The Climate Finance Architect's Board, with GCFC

Thank you very much your highness, excellencies, distinguished guest, ladies and gentlemen. Good morning. I'm Mercedes Bella Monserati, the CEO of the Global Climate Finance Center, and we are delighted to welcome you to this climate finance architect board. During the next 25 minutes, we need to be very brief. We're going to be looking at three main areas.

First one, where transition um capital is flowing today. We will then look at what is guiding investment decisions. And then finally we'll be looking at where the next wave of opportunities will come from. It's a privilege to be joined today by her highness Shikha Shama bin Sultan bin Khalifa and Nayan one of our GCFC board members and of course I'm delighted to be also joined by our esteemed panelist all of them board members of GCFC. Let's get started.

Martin I would like to start with you. First, Abu Dhabi Bank has committed 500 billion in sustainable finance by 2030 and plays a central role connecting UAE markets with global capital. Where are you seeing the strongest momentum right now in renewables, grids, industrial transition and how does this align with the areas that the GCFC and of course Abu Dhabi in particular are helping to the in ecosystem, the investment environment.

Thank you, Mercedes. Very good morning to uh everyone and thank you for having me. Um maybe to say that um our commitment at the first Abu Dhabi Bank to sustainable financing uh has started now quite um some time ago. So u we we issued our first uh green bond in 2017 and uh since then we have um issued uh 15 times you know uh under a green format

and trying to bring more sophistication uh to what we were doing and this year in particular we did the first blue bond for the region

and um and the first um sustainable bond uh uh which was entirely allocated to a very low carbon emission uh project in the nuclear industry. Uh so uh we have been trying to diversify um instruments sustainable debt uh instruments uh and together by increasing significantly the amount we have committed to sustainable project. At the time of COP 28, we we committed to finance about 35 billion dollars finance or facilitate the financing. Uh and we have delivered about 70% 75% of that and the target is to deliver that by 2030. So we are well well on track.

So in that uh context you know our participation and involvement to GCFC was very very uh natural. It was something obvious to us that as a pioneer in the region, you know, for sustainable sustainable financing, we needed to be involved. And we see GCFC doing a fantastic job, you know, uh, in being, uh, positioning Abu Dhabi even further together with Altera and with a number of other initiatives and what her highness mentioned as well this morning, positioning Abu Dhabi as a global hub for sustainable uh, finance, creating the ecosystem also together with ADGM and uh, and and being a catalyst I would say for initiatives in um in the region because it goes beyond Abu Dhabi. It's a it's truly a global uh finance center uh and uh and and participating in a very strong manner to the Abu Dhabi ecosystem for sustainable financing.

Thank you very much Martin Muhammad. Let me turn to you now. Vision 2035 positions a deep at the intersection of Islamic finance, digital innovation and sustainability. What factors are shaping investment decisions today around project quality, bankability, technology readiness and clarity of frameworks and how does that link of course with the global climate finance center.

Okay and thank you so much and good morning everyone very happy to be here today. So in the context of Abu Zabi Islamic Bank last year we launched the vision 2035 which was around main three pillars. The first pillar being uh driven uh by AI and technology. The second pillar was talking about client experience. But then comes the third one of the most important pillars is sustainability which is basically the how.

How are you going to deliver vision 2035? Um going back to your question so what will drive the next phase of evolution when it comes to not only ADI but the banking sector we always say that we are only part of a wider ecosystem and for this initiative to succeed it has to meet certain pillars. Number one, we always say that we are solving for a specific outcome, but this outcome also has to be commercially viable because if there's no commercial viability behind any initiatives we do, it will be very short-lived and we're building something which is here to stay and um will also create value not only for the country but for the wider ecosystem. The second is all um all elements which are leading to success of that initiative have to pull at the same pace and in same direction. I talk about where the capital flows, the participants, the clients who are using the funds, the regulatory environment and the clients participation as well as technology and technology is very important because many of the technologies utilized today are new technology.

It's untested. So you're almost taking a leap of faith in terms of ensuring that you are investing in these technologies for a greater outcome. Uh on day one actually of this event I heard um um in one of the panels talking about the belief concept. You have to believe and I really like this word because when you say you have to believe it goes beyond just normal Excel files or planning but you are taking I wouldn't say a leap of faith but you you you have your eyes on the wider picture. you make sure that the entire ecosystem moves together and accordingly you solve for an outcome.

Indeed, thank you very much um Muhammad. Now let me turn to Muhammad HSBC and staying of the theme of global flows um HSBC expansion in transition banking and digital infrastructure sign of strong confidence in the UAE. Looking ahead, Muhammad, where do you see the next wave of opportunity again in energy infrastructure and climate solutions and what will accelerate investment further given Abu Dhabi's growing role as a global climate finance hub?

Mercedes, thank you very much for the opportunity. Well, again, positioning the UAE as the global climate finance hub is is um it goes very well with HSBC's group strategy. This is exactly what you and the team at GS GACFC trying to do. We are uh very proud members of GCFC. So congratulations to you and to the team for you know what you have achieved in less than a year I would say.

So congratulations uh to start with. Well, um you know, facilitating the the uh the investment and the the support of the private sector in in in this uh cause is something that goes very well with HSBC's net zero uh target. Now, instead of looking at the future, I would like to, you know, focus on what the clients are doing today. So, we have been at HSBC collecting data for the past many years. um the focus was on 4,000 clients in 50 plus markets and I would like to share some of the statistics of of the the study.

So out of those 4,000 clients again they are um you know in 50 plus markets more than 75% of them they plan to invest in clean electrification such as um power uh solar power such as uh wind and electric vehicles. Out of which uh 25% of them they are scaling up to invest in sustainable fuels u such as bofuels, hydrogen or uh sustainable aviation fuel and around 25% of them u they are actually planning to invest in carbon capture and storage facilities uh including direct air capture and natural climate uh solutions. So the momentum is there. um they are actually planning for the future and whatever that the future might suggest is it 2030, 2025, 2035 but we are we are comfortable with what what we are seeing when it comes to our you know the global client uh base. Now when it comes to the two focus areas actually for HSBC and I believe this is the case for the wider uh community is the facilitation of offtake commitment um having a strong take oftakers with say something like government of Abu Dhabi rated this can um this can cover lots of uh key risk especially the emerging risk of those new technologies we talk about hydrogen we talk about some of those technologies which are yet to be tested still in the R&D space.

And the second point is is the blended finance. This is something that you and the team have been focusing on. Blended finance is is uh very important right to get whatever opportunities and whatever instruments are there to help uh with this cause.

Indeed. Thank you, Muhammad. And of course no transition transaction progresses without legal and regulatory certainty. Um John from a legal and regulatory standpoint which developments and standardizations framework transparencies you think will strengthen investor confidence and speed execution here in Abu Dhabi.

Thank you Mercedes. Um so as a lawyer for me everything ultimately comes back to the law. I mean, and we talk about belief and we talk about kind of the vision and we talk about executing things and especially with the energy transition and the renewable sector, but unless there's a strong legal framework to actually give investors confidence to put their money towards these projects, to see them to their fruition, no one's really going to invest. And it's it's this kind of transition from kind of a broader kind of optimism to kind of hard legal fact that we're seeing a kind of transition on the ground here in the UAE as a whole. So in Abu Dhabi and in Dubai, this jurisdiction has been a a center for finance going back 20 years if not longer.

But in terms of the modern financial world, significant infrastructure, power generation, 20 years. But what we're seeing right now is that transition from being a virtual center to a more physical center. And it's driven by a few legal developments that I just like to get into because I'm a lawyer and it's kind of what I do. Okay. So, and it's interesting that what we have is in terms of the frameworks, the legal frameworks on the ground, the legal systems, and I refer to it in plural because we're not just talking about the onshore traditional civil law legal systems.

We're talking about this interconnected, interwoven and and effectively seamless blending of common law jurisdictions like the ADGM courts or the DIC courts, various uh international arbitration uh fora within different free zones and on shore and then seamlessly interacting with the UAE legal system in the traditional courts and that drives investor confidence, drives global confidence. And so instead of simply kind of looking at the UAE as as as this virtual center for finance, people are actually moving here and setting up structures here and they're comforted by it. Um the other thing is counterintuitively the corporate income tax is actually a net plus for the UAE for two main reasons. One, it kind of takes away that kind of the tax haven kind of perception of the UAE and it makes it a more kind of let's say a more internationally kind of relevant jurisdiction. And in addition to that, the fact that there now is corporate income tax, it allows the UAE to properly take advantage of its extensive double taxation treaty network.

And so instead of simply moving funds through the UAE, people are setting up durable structures in the AGDM, in the DIC, onshore, broadly within the UAE. And it's creating an ecosystem in the same way that Silicon Valley in the United States exists in its special sauce. What makes it interesting is this collocation of physical people exchanging ideas. The same way that we're exchanging ideas on the stage, the same way that people are exchanging ideas at ADFW by those physical interactions and actual conversations. the fact that so many entities are coming to the UAE to set up not just financing through the UAE as a pass through destination, but setting up brick and mortar offices here to exploit these opportunities they see in the broader Middle East or in Africa.

And so those are two things that really give me comfort that I see kind of driving the conversation forward and more from uh not just the virtual to the physical and that being kind of the legal systems present here that give comfort to investors and then also the introduction of the corporate income tax.

Thank you. Thank you very much John. Before we close one last question we have just a few minutes left. Um what is the single most important factor that can amplify the momentum we are seeing here in the UAE around climate finance? I would start with Martin two seconds.

Okay. Very quickly uh you know at COP 28 um the president of COP his excellency Dr. Sultan Aljab said something which struck me uh he said the world needs more energy and less emissions. So very very uh clear. So we need to continue focusing on financing renewable project even if we uh have to maintain support to the conventional energy production.

Uh so this said what do we need to do that and to be able to do that? Uh we have um the regulatory framework we need a regulatory framework which is predictable and this has been achieved with ADGM. Uh we may think also at uh encouraging further from a regulatory perspective uh more investment and allocation of capital in renewable energies. Today for banks if you allocate $1 of capital in a conventional energy project you do exactly the same $1 of capital uh required from a regulatory perspective in renewable project. So we could we could think about a regulatory framework which was which would provide incentive for the banking industry to allocate more to renewable energies.

Thank you Mi Muhammad.

Okay. Yeah. And one second um I think everything has been said but I will make only one point. I think where the next focus should be is in in fact talent. We need to get talent into that ecosystem because I am a strong believer is that capital follows talent.

Talent doesn't follow capital. So you get the right talent into that ecosystem and drives that agenda forward and you will see capital immediately flowing accordingly.

Thank you Muhammad. Talent being one of our key pillars at GCFC. Muhammad

absolutely while while preparing for this panel I forgot that we have a lawyer with us. So I have to say this because my my team told me to say this right. So it's the anticipation of the next UAE climate change law which will come into force next year. very very important and the reason for that you have we we do big talks top down right but then you know it's very very important actually for what Martan has just mentioned to have those rules and regulations to provide enough incentives and if you don't these are the consequences and if you do this is how you'll be um you know awarded we are all you know waiting for that to happen next year

John

yeah absolutely um for me it's kind of that that issue of this legal legal and regulatory comfort that is really driving the creation of an ecosystem. I mean, we we've all seen it kind of develop, but the fact that new company openings in the UAE within the free zones and outside the free zones, issuance of residence visas, I mean, we we are drawing that talent to the country, I mean, and whether it's Matanine UAE nationals or whether it's people from the the four corners of the earth, that that collaborative kind of ecosystem that's developing is going to exponentially kind of grow this sector. and whether it's the traditional energy and more importantly the sustainable energy and the ability to export lessons learned here in the UAE towards other jurisdictions that are more frontier whether it's Africa or Central Asia. That's something that excites me greatly.

Thank you very much. Uh what this conversation is showing ladies and gentlemen is that Abu Dhabi is emerging as a global climate finance hub through its regulatory framework as highlighted by um the FSR CEO of AEDGM early this week, but also through key institutions already working on climate finance like the one in this panel today and of course the speed in which private and public organizations come together through platforms such is the global climate finance center. Your highness, ladies and gentlemen, panelists, thank you very much. Enjoy the rest of Abu Dhabi finance week. Thank you.