Emirates NBD, the second-largest lender in the UAE, has successfully issued a $500 million sustainability-linked loan (SLL) bond as part of its commitment to aligning financial growth with sustainable development goals. The five-year bond, with initial price thoughts (IPTs) set at Treasuries +125 basis points (bps) area, reflects growing investor appetite for ESG-compliant financial instruments.

This issuance marks another milestone under Emirates NBD’s $20 billion Euro Medium Term Note (EMTN) programme, positioning the bank as a leader in the Middle East’s burgeoning green finance sector. The bond will be listed on Euronext Dublin and NASDAQ Dubai, further bolstering the UAE’s status as a global hub for sustainable investment products.

Key Details of the Bond

• Issue Date: November 26, 2024
• Maturity Date: November 26, 2029
• Interest Payments: Annual payments starting May 26, 2025
• Rating: A2/A+ by Moody’s and Fitch, consistent with Emirates NBD’s credit rating
• Structure: Senior unsecured notes under Reg S guidelines

The bond issuance was supported by Emirates NBD Capital and HSBC Bank, which acted as joint sustainability structuring agents. HSBC also served as the billing and delivery bank. Emirates NBD Capital, First Abu Dhabi Bank, HSBC, Industrial and Commercial Bank of China, and Société Générale played roles as joint lead managers and bookrunners, reflecting a collaborative approach to mobilizing capital for sustainability goals.

Focus on Sustainability

The proceeds from this bond will be allocated to Emirates NBD’s SLL Funding Assets Portfolio, which focuses on financing or refinancing projects aligned with environmental and social objectives. This includes investments in renewable energy, energy efficiency, green buildings, and other initiatives that support the transition to a low-carbon economy.

By integrating sustainability into its capital markets strategy, Emirates NBD reinforces its commitment to the UAE’s Net Zero by 2050 initiative. The SLL structure further demonstrates the bank’s leadership in driving sustainable finance innovation across the region.

The Growing Importance of ESG in the UAE

The issuance of this SLL bond comes amid a surge in demand for ESG-linked instruments in the Gulf Cooperation Council (GCC) region. The UAE, as host of COP28, has intensified its focus on climate change and sustainable finance. Emirates NBD’s offering reflects this trend, providing investors with opportunities to contribute to projects with measurable environmental and social benefits.

The bond issuance follows a string of significant announcements by the UAE’s financial institutions, including:

1. First Abu Dhabi Bank (FAB): Recently issued its own green bonds, totaling over $1 billion in 2024.
2. Dubai Electricity and Water Authority (DEWA): Secured funding for its solar projects through green sukuk instruments.
3. Abu Dhabi Global Market (ADGM): Promoted initiatives to attract more ESG-focused investments to the region.

These developments underscore the UAE’s leadership in adopting sustainable finance frameworks to support economic diversification and global climate commitments.

Global Context: Sustainability-Linked Financing

Globally, sustainability-linked bonds (SLBs) have grown exponentially, reaching nearly $200 billion in issuances in 2024. Unlike traditional green bonds, SLBs link the cost of borrowing to the issuer’s ability to meet specific sustainability performance targets (SPTs). This innovative approach incentivizes issuers to align with ESG objectives, ensuring accountability and transparency.

For Emirates NBD, the SLL bond’s success signals strong market confidence in the bank’s ESG strategy. The pricing, set at competitive levels, highlights the robust demand from international and regional investors seeking sustainable investment opportunities.

Regional Leadership in Green Finance

Emirates NBD’s leadership in green finance aligns with the UAE’s broader sustainability agenda. As the country gears up for COP28, set to be hosted in Dubai later this month, initiatives like this bond issuance serve as a blueprint for other institutions aiming to integrate ESG principles into their operations.

The UAE has already made significant strides in fostering a sustainable finance ecosystem:

• The Dubai Sustainable Finance Working Group, launched in 2020, continues to promote ESG awareness among issuers and investors.
• The Abu Dhabi Sustainable Finance Declaration brings together stakeholders to accelerate the adoption of green financial products.

Emirates NBD’s move is a testament to the UAE banking sector’s readiness to lead the transition to a more sustainable economy.

Future Outlook

With this landmark issuance, Emirates NBD is well-positioned to pave the way for further ESG-linked financial instruments in the region. Analysts predict that sustainability-linked bonds and loans will play an increasingly critical role in financing the UAE’s ambitious infrastructure and renewable energy projects.

The success of this $500 million SLL bond also highlights the region’s capacity to attract global investment while driving meaningful progress toward sustainable development. For Emirates NBD, this is not just a financial achievement but also a step toward embedding sustainability as a core pillar of its business strategy.

As regional demand for ESG-aligned investments grows, Emirates NBD’s trailblazing approach may inspire other institutions to follow suit, fostering a culture of sustainability within the GCC’s financial markets.

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photo source: Google

By: Montel Kamau

Serrari Financial Analyst

19th November, 2024