SHARM EL SHEIKH, Egypt – An overwhelming majority of the Arab Coordination Group (ACG) members have committed to provide at least a cumulative amount of US$24 billion in financing by 2030 to address the global climate crisis, the Group announced at the UN Climate Conference COP 27 in Egypt.
The commitment, put together by regional and international development financial institutions will support the acceleration of the energy transition, the increased resilience of food, transport, water and urban systems, and the promotion of energy security in countries including the least developed countries and small island developing states. The financial commitment comes as part of a joint Call for Climate Action for Equitable Development.
The ACG commits to promote a just, inclusive, affordable and equitable energy transition in developing countries. The Group will strengthen global partnerships, including South-South and Triangular Cooperation to provide solutions to the adaptation, mitigation needs of developing countries and contributing to climate finance flows.
In addition to their own resources, the Group members aim to leverage concessional finance to de-risk and catalyze private sector investment in areas and regions where it is needed the most, utilizing a range of financial instruments such as loans, blended finance, guarantees and various islamic financing instruments.
Dr. Muhammad Al Jasser, President and Group Chairman of Islamic Development Bank (IsDB) and Dr. Abdulhamid Alkhalifa, the OPEC Fund Director-General, announced the ACG climate action commitment on behalf of the member institutions at COP27.
Dr Al Jasser said: “The Islamic Development Bank is proud to support the Arab Coordination Group Declaration on Climate Action. This commitment comes while IsDB is ramping up its level of climate finance in its operations which, in 2021, reached 31%. The Bank has made an ambitious target to have by 2025 at least 35% of its financing as climate finance. IsDB is also pledging to approve at least US$13 billion in adaptation and mitigation finance during the period 2023-2030”.
OPEC Fund Director-General Dr. Alkhalifa said: “The ACG’s sizeable financing represents decisive and collective action to address one of the world’s most urgent challenges. Climate action and development must be tackled simultaneously. The OPEC Fund as a committed member of the ACG will contribute to this pledge with the implementation of our recently announced Climate Action Plan, which will double the share of climate financing to 40 percent of all new financing by 2030 and mainstream climate action into our project cycle.”
UAE’s green bonds, sukuk market
As part of its participation in the COP27, the UAE Ministry of Climate Change and Environment (MoCCAE) co-hosted a fireside chat on the UAE Green Bond and Sukuk Programme with the Global Green Growth Institute (GGGI).
During the session, MoCCAE announced the issue of a new situation analysis report of the green bond and sukuk market in the UAE as part of its efforts to support the growth of sustainable finance in the country.
The discussion was headlined by Essa Al Hashmi, Assistant Under-Secretary, Sustainable Communities Sector-ministry of Climate Change and Environment, and moderated by Mercedes Vela Monserrate, Head of Sustainable Finance at Abu Dhabi Global Market (ADGM).
Al Hashmi said, “Innovative financing solutions are key enablers of our efforts to promote the adoption of sustainable practices across all sectors with the aim of achieving national climate goals and accelerating our transition to a low-carbon economy. Therefore, MOCCAE works with its strategic partners to raise awareness among key finance and investment players about the importance of green bonds and sukuk as effective financial instruments to boost sustainability.”
“We are making great strides in developing the sustainable finance sector through the Dubai Declaration on Sustainable Finance and the Abu Dhabi Sustainable Finance Declaration, as well as the UAE Sustainable Finance Framework. The UAE is one of the most active countries in the region in the issuance of green bonds and sukuk, and the UAE Green Bond and Sukuk Programme Development: Situation Analysis Report aspires to contribute to strengthening the enabling environment for sustainable finance activities,” he added.
The report indicates that despite the increased uptake of green financial instruments, they may still not be adequately understood by the wider financial services community. Therefore, the document seeks to help bridge any information gaps by laying out the fundamentals of green bonds and sukuk and the current market conditions in the UAE. It also offers recommendations for further development of the domestic sustainable finance market.
The report builds on the UAE Sustainable Finance Framework, launched in January 2021, and supports investments in low-carbon, environmentally sustainable, and climate-resilient projects.
In preparing the document, MOCCAE has gathered insights from leading financial institutions and relevant public sector stakeholders to gauge their market readiness for issuing and investing in green bonds and sukuk, as well as the needs and priorities for the development of the green fixed-income market in the country.
In line with the vision of its wise leadership, the UAE seeks to consolidate its status as a global sustainability hub by identifying innovative solutions that support national efforts to protect the environment and drive sustainable economic development to build a better future for the current and next generations.
Over the past years, the total value of the domestic market for green sukuk, bonds, and loans has reached nearly US$17 billion. While in 2020, the size of the global market for green sukuk was estimated at US$1 trillion.
The report addresses current methodology of issuing green bonds and sukuk while elaborating on their ability to provide comprehensive and cost-effective financing. It also connects parties that have tangible bankable projects with mega financing institutions, such as pension funds. The document will be used as tool and an enabler to bridge the gap between stakeholders and encourage more sustainable financing practices.