National Bank of Abu Dhabi (NBAD) is committing US$10 billion in financing over the next 10 years towards the clean energy sector.
It will “lend, invest and facilitate” this amount in total to projects “focused on environmentally sustainable activities” to help meet rising energy demand around the world over the next 20 years, which will partly be met by renewable sources, the bank said in a statement,
“We believe that in the current climate of low oil prices, the transition towards more renewable sources in the energy mix will continue because the underlying drivers are long term and strong,” said Alex Thursby, chief executive of NBAD.
The financing will be geared toward the wholesale side, meaning projects must be over $100 million, and fall in line with global green bond principles as set by the International Capital Market Association. This will cover renewable energy, climate change, clean tech, water, decarbonisation technology to green infrastructure and real estate.
“Wholesale is really where you should start, but later you could see personal financing of kits for rooftop solar,” said Mr Thursby. He said the initial funding will be focused in the Mena region, but there is the potential to see a drive later into Malaysia and Indonesia, part of the bank’s West-East corridor of opportunities in emerging markets.
This comes at a time when the renewable energy sector is growing more than ever before, particularly in the region. And a lack of financing is one of the most talked about obstacles facing the industry.
According to Nathan Weatherstone, head of sustainable business banking at NBAD, the lender “has identified that there is approximately $640bn of investment required for renewable energy projects across the West-East Corridor”.
The bank released a report in March that said a funding gap of $48 trillion will need to be met over the next two decades to meet global energy demand. This is expected to rise 37 per cent between 2013 and 2035, driven mainly by emerging economies, according to data from BP. NBAD also found that nearly a quarter of its customers had involvement in sustainable activities which lead to the sustainable business division being launched in August.
“On one hand we’re reacting to what we think is an opportunity and on the other we’re reacting to what our clients are demanding,” said Mr Weatherstone.
The bank plans to work closely with regulators, policy makers and the renewable energy industry “to capture up to date market trends”.
The bank is exploring the issuance of a green bond which would be the first of its kind in the region. “We will do a green bond in the near future, and we’ll learn a lot doing it,” said Mr Thursby. “Through our Sustainable Business banking team we hope to become a positive force in the banking sector in the region, accelerating the transition to a much needed new world of energy.”
Follow The National’s Business section on Twitter