First Abu Dhabi Bank’s green bond signals regional shift towards sustainability finance

Abu Dhabi’s biggest bank, First Abu Dhabi Bank P.J.S.C. (FAB), has made quite a notable move in the realm of sustainable finance. They recently priced a €850 million five-year Regulation S green bond, offering a fixed coupon of 3.1201%. The bond was set at 70 basis points over the five-year euro swap rate, which really emphasizes FAB’s growing role in backing projects that are environmentally friendly and socially responsible within the Gulf region.

This green bond from FAB ranks among the largest euro-denominated sustainable financings in the Gulf so far in 2024. It’s a sign of both strong investor confidence and an increasing appetite for debt labeled as sustainable in this part of the world. Market analysts see the tight spread and the size of this issuance as a kind of “vote of confidence” in FAB’s credibility and the general momentum of green finance initiatives in the Gulf. It appears that environmental, social, and governance (ESG) aligned funding is gaining real traction regionally.

FAB, which has impressive credit ratings, Aa3 from Moody’s, and AA- from both Standard & Poor’s and Fitch, all with stable outlooks, stands in a good spot to tap into global debt markets. These high ratings, which Fitch reaffirmed thanks to FAB’s sound financial position and close ties with the Abu Dhabi government, help build investor trust. Essentially, these ratings give FAB the ability to competitively price their green bonds, even in a time when global yields are pretty high. It’s a way for investors to get exposure to quality credit and at the same time support initiatives aimed at reducing carbon emissions.

The funds raised will be channeled solely into projects that meet FAB’s Sustainable Finance Framework. These focus on areas like energy efficiency, renewable energy, sustainable water management, and other green sectors across various locations, including the UAE, United States, Africa, and France. This framework, which incorporates ESG assessments into every issuance of debt and equity, is in line with the bank’s ambitious goal of reaching USD 135 billion in sustainable and transition finance by 2030. That’s about 80% more than their target for 2023, ambitious indeed.

FAB’s green financing efforts are building on previous innovative deals. For example, they previously issued a USD 750 million five-year “low carbon energy” bond under their European Medium Term Note (EMTN) program. Interestingly, this was the first bond globally to refinance nuclear power generation, setting a precedent for other financial institutions interested in sustainability-linked debt. This latest green bond further cements FAB’s role as a pioneer in sustainable debt markets.

The timing of this launch coincides with a rising focus from regulators and investors on transparency around use-of-proceeds and impact reporting for green bonds. FAB has promised to provide thorough annual updates on how their sustainable finance initiatives are performing. They’ve also established an ESG and Sustainable Finance Committee responsible for overseeing the eligibility of their projects. Strong governance like this is essential for keeping investor trust and ensuring that green bonds truly deliver environmental benefits.

That said, it’s worth noting that the Gulf region still lags behind global averages when it comes to issuing labeled green and sustainability debt, meaning there’s a lot of room for growth. The international capital markets community emphasizes how important it is for high-quality issuers like FAB to enter this space more actively, helping set benchmarks that increase liquidity and boost confidence in the market.

This issuance aligns quite well with the UAE government’s broader push toward a net-zero economy and developing diverse funding options for infrastructure and low-carbon projects. Regulators here see the financial sector as playing a key role in this energy transition, and FAB’s significant green bond signals to both local and international investors that the bank is committed to sustainable development alongside its financial goals.

Looking at recent financial performance, FAB’s resilience is clear. In the first quarter of 2025, they posted a 23% jump in net profit, reaching 5.13 billion dirhams, primarily thanks to growth in non-interest income from fees and commissions. This diversified revenue mix demonstrates their strategic focus on stability and strong financial health, which in turn supports their ability to fund sustainable initiatives. And their quarterly profits continue to grow, by about 5% in Q3 of 2024, for example, showing their consistent economic stability.

All in all, with solid credit ratings, attractive pricing, and a serious commitment to sustainability, FAB’s recent green bond marks a significant step forward for finance in the Gulf. It’s a clear sign of how regional banks are increasingly leveraging their financial strength and ESG goals to attract global capital for projects aimed at creating a greener, more sustainable future. This move could inspire other banks and corporates across the Gulf to issue similar bonds, helping accelerate the development of green finance in the region and pushing local markets closer to global climate objectives.

Source: Noah Wire Services