On the sidelines of COP28 last week, ESG Mena’s Lead Journalist, Madaline Dunn, sat down with Lamia Khaled Hariz, Group Head of Public Affairs and Corporate Communications, Abu Dhabi Islamic Bank (ADIB), to discuss the bank’s approach to sustainable finance, green sukuk issuances and its inclusion on Spendwell’s list of sponsors without UN-backed net-zero targets.
Lamia, this week at COP28, climate finance has been in the spotlight, with talks focussing on mobilising finance for the green transition. ADIB recently raised $500m from its first-ever green sukuk. Tell me about this and the bank’s wider sustainable finance efforts.
On Monday, [UAE] banks pledged one trillion dirhams for sustainable financing by 2030. ADIB was one of the banks included in that pledge.
For the time being, our total sustainable financing is around six billion dirhams, and there is a plan to grow this by 2030.
We have put together a team to assist us with this, and there are a lot of green financing and sustainable financing assets that are being created in the country, from both the government and corporates, given that the UAE is moving to a net-zero plan.
Can you tell me more about the green sukuk issuance and the impact it will have?
We issued a green sukuk a month ago, and it was the first dollar denominated green sukuk to be issued by a bank. It was a $500 million green sukuk, and five times oversubscribed.
It shows that there is a lot of trust in ADIB as a brand and in our financial performance, as well as a good appetite for green sukuk.
The proceeds from this green sukuk will be used in our Sustainable Finance Framework, a framework that was validated by a second-party opinion. It clearly identifies where this green sukuk will be invested. The idea is to refinance some of our existing assets, or to book new financing under this new sukuk.
The assets we’re looking at are energy-related assets, such as renewable energy, whether solar or wind, and we’re also looking at green homes, green auto finance, pollution prevention, and water treatment.
These assets exist in this part of the world, and specifically in the UAE, with the net-zero plan.
Can you delve further into your overarching Sustainable Finance Framework, as well as your ESG priorities and parameters?
Our sustainable finance framework clearly defines what can qualify and what cannot. It’s divided between the green assets and the sustainable assets.
So, under the green assets, we have everything related to renewable energy, green buildings, clean transportation, water treatment, and pollution prevention and we also have the social element, related to affordable housing, public school funding and the like.
From an ESG perspective, the bank has a clear roadmap and strategy for the next three years.
We are putting the right governance structure together. We have the Board Committee and the Management Committee that will take care of ESG-related issues, and we have an ESG risk framework in place as well.
Our Management Committee is all C-level representatives representing different businesses, the risk, the credit and the compliance team and the set by our Group CEO, who will ensure that the ESG elements are integrated within our operation and within the day-to-day business of our bank.
Above that, there is the ESG board committee, whose responsibility is to oversee the work of the Management Committee and ensure that we are operating within a specific governance framework.
You mentioned clean transportation, and of course, it’s a central part of the green transition. Tell me about your Electric Vehicle Finance Programme.
So we launched our electric vehicle programme to encourage our customers to move from conventional cars to electric cars. At one point, the rate was 1.79 per cent, and this is the lowest rate for car financing in the country.
The demand is incredible. The minute we launched it, we had so many customers calling and applying for it and it’s a product that we intend to keep and grow in the portfolio.
We’re even doing deals with different car dealers in the country so that they will have electric cars, to provide them with better rates as well and encourage our customers to move to electric.
And can you tell me about some of the initiatives that extend beyond mobility and any partnerships here?
We’re looking at green mortgages as well, or the green home finance, as we call it, and looking to partner with different partners that come and do the fit-out in houses to move customers to renewable energy and see if we can finance this at a good rate, in addition to looking at from a corporate banking perspective, looking at financing the entire supply chain from a green perspective.
As an Islamic bank, what can you tell me about the interconnection of Islamic finance and sustainability and the role it has in the net-zero transition?
If we look at the spirit of Sharia, Islamic banking, it doesn’t do anything that harms society, the environment, the community, or the customers. And then, if we look at the ESG or sustainability spirit, it’s the same, there’s a lot of overlap.
I always say when you put these two values together, you will have an ideal world, there are a lot of common values.
We do a lot of negative screening as an Islamic Bank, and don’t finance many things, and the same from a sustainability perspective.
That’s why I think it’s easier for an Islamic bank to integrate ESG considerations into our day-to-day operations.
Analysis from Spendwell, which assessed the climate commitments of COP28 sponsors, found that ADIB doesn’t yet have commitments or targets with any initiative within its climate ranking. Why is that? What’s preventing you?
We have just finalised our net zero plan, we didn’t announce that, because of so much news, it was a PR decision.
So, we did assess our baseline scope one, scope two and scope three, and we have this number in our hand now. The plan is to put a target plan for 2030 and 2050. Hopefully, the plan is to go with the government plan for net zero by 2050.
But of course, we’re going to have a transitional plan to reach this point, and this is related to our own operational emissions, as well as the financing emissions of our customers.
And what’s the timeline for setting those targets?
The timeline to announce our targets is within a month. So, hopefully, in January of 2024, and as I said, we are putting in the medium term and the long term as well.
Finally, we’ve heard about the climate finance gap that must be bridged to realise the energy transition. There have been a lot of pledges, but what needs to happen now to effectively scale climate finance to have a real impact?
We need new projects related to clean and renewable energy, capacity planning, the reskilling of our people, education and collective efforts at the bank level, with corporates, and with the government to be able to scale things up.