HSBC is seeing growth in the demand for sustainable finance in the Middle East North Africa and Turkey (MENAT) markets as Middle Eastern governments redouble their efforts to diversify their energy sectors and wider economies.
HSBC, which two years ago committed to provide and facilitate $100bn of sustainable financing and investments by 2025, has so far achieved a total of $28.5bn in green funding.
The lender reached $11bn in transactions in 2017 and added another $17.5bn last year, a 159% year-on-year growth, Zoë Knight, managing director and group head of the HSBC's Centre of Sustainable Finance, told local news outlet The National.
This shows us that there is significant untapped potential to work with our clients in the region as they begin to transition to a low-carbon economy"
"This shows us that there is significant untapped potential to work with our clients in the region as they begin to transition to a low-carbon economy," said Knight.
"We have a growing number of sustainable finance deals in the MENAT region, including both executed deals and in our pipeline. We are seeing the opportunities grow as the issue of sustainability rises in importance across the region," she added.
The global green bond market has over the past five years grown from virtually nothing into a broad sustainability-linked fixed income asset class. The deals in MENAT accounted for about 3% of HSBC's total global sustainable finance transactions by the end of 2018.
There is a significant policy focus in most of the region's largest economies, including Saudi Arabia, the UAE and Egypt, on renewable energy specifically and sustainability more broadly, that is translating into an increased interest in the sustainable finance market.
It is prompting many to start recognising the need for private capital alongside public funding to achieve some of those goals and targets.
"Given the ambitions and policy developments on renewable energy and sustainability by the UAE government at both federal and emirate-levels, it makes sense that sustainable bonds [FAB green bond] and funds [Dubai Green Fund] were first developed in the UAE," Knight said. "As other countries in the region advance on their own green agendas, we expect to see an uptick in demand for similar financing instruments."
Last October, leaders of some of the world's largest banks and financial institutions launched a new joint initiative aimed at rapidly mobilising increased levels of private capital for tackling climate change.
Led by Michael Bloomberg, the Climate Finance Leadership Initiative (CFLI) convenes six influential financial sector CEOs from AXA, HSBC, Macquarie, Goldman Sachs, Enel, and Japan's government pension fund.
US billionaire Bloomberg said the initiative would help to bring more capital to the fight against climate change.
"The faster we can accelerate investment in projects that both reduce emissions and create jobs, the more progress we can make reducing the health and economic risks that come with climate change," he said at the time.
In his 2019 new year UN address, secretary-general Antonio Guterres highlighted the fight against climate change as a top priority for 2019, and urged the world to show greater ambition on mitigation, adaptation, finance and innovation. "Quite simply, we must put our pedal to the metal," he said. "I appeal to world leaders to bring solutions and commitments that will at last match the scale of the challenge."
There is "no greater challenge to the world of today and tomorrow", he added. "The threat is on a clear trajectory: hotter, faster, more severe. Science is clear. And things are even getting worse than what was forecast… Over the next decade, we need to transform our economies at an unprecedented scale to keep temperature rise to 1.5C.
"By 2020, under the Paris Agreement, Member States are meant to assess progress and submit new pledges to meet the goals to which they agreed. And by 2050, we need to reach net zero global emissions. That means enhanced efforts now, both to reduce emissions and to seize the opportunities of a clean, green energy future."