First Abu Dhabi Bank Issues Green Sukuk

In a significant development, FAB, the leading bank in the Emirates based on assets, has recently unveiled the inaugural green sukuk denominated in dirhams in the UAE. This milestone underlines the increasing momentum of green issuances in the region. FAB stated in a thursday announcement that its initial public issuance in dirham denomination was represented by a Sharia-compliant instrument valued at 1.3 billion dirhams (equivalent to approximately 353.93 million dollars). The pricing of the green sukuk, with a span of three years, was established at a rate of 4.93 per cent on Wednesday.

According to the official statement from the financial institution, FAB has achieved its most competitive pricing to date in the local currency market through the issuance of the largest sukuk denominated in dirhams. According to the bank, the issuance not only showcases the capabilities of Islamic and green finance but also aligns closely with the UAE’s climate objectives, particularly in view of the upcoming hosting of Cop28.

Acting as a green structuring agent and joint lead manager, FAB made a noteworthy contribution to the sukuk issuance. “Hana Al Rostamani, the Group Chief Executive of FAB, communicated that the launch of FAB’s green sukuk, which also symbolizes the first-ever green issuance denominated in AED within the UAE, stands as a significant accomplishment, benefiting both the Islamic finance and green finance sectors within the UAE, in addition to domestic bonds.” FAB, a significant participant in the investment banking sector, strongly advocates for the growth of a thriving market for bonds denominated in dirhams. This initiative seeks to elevate Abu Dhabi’s increasing significance as a global financial hub.

The realm of sustainable and green bonds, alongside sukuk, is swiftly growing, as businesses throughout the Gulf area are embracing these financing methods to realize their expansion goals. Additionally, governments within the wealthier oil-producing region are propelling the desire for sustainable financial alternatives through the adoption of net-zero pledges.

Majid Al Futtaim, a prominent entity in Dubai’s private sector and the largest mall operator in the Middle East, announced in May that it had effectively raised $500 million via a green sukuk offering.

In that same month, the real estate management arm of Aldar Properties, known as Aldar Investment Properties, the emirate’s most significant publicly listed developer, raised $500 million by introducing its first-ever green sukuk. The funds generated from this issuance will be allocated for acquisitions and to accomplish the company’s sustainability goals.

Masdar, the clean energy firm based in Abu Dhabi, revealed on Wednesday that it had effectively garnered $750 million through the issuance of unsecured notes maturing in a 10-year period. The funds obtained from this issuance will be directed towards supporting a range of initiatives focused on advancing sustainable energy sources.

Based on the insights highlighted in Bloomberg’s extensive examination of capital markets, it becomes clear that the collective valuation of sustainable and green bond and sukuk issuances throughout the Gulf Co-operation Council (GCC) region reached a remarkable milestone of $8.5 billion across 15 transactions in the previous year. This remarkable achievement emphasizes significant expansion compared to the $605 million generated from a total of six transactions in the year 2021.