Apicorp signs $75m carbon offset financing deal with UK firm

Hartree Partners Power & Gas Company

• First Islamic financing facility deployed in Mena to fund carbon offsets
• Other initiatives include Saudi Aramco’s plans to store carbon dioxide
• Adnoc also partnering with Siemens Energy to certify carbon intensity 

The Arab Petroleum Investments Corporation (Apicorp), a Saudi-headquartered, energy-focused development financial institution, has signed a $75 million Islamic financing agreement with a British firm to fund high-quality carbon offsets, supporting the Gulf’s net zero emission targets.

The agreement, known as a Murabaha, is an Islamic financing facility where a financier will purchase an asset and sell it on to a company for an amount made up of the cost of the asset plus a profit margin for doing the transaction.

Apicorp’s deal with London-based Hartree Partners Power & Gas Company marks the first time this type of facility will be deployed in the Mena region to fund high-quality voluntary carbon offsets, which, in turn, will be used to develop environmentally friendly projects worldwide.

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Each carbon offset represents the ownership of one tonnes of carbon dioxide equivalent (CO2e) which offsets corresponding emissions by the holder.

“Financial innovation plays a crucial role in ensuring a sustainable energy ecosystem,” said Khalid Ali Al-Ruwaigh, CEO of Apicorp. 

“This Murabaha facility was created as part of our commitment to provide innovative financial solutions to enable a balanced energy transition, as well as to support Arab countries’ aspirations to reach net zero carbon emissions in line with the Paris Climate Agreement. 

“Banks and other financial institutions play an important role in the efforts to meet the Paris Agreement target because financing remains one of the most crucial challenges in the decarbonisation chain.

“The facility’s Shariah compliance and syndication features can have major implications because they make it convenient for the regional market to adopt and enable additional banks to join and gain exposure to this asset class.” 

Apicorp’s facility will fund carbon offsets that are registered with the non-profit platform Verra, the largest global registry for nature-based offsets. 

Every year, it is estimated that more than 50 billion tonnes of greenhouse gases are emitted into the atmosphere.

Robust voluntary carbon markets, where carbon credits are purchased voluntarily, have emerged as a cost-effective asset class enabling governments and corporations to immediately begin decarbonising their footprints in line with the global effort to reach net zero emissions by 2050. 

Voluntary carbon markets are particularly relevant to the Arab region; on a per capita basis, carbon emissions are substantially higher in Mena compared to peer economies. 

The region is also one of the most impacted by climate change, according to the United Nations Framework Convention on Climate Change, with its already scarce water and agricultural resources coming under increasing strain.  

The path to net zero

On October 24, Saudi’s sovereign wealth fund, the Public Investment Fund (PIF), announced the establishment of the Regional Voluntary Carbon Market Company to support businesses in the region in their transition to net zero. 

PIF will hold an 80 percent stake, while Saudi Tadawul Group Holding Company will own the remaining 20 percent. 

On October 25, the PIF helped facilitate the largest carbon credit auction in the world involving one million tons of carbon credits and offered high-quality credits, including Corsia-compliant, Verra-registered certificates.

The PIF also recently completed a $3 billion green bond issuance as part of its efforts to develop 70 percent of the country’s renewable energy capacity.

The Gulf’s national oil companies are also notably ramping up their decarbonisation efforts. 

In June this year, Saudi Aramco published its first dedicated sustainability report, which outlines plans to begin permanently storing carbon dioxide from 2026 in one of the largest facilities of its kind located near the industrial city of Jubail, on the east coast of Saudi Arabia.

Aramco currently has facilities that can store 800,000 tonnes of carbon dioxide – by 2035 it plans to increase this capacity to 11 million tonnes.

Meanwhile, Abu Dhabi’s national oil company (Adnoc) has also been rolling out strategic initiatives to decarbonise its operations in pursuit of its stated target of decreasing its greenhouse gas emissions intensity by 25 percent by 2030.

While attending the Abu Dhabi International Petroleum Exhibition and Conferences event (Adipec) last week, Adnoc announced a partnership with Siemens Energy to pilot blockchain technology to certify the carbon intensity of a range of products.

Such transparency will allow independent regulators to certify the carbon intensity of products. It will also give customers greater clarity over the carbon footprint of their purchases.