Mashreq will ‘follow science’ for fossil fuel fund phase-out

December 6, 2023

Contributes to $272bn green finance fund
Campaigners seek end to fossil fuel financing
Transition will take time, insists Mashreq

The UAE’s Mashreq Bank will “follow the science” when it comes to phasing out funding for fossil fuel companies, according to a senior executive.

Mashreq is one of the top contributors to the UAE Banks Federation’s AED1 trillion ($272 billion) pledge to boost their green financing.

The bank has committed to facilitating AED110 billion in sustainable finance by 2030.

Despite the huge amount pledged, critics have pointed to continued funding for the hydrocarbon industry as being inconsistent with sustainability pledges.

Climate lobbyist Tzeporah Berman, who is chair of the Fossil Fuel Non-Proliferation Treaty Initiative, argued that banks also need to phase out fossil fuel financing as they claim to escalate their climate commitments.

“Any bank, or any financial company that says that they have sustainable finance now, where they’re continuing to invest in fossil fuel assets, is not being honest,” she said.

In an interview with AGBI, Fernando Morillo, group head of retail banking at Mashreq, said: “We will follow the science. We are banks, we’re not scientific institutions.”

Morillo said the bank is aligned with the United Nations-backed Science Based Targets Initiative, which scrutinises targets set by corporations that align their investment and lending activities with the Paris Climate Agreement.

His comments echoed those made by Dr Sultan Al Jaber on Monday who said his presidency “has been working on, and continues to work on, is focused and centred around the science”.

Changing times

Since the signing of the Paris agreement, the world’s 60 largest private banks have provided $5.5 trillion in financing to the fossil fuel industry, according to the Banking on Climate Chaos report.

“I would ask, if we are serious about climate action, if we are serious about cutting down emissions and stopping development of new fossil fuel projects, why the financial portfolio for fossil fuel is escalating day by day, while by 2023 this year the financial portfolio for renewables, it’s only $1.2 billion,” said Humphrey Mrema, chairman of Tanzania-based NGO Youth Survival Organization.

Upstream investments in oil and gas must be at near pre-pandemic levels of $525 billion up to 2030 to support energy security, as per the International Energy Agency (IEA).

But Morillo added: “Changing the whole supply side of the economy from what today is to a large extent driven by fossil oil fuels into a new energy system will take time.”

Mashreq has allocated about $20 billion in sustainable finance over the last two years, across the UAE, Qatar, Bahrain, Egypt and India. This included leading on a $2.2 billion sustainability-linked loan to Bahrain’s Bapco Energies last year.

“We are at the beginning of the journey and it’s [funding] targeted at helping clients in their transition towards a new energy system, which is what the world needs,” said Morillo.

Mashreq saw its net profit for the first half of 2023 increase 150 percent to AED3.52 billion from AED1.41 billion in the same period last year.