Arab Energy Fund pledges $1bn for energy transition

Cop28/Andrea DiCenzo

• Rebranded fund reveals strategy
• Focus on reducing emissions
• 25 projects being financed

The Arab Energy Fund, formerly known as Apicorp, is planning to invest up to $1 billion over the next five years in energy transition, including decarbonisation technologies.

Based in Saudi Arabia, Apicorp – the Arab Petroleum Investments Corporation – was founded in 1975 by the ten Arab oil-exporting states. The latest investment announcement is part of its new strategy for 2023-2028.

Raeda Al Sarayreh, director of sustainability and communications at the rebranded Arab Energy Fund, said that the institution wants to back its shareholders – the oil-producing countries, and the Mena region – in shifting the energy landscape towards a net zero future.

“The energy sector has witnessed a lot of shifts in the past, specifically post-Covid. This strategy makes sense commercially,” Sarayreh said, speaking to AGBI on the side of Cop28 in Dubai.

The planned investments will be made through private equity and constitute a third of the fund’s private equity portfolio.

Sarayreh said that the fund would invest mainly in carbon capture and storage, nature-based projects, energy efficiency, and any promising new technology to lower, capture or eliminate emissions.

“We have projects in 25 locations. Most of our investments will be focused in the region,” she added.

Apicorp says it understands the need for collective climate action to align with the goals laid out in the UN Paris Agreement.

At Cop28, currently underway in Dubai until December 12, conference president Sultan Al Jaber launched the oil and gas decarbonisation charter (OGDC), a global industry initiative designed to speed up climate action across those sectors.

Fifty companies, representing more than 40 percent of global oil production, have signed the OGDC, with national oil companies representing over 60 percent of signatories.

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Several countries in the Mena region are diversifying their economies beyond oil and gas. This includes investments in renewable energy, sustainable infrastructure, waste management and water conservation. Green financing is crucial in supporting these efforts.

The projects backed by the Arab Energy Fund include Neom Green Hydrogen, Dubai Waste Management Centre, an Aqua Power solar plant in Egypt, and a wind farm in Jordan.

However, unlike some other financial entities that pledged not to support companies in oil and gas anymore, the fund will continue to finance fossil fuel projects.

“We are taking a balanced approach to energy transition, similar to what the region is doing,” Sarayreh said.

“Some parts of the world, like Europe, still need traditional energy sources, so this is necessary.”

She added that reaching net zero must be achieved in a way that makes sense economically, where energy security and sustainability are well balanced.

Green finance 

Almost 20 percent of the Arab Energy Fund’s loan portfolio of $4.5 billion is allocated for environmental and socially responsible initiatives.

The fund carries an investment-grade credit rating from all major rating agencies.

It has issued a five-year $750 million green bond after establishing a framework in 2021. By September 2023, $610 million had been allocated across 11 regional projects.

The majority of the green proceeds – 56 percent – will be allocated to the UAE, followed by Saudi Arabia (32 percent), Egypt (9 percent) and Jordan (4 percent).

Sixty-five percent is in renewable energy, and 35 percent is in pollution prevention and control.

“We reduced gas emissions by 24 million tonnes over the 11 projects,” Sarayreh said. “We are heading in the right direction.”

Over the past decade, green bonds have emerged as a significant force in the financial world. As of the end of the first quarter of 2023, the green bond market passed the milestone of $2 trillion. 

It is projected to reach $5 trillion by 2025, according to the Apicorp green bond report.

In 2022, Apicorp signed a $75 million Islamic financing agreement known as Murabaha with a British company to fund high quality carbon offsets, supporting the Gulf’s net zero emission targets.