu Dhabi Commercial Bank (ADCB) stands out as a leader in this effort by providing the financing necessary to fund the transformation of the energy system and the wider economy, while offering products and services that incentivise corporate action on climate change.
Our view is that investment in the transition represents substantial economic opportunity. While the scale of change has been cast as “a new industrial revolution”, the UAE is fiscally well-equipped to drive significant public investment, and adept at creating the conditions for private investment.
Banks have a pivotal role to play in supporting clients on their journey towards a sustainable future
ADCB is supporting the UAE’s strategy on net zero by joining over 130 global banks in the Net Zero Banking Alliance (NZBA), committing to align our lending and investment portfolio with the goal of net zero emissions by 2050 or sooner. In tandem, the bank has more than tripled its sustainable finance commitment to Dh125 billion by 2030, with a shorter-term target of Dh50 billion by 2025.
As part of this commitment, the bank is working closely with clients to structure sustainability-linked loans that are tailored to a company’s specific environmental, social and governance (ESG) targets, with interest payments adjusted to the performance of key performance indicators.
In addition, ADCB is expanding its suite of sustainable products and services. Recently, the bank introduced the region’s first Mastercard Carbon Calculator to help businesses track their carbon footprint from expenditures made using their ADCB corporate cards.
For larger corporate clients, ADCB is offering advisory, structuring, and distribution services for green and sustainable bonds and sukuks. This expertise is grounded in the bank’s own experience; we have successfully issued $1.15 billion in green bonds to date.
Sustainability drive
More broadly, the region’s sustainable finance market is growing rapidly, with 18 dollar-denominated debt transactions raising a combined $18.2 billion, in 2023, compared to 11 deals for $8.6 billion the previous year, according to Bloomberg. Notably, ADCB has helped drive this issuance across the Middle East, North Africa and Turkey region, having advised on nine deals worth $8 billion in 2023.
In addition, ADCB’s green bond issuance programme plays an important role in facilitating the flow of global capital into green loans to finance sustainable initiatives in the region. The bank has applied international best practice through the adoption of a Green Bond Framework, which is aligned with the UN Sustainable Development Goals and based on the International Capital Markets Association (ICMA) Green Bond Principles. In tandem, the bank’s eligible green loan portfolio expanded 61% year-on-year to $1.65 billion as at the end of June 2023, showing the growth in the green economy.
On the deposits side, ADCB has recently launched a Sustainable Call Account to enable corporate banking customers to manage funds in a manner that contributes to their social and environmental goals.
ADCB has helped drive this issuance across the Middle East, North Africa and Turkey region, having advised on nine deals worth $8 billion in 2023
Funds deposited by corporates and institutions are directly allocated to sustainable, social and green bonds within the bank’s treasury investment book under the principles set by ICMA. The account is available in dirham or dollar provides clients with a convenient channel to increase exposure to sustainable assets, with account holders receiving an annual report on the impact of deposited funds, consolidated at a portfolio level.
The bank's commitment to sustainability has been recognised by both Sustainalytics, which rates ADCB as the leading diversified bank in the region for ESG, and MSCI, which has awarded an 'A' ESG rating.
In the coming years, banks will be bringing more sustainability-related products and services to the market in a natural adaptation to the needs of clients as they pursue a net zero agenda. Digital technology will undoubtedly play a major role, for example, to make high quality carbon offsetting immediately available alongside corporate banking transactions.
Through these commitments, ADCB aims to extend the breadth of its corporate relationships further into the area of sustainability and support a successful transition to net zero.