Financial instruments are essential to the transition to a sustainable economy. Faced with environmental and social challenges, the United Arab Emirates are attracting investments aligned with ESG principles. Through the issuance of green bonds, the development of green sukuks and the growth of ESG funds, Dubai and Abu Dhabi are positioning themselves as regional leaders in sustainable finance. These initiatives promote innovation, economic diversification and strengthen their role as a financial hub.
Green and sustainable bonds are emerging as key financial tools for accelerating the energy transition, mobilizing green capital for projects with a positive environmental impact and strengthening investors' commitment to sustainable development.
Green bonds have become an essential financial instrument for raising capital for projects with a positive environmental impact. Unlike conventional bonds, they are specifically dedicated to financing initiatives linked to renewable energies, energy efficiency, sustainable infrastructure and climate change adaptation. In 2023, the global green bond market reached over $600 billion in issuance, marking a 30% increase on the previous year. In the United Arab Emirates, these instruments are growing rapidly, with Abu Dhabi and Dubai capturing 15% of sustainable bond issues in the MENA region, reinforcing their position as a green financial hub.
The United Arab Emirates is establishing itself as a key player in the sustainable bond market, diversifying its financial instruments to support the energy transition. In 2023, Emirates NBD and First Abu Dhabi Bank (FAB) issued green bonds totaling more than $3 billion to finance low-carbon infrastructure and renewable energy projects. The Emirati government, through its commitment to achieving carbon neutrality by 2050, is also encouraging such issuance through attractive regulatory and tax incentives.
Issuing green and sustainable bonds not only helps reduce dependence on hydrocarbons, but also attracts foreign capital wishing to invest in ESG-compliant initiatives. Such financing contributes directly to the expansion of solar and wind power capacity, with projects such as Noor Abu Dhabi and the Mohammed bin Rashid Al Maktoum Solar Park, which aim to increase the share of renewable energies to 30% of the country's energy mix by 2030. In addition, these investments support the creation of green jobs and the development of clean technologies, consolidating the Emirates' position as a financial center for the ecological transition.
With the rise of sustainable finance, green sukuks are emerging as a key alternative to traditional bonds, combining compliance with Islamic principles with the financing of ecological projects.
Green sukuks represent a major innovation at the intersection of Islamic finance and responsible investment. Inspired by Shariah principles, these financial instruments operate like bonds but without interest, based on tangible, income-generating assets. Unlike conventional bonds, green sukuks are exclusively dedicated to financing sustainable projects, notably in renewable energies, green infrastructure and energy efficiency. By 2023, global issuance of green sukuks had exceeded $10 billion, with annual growth of 25%, reflecting investors' growing appetite for these assets that comply with Islamic values and ESG criteria.
The United Arab Emirates play a central role in the development of green sukuks. Abu Dhabi and Dubai have issued over $2 billion worth of green sukuks in the last three years, a figure that is growing rapidly thanks to government initiatives and institutional investment. Local Islamic banks, such as Dubai Islamic Bank and Abu Dhabi Islamic Bank, are now including these instruments in their portfolios, facilitating access to green financing for businesses. In addition, sovereign wealth funds are allocating a growing proportion of their assets to these sustainable Islamic bonds, reinforcing their attractiveness to international investors.
The rise of green sukuks is having a significant impact on the economy and environment of the United Arab Emirates. By channelling finance into projects aligned with the country's climate objectives, these instruments are helping to reduce CO₂ emissions by 15 million tonnes a year. They are also boosting the green infrastructure market, with massive investments in solar parks, green hydrogen projects and green buildings. At the same time, the development of these instruments enhances the Emirates' attractiveness on the global financial stage, attracting capital from investors concerned with ethics and sustainability.
The rise of ESG funds in the United Arab Emirates bears witness to the changing global financial landscape, where sustainability and social responsibility are becoming essential criteria for attracting international capital and stimulating long-term economic growth.
The United Arab Emirates is consolidating its role as a financial hub by further integrating ESG criteria into its investment strategies. In 2023, ESG assets under management in the MENA region exceeded $200 billion, with the Emirates accounting for a significant share. Growing demand for these investments has led to an increase of over 25% in ESG funds domiciled in Abu Dhabi and Dubai in three years. Institutions such as Mubadala and ADIA have already allocated over $20 billion to green infrastructure and renewable energy projects.
The Emirates' appeal to responsible investors is based on several key factors. Firstly, the favorable regulations and tax incentives put in place by financial zones such as the Abu Dhabi Global Market (ADGM) and the Dubai International Financial Centre (DIFC) have attracted over 50 new ESG funds in just two years. Secondly, the presence of major renewable energy projects, such as Noor Abu Dhabi, one of the world's largest solar power plants with a capacity of 1.2 GW, reinforces the Emirates' credibility as a destination for green investments. Finally, the country's commitment to achieving carbon neutrality by 2050 sends a strong signal to investors, who see the Emirates as a key player in sustainable finance.
The rise of ESG funds in the Emirates is having a significant impact on the local economy and the energy transition. By channelling capital into environmentally-friendly projects, these funds are contributing to economic diversification, reducing dependence on hydrocarbons, which still account for 30% of the country's GDP. In addition, ESG financing is accelerating the growth of renewable energies, which should account for 30% of the country's energy mix by 2030, compared with 7% today. This momentum is also helping to create green jobs, with over 50,000 new positions created in the sustainable finance, clean energy and green technology sectors in recent years.
Emerging carbon credit markets are a strategic lever for financing the energy transition, attracting sustainable investment and strengthening the UAE's position as a hub for green finance.
The United Arab Emirates is accelerating its transition to a low-carbon economy by developing carbon credit markets. These markets enable companies to offset their emissions and invest in greenhouse gas reduction projects. Dubai and Abu Dhabi are positioning themselves as regional leaders with platforms such as the AirCarbon Exchange (ACX), one of the first regulated voluntary markets in the region. This initiative is part of a broader strategy to integrate green finance into the Abu Dhabi Global Market (ADGM) and the Dubai Financial Market (DFM), in order to attract international investors and ensure the credibility of transactions.
Carbon credits play a central role in the Emirates' energy transition by financing the development of renewable energies, such as solar farms and green hydrogen, as well as carbon capture and storage (CCS) technologies. By reducing the carbon footprint of the oil and gas industries and supporting innovation in low-carbon solutions, they facilitate the country's adaptation to environmental requirements. These mechanisms thus contribute directly to the Emirates' carbon neutrality objectives for the coming decades, while enhancing their attractiveness to responsible investors.
Carbon credit markets in the Emirates are helping to attract green investments and consolidate Abu Dhabi and Dubai as ESG financial hubs. Their integration with green bonds and green sukuks enables the development of hybrid investment solutions. However, their success depends on clear regulations and transparent certification to avoid greenwashing. Adoption by local companies also remains a challenge, as some are still reluctant to integrate these mechanisms into their sustainable strategy.
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