Private-sector environmental initiatives are being hampered by banks’ reluctance to finance clean-energy enterprises.
Indeed, economic development is taking its toll on the environment even though the UAE has made progress in reducing its carbon footprint. The country has lowered its annual per capita emission of greenhouse gases to 18.8 tons last year from 40 tons in 2006, according to the Ministry of Environment, NewsNow reported.
“Although there are some banks that have a green remit, most are failing in their environmental concerns,” said Aisha Al Abdooli, assistant undersecretary of the Green Development Department at the ministry of environment and water.
She was speaking in Dubai last week at the national round table on financing and investing in green economy projects.
“It is not a secret that conventional banks do not see the return on investment from green initiatives, but that is short-term thinking,” said Al Abdooli.
“The government has committed to making the country environmentally sustainable. The investment is already being made, we need the private sector to join in.”
Sabrin Rahman, a senior manager in HSBC’s Middle East corporate sustainability team, said the bank recognized the importance of supporting environmentally-friendly businesses.
Renewable Energy
“Renewable energy is a big focus, but so is energy efficiency, low carbon transport, and waste and water management,” he said.
Last year, HSBC helped to finance wind-energy projects, energy-efficient social housing, water projects, biodiversity schemes and public transport systems, said Sabrin.
Islamic finance is a natural fit for environmental initiatives, given its basic tenets of partnerships and benefiting society with a longer investment time frame than conventional banking, according to experts at the round table.
“There is a huge opportunity in the range of $15m to $50m sukuk,” said Martin Haupts, managing director of Phanes group, a solar energy developer and asset manager.
“The green initiatives offer long-term stable revenues over 15 to 20 years. Islamic finance with securitization is a great option where conventional financing is not ready for the risk.”
Conventional banking is not a natural fit for new technologies and early adoption needs because of its short-term investment time frame.
UNEP Encouragement
The United Nations Environment Program (UNEP) is, however, encouraging the banking sector to take a leading role in the development of environmentally-minded businesses.
“The UAE’s banking system needs to get out of the back seat and into the driving seat,” said Iyad Abumoghli, the program’s director and regional representative for West Asia.
“Generally there is no buy-in from the banks or their customers, and it is incredibly short-sighted. The UAE is the only country in the Middle East with a strategic plan for a green economy that encompasses food, transport, energy and buildings. The banks are missing a massive opportunity.”
However, the National Bank of Abu Dhabi (NBAD) has been working with global consultancy PwC and the University of Cambridge regarding the role that the lender can play in the clean-energy sector.
