Mashreq calls for state help to push green financing

February 10, 2025, 2:44 PM

The Green Data Centre at the Mohammed Bin Rashid Al Maktoum Solar Park. More help is needed to fund sustainable energy projects, says Mashreq Bank

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The UAE needs to introduce new incentives, subsidies and tax rebates to increase financing for sustainability projects in the country, a senior executive at Mashreq Bank has told AGBI.

“We need the government to introduce incentives and subsidies to create the momentum, the tsunami of sustainable finance,” said Faisal Al Shimmari, Mashreq Bank’s head of ESG (Environment, Social and Governance) and corporate strategy. “We need to start talking about tax rebates and incentives openly.”

Tax incentives and government subsidies have been essential to financing so-called green projects in the EU and US, experts say. The EU Innovation Programme, for example, which included government grants to companies, helped finance more sustainable aviation and biofuel projects.

Despite growing interest in sustainable financing, its adoption in the Gulf faces challenges that hinder its scalability and effectiveness.

Most countries in the region need significant investment to achieve their net zero targets. The UAE needs more than AED600 billion ($163 billion) in clean and renewable energy investment to reach net zero emissions by 2050.

This number may increase with the adoption of artificial intelligence and the construction of energy consuming data centres.

“The Inflation Reduction Act in the US was amazing for the hydrogen sector, R&D, and renewables,” said Massimilano Cervo, a UAE-based power and new energy expert. “Countries should follow this.”

Mashreq Bank has pledged to facilitate AED110 billion in sustainable financing as part of the UAE Banks Federation’s AED1 trillion green financing commitment by 2030.

But, said Al Shimmari, banks should not be alone in bearing the burden of higher relative risk and lower profitability associated with financing sustainable projects. “We need to redefine private-public partnerships,” he said.

“Taxes are going to generate revenues in the tens of billions to the government, and we need (tax rebates) to accelerate the UAE’s ESG and sustainable finance journey.”

Jan Haizmann, founding partner of law consultancy Coreggio Consulting, believes governments play a key role in de-risking infrastructure investments.

“We have certain projects in the EU that the European Commission singles out every year as of primary interest. They receive government funding for strategic reasons,” Haizmann said.

Globally, the sustainability financing market hit $6 trillion last year and is expected to more than quadruple to $28 trillion by 2033. Sustainability bond sales in the Gulf fell last year to $16.7 billion.