Today's Edition
HOSSAM ABDELNABY (ABU DHABI)
Companies and financial institutions in the UAE have been pioneers in issuing green Sukuk (Sharia-compliant bonds) and green bonds to finance environmentally friendly projects, surpassing many countries in issuing this type of debt instrument, especially those denominated in US dollars.
Particularly notable is the fact that these institutions have listed green bonds and green Sukuk in global markets and exchanges and have been met with an overwhelming response from international investors and institutions, with many of the bonds listed several-times oversubscribed. This reflects the international community’s confidence in the UAE’s sustainability efforts as well as a strong trust in the issuing companies and banks, as the future of investment demonstrably lies in sustainability compliance.
Majid Al Futtaim Group was the first company to issue a green Sukuk in May 2019, making it the first private company in the Middle East to adopt and implement sustainable financing principles. This pivotal move paved the way for other successful issues, and the company’s second issuance came only a few months later in October 2019. A sustainability-linked loan of $1.5 billion was later issued in July 2021.
The environmentally friendly bonds were six times oversubscribed, indicating the increasing demand in the region for sustainability-aligned financing.
Last May, Majid Al Futtaim Group announced the fourth issuance of green Sukuk in capital markets, reaffirming the company’s position, vision, and commitment to sustainable financing. The company raised $500 million through this issuance to refinance existing bonds worth $800 million, due in May 2024.
In early 2022, Sweihan PV Power Company, which owns the Noor Abu Dhabi solar power plant, listed the first green bonds in the Abu Dhabi Securities Exchange, valued at $700 million.
Green SukukThis month, Abu Dhabi Islamic Bank became the first financial institution in the world to issue green sukuks denominated in US dollars after the bank announced the issuance of green sukuks worth $500 million. The green sukuks will be listed and traded on the global securities market at the London Stock Exchange and in the London Stock Exchange’s green bond market.
The bank, which has an A2 rating from Moody’s and an A+ from Fitch with a stable future outlook, priced the five-year sukuks at an annual profit rate of 5.695%, paid semi-annually. The sukuks received an A+ rating from Fitch.
Nasser Al Awadhi, the CEO of Abu Dhabi Islamic Bank Group, revealed a record demand for the green sukuks, which attracted the attention of more than 100 global and regional investors and had an order value of $2.6 billion, more than five times the targeted value. The issue achieved the highest subscription demand of sukuks issued by banks since 2020, reflecting investors’ confidence in the bank.
The issuance was based on Abu Dhabi Islamic Bank’s efforts to accelerate the fight against climate change and its ambition to provide solutions for the transition to the green economy, Al Awadhi explained.
Al Awadhi said that the issuance of green sukuks is part of the bank’s sustainability strategy and will lead to expanding the bank’s role as a catalyst for capital projects centred on urgent environmental and social issues.
The listing of the dollar-denominated green sukuks in the London Stock Exchange affirms the bank’s firm commitment to adopting sustainability principles and offering a platform for investors who share the same and commitment to environmentally and socially beneficial projects, Al Awadhi said. Abu Dhabi Islamic Bank also intends to allocate an amount equal to the net proceeds of the sukuks to finance eligible green projects, within the bank’s sustainable financing framework, he added.
Green BondsAbu Dhabi Commercial Bank has priced $650 million in green bonds to support the financing of qualified green assets, according to the bank’s green bond framework. The proceeds of the issue will go to financing eligible green projects, reflecting the bank’s commitment to supporting its clients in the transition to a carbon emission-free economy. This aligns with the bank’s commitment to provide over Dh35 billion in sustainable financing by 2030.
The green bonds were priced at a margin of 125 basis points above the rate of treasury bonds at a 5.5% interest rate. The issue was 2.9-times subscribed after attracting a wide range of local, regional, and international investors, with the total value of the orders exceeding $1.9 billion, a tangible indicator of the high confidence in the bank and its distinguished sustainability initiatives.
Ala’a Eraiqat, the CEO of Abu Dhabi Commercial Bank Group, reported that the second issuance of green bonds comes after the success of the bank’s first green bond issuance of $500 million in September 2022.
Eraiqat said that the bank’s climate strategy aims to finance solutions capable of addressing climate change, in line with the UAE’s strategic initiative to achieve climate neutrality by 2050. He emphasised that Abu Dhabi Commercial Bank is fully prepared to support its clients in transitioning to a carbon emission-free economy, especially as the UAE prepares to host the COP28 conference.
The positive resonance of this green bond issuance among investors reflects the value they see in the bank’s approach to sustainable financing, Eraiqat explained, noting that this achievement not only enhances the commitment to contribute to positive change, but also affirms the bank’s credibility in the market and its strengths in ESG.
By June 30, 2023, Abu Dhabi Commercial Bank’s qualified green loan portfolio saw a significant 61% growth compared to the same period last year, reaching $1.65 billion. Green buildings and renewable energy account for the largest share of this portfolio, at 55% and 26% respectively, together constituting over 80%.
For every Dh1 million invested in the portfolio, 119 tonnes of carbon dioxide emissions are not released.
Fee ExemptionDuring its meeting at the end of April, the Board of Directors of the Securities and Commodities Authority approved a proposal to exempt companies wishing to list their green bonds or sustainability-linked bonds in a local market from registration fees for 2023.
The decision aims to highlight the country’s clear agenda to advanced towards the sustainable development goals on multiple fronts, particularly in sustainable economic growth.
Chairman of the Board of Directors of the Securities and Commodities Authority Decision No. (32/R.M) of 2018 regarding the fees for technical services had set the registration fee for bonds and Sukuk for listing purposes at 0.01% of the issue value, with a maximum of Dh30,000.
In February of this year, the Securities and Commodities Authority issued Decision No. (21/ R.M) of 2023, which regulates green and sustainability-linked bonds and sukuk. The Decision allows public joint-stock companies to issue green bonds and green Sukuk, the proceeds of which are fully used to finance or refinance environmentally friendly sustainable projects. Examples of sustainable projects under the Decision include renewable energy projects, energy efficiency projects, pollution prevention and control projects, sustainable management of living natural resources and land use, projects for the conservation of terrestrial and aquatic biodiversity, clean transport projects, and sustainable water and wastewater management projects.
The decision also allows companies to issue sustainability-linked bonds and Sukuk, which are used to achieve the issuer’s predefined sustainability goals within a specified timeframe to contribute to achieving key performance indicators, and carry structural and/or financial features that are subject to change depending on the issuer’s achievement of sustainability goals.
ListingIn September last year, Abu Dhabi Securities Exchange announced the secondary listing of the Abu Dhabi National Energy Company’s (TAQA) dual-tranche bonds, worth $1.5 billion in its primary market. The bonds, valued at $500 million with a five-year term, are due in 2029, and are issued as conventional bonds with a coupon rate of 4.375%.
Meanwhile, the ten-year tranche, valued at $1 billion and due in 2033, was priced with a coupon rate of 4.696%, with coupon payments to bondholders to be made on a semi-annual basis. The ten-year bonds were organised as green bonds, marking TAQA’s first issuance of green bonds, with proceeds intended for financing, refinancing, and investing in eligible green projects, in line with the company’s green financing framework.
This listing in both Abu Dhabi Securities Exchange and the London Stock Exchange of the unsecured dual-tranche bonds is part of TAQA’s global medium-term bond programme. At the time of issuance, the subscription was exceeded almost ten times, with regional and international investors presenting total orders of over $15 billion. In line with TAQA’s corporate credit rating, the bonds were rated Aa3 by Moody’s and AA- by Fitch, reflecting TAQA’s strong financial position and the robust macroeconomic outlook of Abu Dhabi.
Commenting on the secondary listing, Abdulla Salem Al Nuaimi, CEO of Abu Dhabi Securities Exchange, said that the listing demonstrates the increasing prevalence of sustainability-linked bonds, which have seen a rise in listing in the Abu Dhabi Securities Exchange issued green bonds. In line with green financing frameworks, these issuances support the ongoing development of environmental, social, governance, and sustainability issues in the market, aligning with the UAE’s efforts and ambitions towards achieving net-zero.
Jasim Husain Thabet, Group CEO and Managing Director of Abu Dhabi National Energy Company (TAQA), said that the secondary listing of the dual-tranche bonds in Abu Dhabi’s debt markets, in collaboration with Abu Dhabi Securities Exchange, includes TAQA’s first green bond.
“As a leading low-carbon utilities company, we consider green financing projects and carbon removal as key opportunities for our business growth, given the increasing demand from local and international investors for credible green investments,” he said.
TAQA aims to establish itself as a regional leader in green financing through its recently launched green financing framework, in addition to its environmental, social, and governance strategy, and the company’s ambitious goals to reduce emissions by 2030, Thabet added.
‘Masdar’ BondsAs part of the same approach, Abu Dhabi Future Energy Company (Masdar) listed its first issue of unsecured green bonds with a ten-year term worth $750 million on the London Stock Exchange. This step is part of Masdar’s plan to issue $3 billion in green bonds.
The Abu Dhabi Securities Exchange also announced Masdar’s secondary listing of green bonds valued at $750 million. These bonds have attracted significant interest from regional and international investment entities, with subscription levels more than five times over the targeted value.
During the opening ceremony of trading at the London Stock Exchange, Masdar CEO Mohamed Jameel Al Ramahi sasid that the first issue of its green bonds reflects seventeen years of relentless efforts and dedication to establish Masdar’s leading position in the global renewable energy sector. He noted that this achievement comes after the launch of Masdar’s “Green Bond Framework” in March 2023, which received the highest sustainability rating (SQS1) from Moody’s.
Future of Investment Dr. Michael Urban, Chief Sustainability Strategist at the investment bank Lombard Odier, stressed that the future of investment lies in alignment with sustainability principles and standards. Sustainability is no longer a luxury, but has become an investment conviction and a fundamental necessity, he said. It is now a driving force in shaping global economies, he added, pointing out that as COP28 approaches, integrating climate goals with food security and energy necessities presents a compelling scene filled with opportunities and risks for financial markets.
