Abu Dhabi banking giant FAB is ‘green’ financing where it is needed most

Dubai: Net Zero by 2050 – The UAE has made its goals clear enough on where the country’s carbon emissions should in the next 27 years.

Joining in would be businesses and enterprises of all possible size and sphere of operations in making sure what’s put out as emissions is counter-balanced. The deadline is clear enough and each entity needs to get cracking on that journey with immediate effect where possible.

Apart from changes to their operations, businesses will also need to find the funds to make things happen. And there are some serious costs involved in the changeover towards going carbon-neutral.

This is where the UAE banking behemoth FAB wants to make its presence felt. Recently, the Abu Dhabi headquartered entity said it has targeted three sectors – aviation, oil and gas, and power generation - as being the highest carbon emitters. More to the point, to get companies in these sectors to change their ways, FAB will help out financing their sustainability-linked projects.

In an interview, Shargiil Bashir, FAB’s Group Chief Sustainability Officer, presents the broad brush strokes on how the bank will help make the difference.

Why do you feel it was necessary to set reduced financing targets across these highest emitting?

By announcing the Net Zero 2050 strategic initiative, the UAE became the first country in the Middle East to make a commitment to full de-carbonization. To support the UAE’s transition and consequent growth ambition, First Abu Dhabi Bank joined the Net-Zero Banking Alliance (NZBA) in October 2021.

We believe that engaging with and supporting our clients in their transition will contribute significantly to the Middle East’s net-zero goals.

Along with reducing our carbon footprint, it is our responsibility to support our clients in reducing their Green House Gas (GHG) emissions through the operations that we finance, referred to as ‘financed emissions’. We have already delivered 31 per cent reduction in our GHG intensity in the period 2019-22, per full-time employee.

In line with our commitment and to support UAE’s ambition to decarbonise, FAB’s set targets to reduce financed emissions for three priority sectors: oil and gas (O&G), power generation and aviation.

Why focus on these three sectors, even though they account for the highest emissions? Can’t the same financing principles apply to clients in other industries too?

In the first phase we have focused on sectors with highest emissions and hard to abate sectors. In the next phase – coming 12 months – we will be analysing other sectors in detail to understand their financed emissions.

All sectors will need to de-carbonize to achieve net-zero however all sectors will have their own unique journey to net-zero. By understanding our customers emissions we can support them in their pursuit towards net-zero.

FAB has already set a funding target on its own Net Zero journey. Are the new financing mandates for the three industries over and above that?

FAB has set a target to facilitate sustainable projects for USD 75 billion by 2030. In 2022 we facilitated $9.1 billion of this target.

We are keen to facilitate sustainable projects for all industries that can support them in their journey to net-zero.

How does this financing work? Is it Company A in, say, oil and gas approaching you for its sustainability project. And then you lend on that?

Yes, indeed.

A firm example of this is when FAB recently supported ADNOC Distribution with a ‘Sustainability Linked Loan’. This loan will help ADNOC Distribution to achieve their plan to reduce carbon intensity by 25 per cent by 2030.

ADNOC Distribution will install solar panels to power service stations and use biofuels in their fleet of vehicles, in addition to expanding their network of EV charging stations. To construct the new service stations, ADNOC will utilise ‘green concrete’, which is eco-friendly and has a smaller carbon footprint than traditional concrete.

How does this financing align with the UAE’s sustainable development journey?

The targets are on reducing emissions that the bank finances. We want to support UAE’s ambition of Net Zero by financing the transition to de-carbonization. Last year, we facilitated $9.1 billion of sustainable projects.

Will you require clients in these 3 industries to show they have sustainability programs?

At present, we work alongside our clients to understand their sustainability plans and to understand how we can support them on their journey.

We do not put a criteria that they should have a sustainability plan, but we engage with them and discuss if they have a plan. If they do not have a plan yet, we discuss with them the benefit of such plan and how we can support them on this journey.

How do you evaluate if your sustainable project financing has been a success or not?

We see sustainability as a big opportunity as we need to support the transition to de-carbonization. Each project is assessed to see whether it can be categorised as sustainable by measuring it against our Sustainable Finance Framework, which is in line with international guidelines.

On a yearly basis, we also assess the impact from the projects we have financed. The first green bond in the region that was issued in 2017 by FAB matured in 2022. Through this bond, 13 projects were financed which included:

* 2,577 MW of total renewable energy capacity generation;

* 34,761,000 tonnes of CO2 annual GHG emissions reduced/avoided: and

* 430,000 cubic metres a day of wastewater treatment.

Do the financing packages come at a lower rate for clients?

Financing green or sustainable projects are priced similar to other projects depending on risk, sector, maturity, etc.