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UAE banks step up sustainability efforts ahead of COP28 in Dubai

Growing sustainable financing goals signal that banks in the region are keen to support the world's net zero transition.
Melodie Michel
UAE banks are stepping up sustainability efforts ahead of COP28
Photo by ZQ Lee on Unsplash

First Abu Dhabi Bank and Mashreq are making headlines with expanded portfolio decarbonisation goals and several sustainability-linked loans as the world’s eyes turn to Dubai for COP28.

First Abu Dhabi Bank (FAB) has announced the expansion of its net zero financed emissions commitment to the agriculture, aluminium, cement, commercial real estate and steel sectors. This is the bank’s second wave of industries to be covered by emissions reduction targets, after it set initial goals for oil & gas, aviation, and power generation in March.

FAB’s Chief Sustainability Officer Shargiil Bashir explains that the target update “will inform and enable better investment decisions as well as advance the growth objectives of our clients, as they pursue their own transition and decarbonisation ambitions”.

Read also: The three F’s of COP28 - Part 2: Finance

First Abu Dhabi Bank net zero targets

The bank, which reported record 65% year-on-year profit growth to US$2.2 billion in the first half of 2023, aims to achieve different levels of emissions cut by 2030 depending on the sector: 35%-45% for agriculture, 32% for aluminium, 25% for cement, 45%-55% for commercial real estate, and 26%-32% for steel.

FAB is the only UAE member of the Net Zero Banking Alliance, and says it was the first bank in the MENA region to set decarbonisation targets for financed emissions in March this year. The new announcement means that net zero targets now cover about 90% of FAB’s corporate financed emissions. 

Alongside its carbon reduction efforts, the bank also has a goal to provide US$75 billion in sustainable financing by 2030, and is pursuing an aggressive renewable energy strategy, with a goal to cut the Scope 1 and 2 emissions intensity of power generation in its portfolio by 64% by 2030.

Mashreq Bank: Sustainability-linked financing on the rise

Meanwhile, Mashreq Bank, also based in Dubai, has signed a raft of sustainability-linked facilities in recent weeks, as part of its commitment to unlock US$30 billion in sustainable financing by 2030. 

The latest is a sustainability-linked loan to Jordan apparel manufacturer Classic Fashion Apparel Industry, based on KPIs around renewable energy and GHG emissions reduction, as well as water recycling and employee engagement.

Last week, Mashreq also provided UAE luxury retail company Chalhoub Group its first three-year sustainability-linked working capital facility, involving KPIs around its science-based decarbonisation target, gender equality and sustainable procurement.

Read also: Sustainability-linked loans are not (yet) where they need to be