Zest in the news: Middle East green finance to see further boost from COP28
Zest's Managing Director Jeffrey Beyer shares insights with Al Monitor journalist Harry Clynch.
Click the image for the full article and read Jeffrey's excerpts below.
Green Finance in MENA: 2023 Outlook
Jeffrey Beyer, Founder and Director at Zest Associates, a sustainability-focused consultancy firm based in Dubai, told Al-Monitor that he believes we could see the continued rise of sustainability-linked instruments as opposed to those strictly focused on “green.” Beyer argued that these have a broader definition than green bonds and therefore “are helping to bring companies into the conversation that don’t traditionally associate themselves with climate or sustainability.” Beyer pointed out that sustainability-linked tools are “growing fast [and that] in 2021, sustainability-linked bonds and loans hit $189 billion and $700 billion respectively.” This growth could continue into 2023.
Green Finance in MENA: The Role of Islamic Finance
In 2021, the entire MENA region accounted for just 0.3% of global green bond issuances. However, the industry is growing rapidly. An important factor helping to drive this upward trend is the interplay between green finance and Islamic finance, which has a natural home in MENA. Beyer told Al-Monitor that “there is a real synergy between green finance and Islamic finance.”
But on a practical level, too, Beyer noted that the two financial instruments share several similarities – both in terms of their construction and their intended consequences. “Both require frameworks that ensure investments adhere to either green or Islamic principles. Both require an additional level of scrutiny to ensure money is invested as it’s intended. Both aim to support equitable and sustainable economic development,” he said. Because of these shared frameworks, more MENA institutions are looking to issue green sukuk – Islamic bonds where the proceeds are used to fund green projects.
Green Finance in MENA: Key Takeaways
A regional leader in green finance already, Beyer suggests that the UAE could become a hub for green funds because of recent moves made by the Abu Dhabi Global Market (ADGM), an international finance center and free zone. In November 2022, the authority launched a public consultation on developing its green taxonomy.
“Funds that want to be designated as green funds can initially select from any published, credible, and independent green taxonomy as a reference against which to choose its green assets,” Beyer told Al-Monitor. “It’s a smart move on the UAE’s part because it kickstarts the establishment of green funds in the UAE by giving managers this flexibility, while the UAE finalizes its own taxonomy and overcomes some of the challenges around harmonizing fiscal standards. This also helps the UAE establish itself as a regional and even global hub for green funds.”