US$700 Million Green Bonds By ADX Harbinger Of New Era In Financing

As the government plans a range of programmes and policies in the areas of energy, agriculture, investment, and sustainable transport in addition to new environmental and construction policies, the entire idea of green financing takes the discourse to a whole new level. The time has come for the region to recognise, accept, and acknowledge the importance of secure green financing. While it is true that green financing has picked up in the Middle East, equally true is the fact that the ratio of public-private investments is skewed with a better part of the money being invested by the public sector rather than the private sector.

This also means that unless private players need to move away from plain CSR to adopt, adapt and enact a vision for a circular economy. One of the main objectives while investing is to take stock of financial risks that are associated with green lending and whether an increase in green lending will decrease the non-performing loans ratio (NPLR) of UAE banks.

Green bonds, a debt instrument that helps raise funds for climate and environmental projects, companies, governments, countries, and multilateral organizations have become an alternative investment. Like other bonds, green bonds also offer investors fixed interest payments. Also, they offer tax incentives like tax credits, making them attractive to investors.

The 2016 State of Green Economy Report highlighted the endeavors of the UAE financial sector in empowering a robust green economy with the introduction of 10 unique sustainability initiatives to demonstrate the private sector’s commitment to supporting the government’s vision.

The process of green economy transformation can be a reality if the lending , investing and financing of insurance of projects, businesses and customers with sustainable purposes grows in a linear upward graph, while concomitantly supporting the growth of a successful small- and medium-sized enterprise (SME) sector.

Effective implementation requires extensive amounts of knowledge transfers and experiences apart from capacity building in financial institutions. When the best minds come together and put together a public policy framework that not just enables green financing but also measures the quantum of returns in an orderly manner through public accountability and CSR Reports it also puts things in perspective to find out whether these frameworks are in sync with the international standards.

The conversion of simple local knowledge transfers to a more national learning network and collaboration with the international community will help solidify the importance and sustained returns on green financing including green bonds.