OPINION PIECE
OPINION PIECE Opinion Piece
ThePath Pathfrom fromCOP26 COP26– – The Facilitatingthe theTransition Transition Facilitating
into action. The global finance community, Stella Cox CBE, Managing Director of DDCAP and into action. The global finance community, and in particular the Islamic Capital Stella Cox CBE, Managing Director of DDCAP and and in particular the Islamic Capital Markets (ICMs), have the responsibility to JenniferSchwalbenberg Schwalbenberg Chief Governance Officer Markets (ICMs), have the responsibility to Jennifer Chief Governance Officer help accelerate this change and become this change and become providesome somepractical practical clarity what needs to be help accelerate provide clarity onon what needs to be stewards of said change. stewards of said change. consideredand anddone done when divesting from heavy considered when divesting from heavy Recent examples of transition Recent examples of transition emittingsectors sectors emitting sukuk and other commitments
sukuk and other commitments
of these currently high-emission ManyMany of these currently high-emission sectors will be sectors real economy still sectors will be sectors the realthe economy still needsneeds in 2050inand viable or no carbon 2050 andlow viable low or no carbon alternatives do notdo yetnot exist the scale alternatives yetatexist at the scale required. Some Some sectors face significant required. sectors face significant hurdles to achieve decarbonisation hurdles to achieve decarbonisation whether they be economic, technological whether they be economic, technological or rooted in other Other Other or rooted in considerations. other considerations. sectors may not be able to completely sectors may not be able to completely achieve decarbonisation but still need to be achieve decarbonisation but still need to be included in the global economic transition included in the global economic transition and need assistance to develop effective and need assistance to develop effective offset programmes for residual emissions. offset programmes for residual emissions. Estimates suggest that an annual Estimates suggest that an annual USD6.9tn in infrastructure investment USD6.9tn in infrastructure and between USD1.6tn and USD3.8tninvestment for and between USD1.6tntoand USD3.8tn for energy transition is required meet the energy transition is required to meet the Paris Agreement targets.1 As there are Paris Agreement Asthis, there are not sufficient public fundstargets.1 to satisfy Stella Cox CBE Managing Director and Jennifer Schwalbenberg not sufficient public funds to satisfy this, private capital is vital, and this presents Chief Governance Stella Cox CBEOfficer Managing Director and Jennifer Schwalbenberg private capital is vital,for and presents a considerable opportunity thethis ICMs Chief Governance Officer to mobilise funding. Toopportunity date, there for have a considerable the ICMs 18 transition bondsTo globally, and have ntroduction the necessary resources to transition to only been to mobilise funding. date, there far fewer sukuk, but it seems more Entroduction S G - fo c u s e d c a p i t a l m a r ke t onlytransition been 18 transition bonds globally, and thesustainable necessarypractices. resourcesDivestment to transition to momentum maytransition be growing.sukuk, In 2020, not result in lowerpractices. emissions.Divestment activities far fewer butthe it seems more sustainable E S G - fo care u s eoften d c asynonymous p i t a l m a r ke t does Islamic Finance sector saw the first The capital markets need to focus with portfolio divestment from momentum may be growing. ever In 2020, the does not result in lower emissions. activities are often synonymous transition sukuk by Abu Dhabi’s on decarbonising real economy, notfocus heavy emitting sectors such as oilfrom & Islamic Finance sector sawEtihad the first ever The capitalthe markets need to with portfolio divestment Airways, which raised USD600m for Etihad their portfolios. Conscientious investors gas, cement, steel, aviation and mining. on decarbonising the real economy, not transition sukuk by Abu Dhabi’s heavy emitting sectors such as oil & in sustainable aviation and and financiers need to identify those investment However, by divesting, ESG-principled their portfolios. Conscientious investors Airways, which raised USD600m for gas, cement, steel, aviation and mining. companies making the ambitious carbon reduction targets. In March 2021, investors effectively abandon control and financiers need to identify those investment in sustainable aviation and However, by divesting, ESG-principled commitments, setting strong goals and the Islamic Development Bank (IsDB) raised to those who may not share the same companies making the ambitious carbon reduction targets. In March 2021, investors effectively abandon control taking action. If concerned investors $2.5 billion with its Sustainability Sukuk, concerns and who may not exert their commitments, setting strong goals and the Islamic Development Bank (IsDB) raised to those who may not share the same support these sectors to transition to the proceeds of which will be allocated influence in furtherance of a sustainable $2.5 billion withunder its Sustainability action. and, If concerned investors concerns and who may not exert their to eligible projects the IsDB’s Sukuk, newtaking technologies where possible, agenda. Equally, by refusing to provide the proceeds of which will which be allocated support these sectors to transition to influence in furtherance of a sustainable retool to accommodate renewables, they Sustainable Finance Framework, financing to these sectors the capital to eligible projects under the new technologies and, where possible, agenda. Equally, by refusing to provide to IsDB’s enable these sectors to convert intent incorporates supporting the transition markets leave these industries without
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retool to accommodate renewables, they financing to these sectors the capital enable these sectors to convert intent markets leave these industries without News for the MEA region and Finance news in the MEA market 54 MEABUSINESS Business Banking 38
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Banking and Finance news in the MEA market
Sustainable Finance Framework, which incorporates supporting the transition to
