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Thursday, July 18, 2024

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Dubai Islamic Bank eyes sustainable Sukuk with Sustainable Finance Framework

Dubai Islamic Bank (DIB) is eyeing sustainable Sukuk with the launch of its Sustainable Finance Framework, which will also facilitate multiple ESG initiatives, Group CEO Dr Adnan Chilwan told ISFI.

“DIB intends to use this framework as a basis for issuing green, social or sustainability Sukuk and other financing instruments. Part of this journey will see us tap into sustainable finance instruments, such as Sukuk, in various formats that will include sustainable labels like green and social,” Dr Adnan shared.

Through the framework, the bank will finance projects in eligible project categories including renewable energy, energy efficiency, clean transportation, green buildings, pollution prevention and control and sustainable water and wastewater management. DIB has already participated in nearly US$7 billion in global green Islamic capital market transactions.

The bank, according to Dr Adnan, is strengthening its risk management to include the climate and environmental risk factors for its customers, which will become integral assessment criteria for credit facilities and approval processes. This is part of a group-wide effort to embed sustainability best practices throughout its businesses across business operations, human capital engagement and risk management.

The development of the framework, which is compliant with sustainable finance principles from the Institute of Cost and Management Accountants and the Loan Market Association, was initiated in early 2022 with Standard Chartered Bank as the advisor and ISS ESG, the responsible investment arm of Institutional Shareholder Services, as the second-party opinion (SPO) provider.

The framework document was developed in July 2022. Following its completion, the document was independently evaluated by ISS ESG. DIB officially published the framework on the 21st October 2022 following the finalization of the SPO report.

“The launch also makes DIB the first Islamic bank in the UAE to issue such a comprehensive framework for action on sustainable finance,” Dr Adnan added.

The launch of the framework is part of a wider national and regional effort including the UAE government’s aspirations to align, support and contribute toward achieving the SDGs and reaching net zero by 2050. The UAE has also developed various national agendas to support a low-carbon economy including the Dubai Clean Energy Strategy, which requires support from the public and the private sectors.

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