Abu Dhabi aims to become ‘Green Bond’ hub

By Eudore R. Chand

ABU DHABI 18 January 2020: The Abu Dhabi Department of Energy (DoE), has announced a new Green Bond Accelerator initiative.

The Green Bond Programme is a joint initiative between DoE, Abu Dhabi Global Market (ADGM) and Abu Dhabi Securities Exchange (ADX). The initiative has been launched with the objective of establishing Abu Dhabi as a regional hub for the issuance of green bonds and green sukuk for sustainable projects in the Emirate as well as across the Middle East and Africa.

The Green Bond market in the Middle East and Africa is worth more than US$2bn with the potential to grow further. The overall global green bond market was worth over US$230bn in 2019 and is expected to grow to around US$350bn in 2020, said Wam.

DoE will work closely with ADGM, ADX and other stakeholders to develop this green bond initiative and support sustainable finance in the region.

Shortly, the DoE will be issuing a consultation paper for the new DoE green bonds policy.

The DoE will continue to work closely with ADGM, ADX and other stakeholders to ‘clear a path’ and develop a clear framework for green bonds. More detail will be included in our Green Bond consultation paper, but in broad terms, the Issuer of a Green Bond will be established in Abu Dhabi, with the money from any green bond potentially supporting sustainable and efficiency projects both inside and outside the Emirate. This will create a green bond investment hub in the Emirate.

Mohamed Bin Jarsh Al Falasi, Undersecretary of the Abu Dhabi Department of Energy said: “We will work with ADGM, ADX and other key stakeholders to ‘clear a path’ and develop a transparent framework for green bonds. More details will be included in our consultation paper shortly, but in broad terms, the Green Bond will be established, regulated and listed in Abu Dhabi, with the money from any green bond supporting sustainable and efficiency projects both inside and outside the Emirate. Over the coming months, we will be engaging with stakeholders to further develop this initiative and consider whether Blue and Transition Bonds can also be included. This will continue to establish Abu Dhabi as both a sustainable finance and a green bond hub for the region.”

The green bonds scheme has a multi-pronged objective which not only makes green financing and refinancing options available for Abu Dhabi’s sustainable projects but also opens a window of opportunity for Abu Dhabi to become a new investment hub for sustainable projects in the MEA region. The scheme will create a knowledge and innovation hub for green bond thought leadership in the region and encourage clustering of international and local advisers in Abu Dhabi to provide a one-stop- shop for sustainable financing. This would include energy consultants, banks, law firms, auditors and other specialist advisers who will offer their services to build a strong green and sustainable finance infrastructure.

The bonds will be listed on the ADX and will support only green and sustainable projects that comply with the DoE’s Green Bond Policy. Abu Dhabi is leading the way on green and sustainable projects in the region and can look to build on its experience from the 1GW Noor Solar PV Park (world’s largest single site PV), the 200 MIGD reverse-osmosis plant at Taweelah (world’s largest sea water RO plant) and district cooling plants. These kind of projects would qualify as ‘green’ projects. The green bonds policy will also likely cover energy and water efficiency schemes, green buildings, new electric vehicle charging infrastructure, carbon capture and efficient technologies for water, wastewater and recycled water management.

In order to promote investor confidence and ensure that any green bonds issued in Abu Dhabi are genuinely ‘green’ and not ‘green washed’ , DoE will set out in its consultation paper clear qualification, reporting and certification criteria in line with international benchmarks (including the ICMA (International Capital Markets Association) green bond principles).

DoE will not itself issue the bonds. The bonds will be issued by financial institutions, governments and companies, to support green projects and energy and water efficiency inside and outside the Emirate.

The initiative will leverage on DoE, ADGM and ADX individual strengths and expertise.

Listing the green bonds on ADX will promote investor confidence and create transparency. This green bonds initiative will complement ADGM’s sustainable finance initiatives and provide further employment and business opportunities in ADGM. Green Bond or Sukuk Issuers that are based in ADGM will be able to leverage the unique benefits of incorporating English Law for their green bond financing documents and take advantage of ADGM’s ‘special purpose vehicle’ regime, as well as a neutral and expert court and arbitration system already established by the ADGM courts.

Abu Dhabi Sustainability Week (ADSW), which runs from January 11 to 18, 2020 at ADNEC, Abu Dhabi, is a global platform for accelerating the world’s sustainable development. The week brings together policy makers, industry specialists, technology pioneers and the next generation of sustainability leaders from around the world to debate and discuss the future of sustainability.