Without investment in climate damage, countries can lose AED 1 trillion finds Standard Chartered

Standard Chartered announced the launch of its latest research report titled ‘The Adaptation Economy’ which investigates the need for climate adaptation. The report revealed that a AED 10 billion adaptation investment to withstand projected climate damage could contribute more than AED 100 billion to the country’s gross domestic product by 2030.

The research features 10 markets, including the UAE, India, China, and Pakistan, and highlights that the lack of action could cost billions in climate damages and lost GDP growth this decade. Across the entire study, without a minimum investment of AED 110 billion, the markets included in the study face projected damages and lost GDP growth of over AED 1 trillion.

The projection assumes that the world succeeds in limiting temperature rises to 1.5°C, in line with the Paris Agreement. In a 3.5°C scenario the estimated minimum investment required more than doubles to AED 225 billion and potential losses escalate dramatically if the investment is not made.

Examples of climate adaptation projects include the creation of coastal barrier protection solutions for areas vulnerable to flooding, the development of drought-resistant crops and early-warning systems against pending natural disasters. Among the 10 markets in the study, India is projected to benefit the most from adaptation investment. The market would require an estimated AED 40 billion to prevent climate damages and lost growth of AED 500 billion in a 1.5°C warming scenario – equal to a thirteen-to-one return for the Indian economy of investment in climate adaptation.

Meanwhile, China could avoid an estimated cost of AED 410 billion by investing just AED 30 billion. And Kenya, which requires the least investment, could avoid costs of an estimated AED 8 billion by investing AED 730 million in adaptation.

Green and sustainable debt issuance has been growing rapidly in the Middle East, despite the comparative lack of regulation of green financial instruments. In 2021, the total issuance of green and sustainability-linked debt in the region increased more than four times compared to 2020. In these early stages of the climate transition, there is a critical need for patient, high-risk capital for investments in sectors whose paths to decarbonisation are dependent on technologies that are still in the early stages of development, such as iron and steel, heavy road transport, and shipping.

A new report titled “ Financing a Net-Zero Middle East” by Boston Consulting Group shows how regulatory pressure in most Middle East countries is not yet strong enough to compel banks to take immediate action on climate issues, even though climate change poses an array of risks to their portfolio. Larger banks in fossil fuelexporting countries typically have high exposures to the oil and gas industry and other high-emitting sectors of the economy such as transportation, construction and infrastructure, and shipping. Considering development banks and funds have a critical role to play in supporting green investments, BCG’s report offers three core recommendations to meet the above mandate: l Providing financing for non-bankable green projects with lower risk-adjusted returns or higher investment risks, such as supporting research and development of innovative technologies such as renewable power and CCUS. l Mobilising private capital investments in green projects by improving their riskadjusted returns with various risk mitigation instruments. l Using their expertise to provide support and advice to policymakers and regulators on the reforms needed to scale up climate finance. Regional bank alliances prove key to this end, such as the Net Zero Banking Alliance, NZBA and the Science-Based Targets initiative, SBTi, as well as joining working groups such as the Partnership for Carbon Accounting Financials, to influence the global standard-setters. in sustainable fuels and feedstock production in Pakistan.

Under this agreement the companies will explore the possibility of pursuing projects in circular economy initiatives, including plastics production and recycling, sustainable fuels and feedstock as well as the development of synthetic oil and chemical products. The collaboration builds on a well-established partnership between Mubadala Energy, OMV and PARCO and seeks to utilise cutting edge technologies while leveraging existing infrastructure and market access.

Mubadala Energy, the Abu Dhabi-based international energy company, has announced the signing of a Memorandum of Understanding, MoU with OMV Downstream GmbH, OMV and Pak-Arab Refinery, PARCO to explore opportunities

In line with Mubadala Energy’s strategy to pursue opportunities in new energy sectors and low carbon solutions, the agreement also supports its recently launched sustainability strategy that pinpoints three key priorities: Creating a positive environmental impact, supporting responsible operations, and being a partner of choice. Through the MoU the partners also hope to further support efforts to ensure energy security within key customer centers.