Despite ‘greenlash’, UAE banks will stick to net zero commitment

US banks may have withdrawn from the Net Zero Banking Alliance, but FAB and ADCB should stay put

January 7, 2025, 4:14 PM

Former Bank of England governor Mark Carney, pictured at Cop26 with IMF managing director Kristalina Georgieva, was the main force behind the launch of the Net Zero Banking Alliance

The Cop26 climate change conference in Glasgow in 2021 was the high-water mark for green finance.

Bliss it was that dawn to be alive by the River Clyde, and inside the halls of the Scottish Event Campus, as the bastions of capital surrendered one after the other to the environmentalist cause.

“We’re all going to die unless we just stop oil” was the simplistic message, and the men in suits rushed to agree, led by Mark Carney, former governor of the Bank of England, no less.

Carney was the main force behind the launch of the Net Zero Banking Alliance (NZBA), which committed 140-plus banks from around the world to “transition the operational and attributable greenhouse gas emissions from their lending and investment portfolios to align with pathways to net zero by 2050 or sooner”.

There were some other obligations expected from the signatories – like publishing and adhering to five-yearly targets – but the important one was contained in the “lending and investment portfolios” reference.

That was interpreted, and celebrated, by the environmental lobby as a commitment by the global banking industry to stop investing in oil and gas by 2050.

The 140-odd number was impressive and contained some big names in the banking world – NatWest, Standard Chartered, Deutsche, BNP Paribas, for example – but it was bulked up by many second-rank financial institutions too, mainly from Europe and Latin America.

There were no banks from China or India, two of the world’s biggest energy consumers, in the list.

What gave the Alliance real heft was the presence of giant US financial institutions like Citi, Bank of America, Goldman Sachs, Blackrock, Morgan Stanley and JP Morgan (JPM). Wall Street was behind the movement, it seemed.

That was then. Now, after a spate of withdrawals by American blue-bloods, only JP Morgan is left supporting the NZBA – and surely it cannot be long before JPM, the bank which funded early oilfield development in the Arabian peninsula and remains a potent force in the regional hydrocarbon sector, quits too.

The US signatories have come under pressure from Republican lawmakers in the US who have threatened to take legal action. The legislators argue that the banks were not acting in the best interests of their clients, shareholders and energy consumers by pushing a green agenda ahead of energy security.

The imminent arrival of Donald “drill baby drill” Trump in the White House is another big incentive to shed those environmental masks, for fear of missing out on what most analysts believe will be a boom time in US oil and gas.

It is all part of a “greenlash” against rigid environmental investment principles which has seen environmental, social and governance (ESG) commitments abandoned or watered down by big investing institutions, and some ratings agencies dropping ESG as a factor in investment assessment.

Only two banks from the Arabian Gulf, both from the UAE, signed up to the Alliance.

First Abu Dhabi Bank (FAB), the country’s biggest by assets, joined in the first rush of enthusiasm in 2021, and now chairs the NBZA steering committee.

Abu Dhabi Commercial Bank (ADCB) followed suit in late 2023, around the time of the Cop28 gathering in Dubai.

At the time, it was regarded as a straw in the environmentalist wind that two such institutions – central pillars in the hydrocarbon-driven economy of the UAE – should join the Alliance.

In fact, it represented a clear statement of intent by UAE institutions that they were committed to the energy transition and the battle against climate change, even while the country was planning a big increase in investment in its hydrocarbon resources in pursuit of its goal of 5 million barrels per day of crude.

Critics, especially in the hostile Western media, point to the conflict inherent in this position. How can the likes of FAB and ADCB remain a member of an organisation which appears dedicated to cutting back fossil fuel investment, while operating in an economy that is still dominated by hydrocarbon revenue (though to a decreasing extent)?

The conflict is not as clear-cut as it appears.

It is perfectly possible to argue the case for ongoing – even increased – oil and gas production while also significantly investing in renewables, alternatives like nuclear, and decarbonisation technologies, as the two UAE banks did when they took part in the AED1 trillion sustainable finance pledge at Cop28.

The greenlash pressure will continue to grow, especially in Trump’s US, but as long as the UAE sticks to its climate change strategy, it looks unlikely that FAB and ADCB will follow their American peers out of the NZBA.

Frank Kane is Editor-at-Large of AGBI and an award-winning business journalist. He acts as a consultant to the Ministry of Energy of Saudi Arabia