In line with UAE President Sheikh Mohammed bin Zayed Al Nahyan’s declaration of 2023 as the year of sustainability, the country’s regulator has approved a proposal incentivizing sustainability-linked Sukuk and bonds in the local market.
The Securities & Commodities Authority (SCA) will be exempting companies wishing to list their green sustainability-linked Sukuk or bonds in a local market, from registration fees for the year 2023.
The registration fee for Sukuk and bonds to be listed, comprises technical service fees at a rate of 0.01% of the value of the issuance, subject to a maximum of AED30,000 (US$8,166.36).
Under the SCA’s Decision No. (21 / R.M), sustainability-related Sukuk and bonds are issuances whose entire subscription proceeds are used to finance or refinance, among others, renewable energy projects, energy efficiency projects, pollution prevention and control projects, management projects for natural resources and land use, projects for preserving terrestrial and aquatic environmental diversity, and more.
The decision supports the SCA’s efforts to encourage companies to issue green and sustainability Sukuk and bonds to finance sustainable projects, and encourage environmentally-friendly investment opportunities. It also reinforces the UAE’s agenda to achieve sustainable economic growth, the regulator said.
Dr Sultan Al Jaber, the minister of industry and advanced technology and the president-designate of COP28 UAE, noted: “The SCA initiative for green and sustainability linked bonds and Sukuk is an excellent initiative that aligns perfectly with the broader COP28 agenda with regards to climate finance. The world as a whole needs to do more to advance sustainability in the financial space that in parallel also helps to contribute to sustainable long term economic growth.”
Separately, Bashar Al-Natoor, the global head of Islamic finance at Fitch Ratings, commented: “By addressing key limitations in the market, such as sustainability regulations and cost optimisations or incentives, capital markets are becoming more efficient, meaning Sukuk and bonds could become a more attractive alternative of investment and funding.”
Bashar added: “Of the outstanding green and sustainable issues in the UAE, 45% are now in the Sukuk format, and this latest announcement will support further developments in both the local Sukuk and bond markets.”
Since the start of 2023, the UAE has seen some corporate green and sustainability-linked Sukuk papers, but issued in the international capital markets, including a US$500 million green Sukuk issuance from Majid Al Futtaim and Aldar Investment Properties each, and Dubai Islamic Bank’s US$1 billion sustainable Sukuk facility.