Translating climate commitments into a comprehensive transition finance strategy

Summary

In March 2023, First Abu Dhabi Bank (FAB) became the first MENA bank to set financed emissions reduction targets across oil and gas, aviation, and power generation (as its wave 1 sectors, with wave 2 sectors including agriculture, aluminum, cement, commercial real estate, and steel). Combined ‘Wave 1’ and ‘Wave 2’ targets are expected to cover approximately 90% of FAB’s corporate financed emissions. To deliver on this commitment, FAB set up a number of internal initiatives. First, the bank developed a Sustainable Finance Framework. This framework outlines FAB’s methodology for labelling financial products, services, and projects as ‘sustainable’ or ‘transition finance’. It also guides the development of sustainable products that reference a specific green, social, or sustainable use of proceeds. The qualifying categories for transition finance are in alignment with the EU Taxonomy, ICMA Principles, and SFDR ‘Do No Significant Harm’ (DNSH) principles among others.

Key Takeaways:

Alignment with international guidelines: Aligning with international principles and standards ensures global consistency (promoting cross-border investments) and enhances credibility.

Wider organisation buy-in: Having key stakeholders engaged, such as the EXCO and board of directors, as well as heads of strategic business units is critical to deliver on commitments.

Guiding framework: Establishing internal sustainable finance frameworks builds clarity and transparency on qualifying transactions and products for transition finance.

Translating climate commitments into a comprehensive transition finance strategy

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