The second ESG Majlis Dubai took place on the 21st May 2024 in partnership with PwC. The session was themes “Decarbonising the Built Environment: the Role of Finance” and heard expert insights from Jonathan Keyes, HSBC and Abdullatif Albitawi, Emirates Green Building Council.

ESG Majlis Dubai

The second ESG Majlis, Dubai took place at the PwC Middle East office in Dubai on Tuesday 21st May 2024 with the discussion focused on the challenges faced in structuring sustainable finance, engaging stakeholders, developing green building projects, and addressing regulatory issues.

The Majlis was attended by senior representatives from Abdulwahab’s Office, Abu Dhabi Commercial Bank, Climate Champions, Commercial Bank of Dubai, Emirates Green Building Council, Emirates NBD Asset Management, HSBC, ING, Marsh McLennan, Mashreq, National Bank of Fujairah, PRI, Scottish Government, and Zurich Insurance.

Key discussion points that were covered during the interactive and dynamic session have been summarised below.

Sustainability and the Built Environment

The discussion opened with a presentation on The UAE Built Environment Blueprint, published in April 2024 by Emirates Green Building Council in partnership with HSBC and the UN Climate Champions, that provided an overview of the sustainable finance report and its assessment of blockers and key levers in the region.

The presentation highlighted the need to address the:

  • fragmentation of stakeholders and policy elements in the region
  • importance of industry feedback and awareness
  • sustainability of the built environment
  • and plans for mobilising private sectors and adopting voluntary standards to signal the market.

Attractiveness of Green finance

The attractiveness of green finance quickly emerged as a key issue and included an example of a major developer who highlighted that while accessing finance is not a problem, the additional costs, and complexities of green finance, such as rigorous reporting and certifications, make it less appealing. It was then mentioned that non-financiers often misunderstand products, such as sustainability-linked loans, arguing for a holistic view that considers occupancy and insurance.

There was a view that the finance community needs to streamline green finance processes, making them less burdensome for developers. Measures such as simplifying certification requirements and ensuring financial benefits justify the additional efforts would be welcomed by developers. Overall, the conversation emphasised that making green finance more accessible and attractive requires a collaborative effort to balance profitability with sustainability goals.

Homogenising Criteria and Streamlining KPIs

A comparison of the different global, regional, and local approaches considered the actions being taken to demonstrate to policymakers that the market can support and benefit from more stringent environmental regulations. The discussion considered the following global, regional and local developennts:

  • Globally, the “Building Breakthrough” announced at COP28 set a target for buildings to be near zero emissions by 2030, a goal that involves many stakeholders and lacks a clear framework.
  • In the MENA region, the Emirates Green Building Council, along with other regional councils, is developing the MENA Zero Framework to guide the decarbonisation of buildings.
  • Locally, initiatives like the Blueprint report are encouraging leading developers to set high standards, signalling market readiness for policy changes.

Despite the perception that green buildings are more expensive, it was suggested that this is not always the case. Effective financing and certifications can reduce costs. However, a significant challenge remains in integrating sustainability into traditional finance frameworks. Banks often struggle to recognise local green certifications like Pearl Rating System, compared to international standards like the Leadership in Energy and Environmental Design.

To address this, there is a push to harmonise KPIs and educate financial institutions. Collaboration among developers, banks, and regulatory bodies is crucial to streamline the process and promote sustainable building practices. This collective effort aims to align market readiness with regulatory changes, ensuring the built environment progresses towards greener standards while maintaining financial viability.

Business Case and Building Certification

With projects like Masdar City and ICD Brookfield, leading developers are demonstrating the business benefits of green buildings, proving that sustainability can align with profitability. However, developing the business case for green buildings remains a challenge.

Addressing broken links in the green building sector requires banks to bridge communication gaps between developers, contractors, and material providers. There is a need for systemic incentives to motivate sustainable practices across the entire real estate and construction ecosystem.

Returning to the Blueprint, the discussion then considered the efforts in streamlining the certification processes and enhancing public awareness of sustainability initiatives. Multiple barriers were identified in addressing the lack of uptake in retrofitting loans and green building initiatives, including:

  • Low energy costs and insufficient government incentives deter individuals from investing in solar panels
  • Regulations across various Emirates also complicate the approval process for such installations
  • Landlords often lack motivation to retrofit since tenants bear the energy costs
  • The lengthy payback period further discourages investment.

It was concluded that enhanced incentives, clearer regulations, and a stronger business case for sustainability are necessary to drive adoption and that collaboration among stakeholders, including banks and government entities, can help overcome these challenges and promote sustainable practices.

Summary

The second ESG Majlis provided a collaborative space for experts to discuss the challenges in structuring sustainable finance, engaging other banks, developing green building projects, and addressing regulatory issues. The key takeaways from this wide-ranging discussion that we will look to support action on were:

  • The need to streamline green finance processes through collaboration to balance profitability with sustainability goals
  • A focus on harmonising KPIs and educating financial institutions to promote sustainable building practices
  • Influencing decisions in green building projects through finance involvement
  • Addressing broken links in the green building sector
  • Exploring business cases to motivate investments in sustainability.

Looking ahead, the next ESG Majlis, Dubai round table with PwC Middle East will take place in Q4 2024.

If you are interested in getting involved please contact angus@globalethicalfinance.com