With the UAE to host COP28 in 2023 and pledging to become net-zero by 2050, the country is at the cusp of a changing landscape for sustainable growth. This phenomena has pushed climate financing to the forefront of policy discussions in the region to meet the objectives of the Paris Agreement, with universities becoming the instigator for the transformation.
Climate finance is vital for effectively addressing climate change through adaptation and mitigation activities. The GCC is beginning to embrace green initiatives, paving the way for the development of a sustainable green finance sector. How can universities equip graduates to develop skills to become more climate-conscious for financing?
Climate finance needs to rise sharply to $5 trillion a year globally by 2030 to fund measures to fight the crisis, according to industry leaders at the 2021 Global Manufacturing and Industrialisation Summit that took place in Dubai. The sharp uptake has seen universities increasingly recognise their responsibility to prepare students - and society - to actively contribute to the mitigation and adaptation to climate change.
This role sees universities adopting and promoting carbon neutral goals and practices across all degrees particularly financing.
From business, finance and management to accounting degrees, universities are teaching students about the importance of fintech and environmental-sustainable finance to make a difference to the environment. To increase climate finance flows, students should also be taught how strategies can scale up public funds, integrate climate consideration to financial systems, provide sufficient incentives while increasing investment opportunities, and reducing risks for private actors.
Environmental and climate finance have enormous potential for the GCC, particularly through the introduction of renewable energy technology including solar and wind energy, green enterprises, and green bonds or Sukuks, which are Shariah-compliant debt instruments to the region. These countries can benefit from the development of sustainable finance, which can help them save money while also reducing carbon emissions, conserving resources, and creating new jobs.
Energy demand in the US, for example, has increased as a result of stable economic growth, which has prompted a desire to protect energy export income in the future. Green growth techniques such as climate financing and sustainable development must become important economic policies in the GCC to achieve these requirements, such as meeting present needs while ensuring future economic growth.
In Abu Dhabi, the 2030 economic strategy examines strategies to lessen the emirate's reliance on oil while increasing the contribution of non-oil industries to GDP to 65 per cent. According to Dubai's 2050 integrated clean energy policy, renewable energy will account for 75 per cent of the city's total generation mix by 2050, an increase from the current 35 per cent.
These are the reasons why, led by the UAE, the GCC has been investing in renewables, notably solar electricity, and has already established itself as an active and expanding market in this area. By the early 2020s, according to the International Renewable Energy Agency's estimate, almost 7 GW of additional renewable power generation capacity will be brought online around the world.
All of these deals have the potential to be supported by green finance. Nonetheless, the green bond market in the GCC remains in its early stages, despite substantial expansion over the previous five years. The National Bank of Abu Dhabi (now First Abu Dhabi Bank, following its merger with First Gulf Bank) issued the first and only green bond we have seen in the region in March 2017, for a total of $587 million.
Additionally, Masdar, based in Abu Dhabi, raised $75 million through a green revolving credit facility (RCF) to fund its environmental initiatives. There have been no green sukuk issued by issuers in the Gulf Cooperation Council (GCC).
With so much activity in sustainable finance across the region, this is opening the door for students to access a larger pool of capital, while also inspiring them to think about the wider perspectives.