Badar Chaudhry
High oil prices certainly boost the Middle East’s financial outlook, but this is far from the whole story. Inevitable economic peaks and troughs means borrowers with a diverse toolkit and attitude of adaptability will be able to quickly capitalise on investors’ appetite during the global energy transition – the greatest challenge in modern history.
The financing yardstick to release capital is surer than ever: proof of concept and the validity of the project must be extremely robust. For example, Mashreq has committed to provide or deploy $30bn of sustainable financing by 2030 – a vast sum in a very short amount of time in a very ambitious space. Yet, our challenge is echoed by others in the financial ecosystem: finding the right commercial and environmental destinations to justify allocating the credit. Essentially, money is available across the Gulf Corporation Council (GCC), but borrowers need to elevate the strengthen of their proposals.
Streamlining the sell
Momentum to craft a mixed energy basket is undoubtedly moving fast, but more can be done. For one, more clarity is needed on the follow-through of climate commitments made at recent COPs – the world’s biggest annual climate gatherings. This applies to COP27 in Egypt last November and COP28 in Dubai in ten months, as investors are very reassured by seeing tangible steps emerge from high-level dialogue. This is especially true for those being asked for big-ticket financings in relatively new energy markets, like circular markets and green hydrogen.
Other much-needed actions include ironing out policy frameworks and reporting standards, from carbon pricing to carbon capture and storage (CCS) and more. There are far more questions in the energy transition than answers; investors want to see strategies that aim to reverse this global status. Of course, such frameworks and standards must meet international best practices, but it is equally crucial that they factor in local and regional nuances. Not only does this make them more useful and applicable, but it helps borrowers capture the attention of many types of investors.
Investors’ need for greater visibility extends to the hydrocarbon sector – pivotal to sustaining energy security – especially as the Russia-Ukraine war affects supply-demand dynamics. With the International Energy Agency (IEA) expecting global oil demand to rise by 1.9mn barrels a day this year, to a record high of 101.7mn barrels a day, garnering investors’ support to both expand and green hydrocarbon operations simultaneously is key.
Ramping up Environment, Social and Governance (ESG) efforts is another sure route to deepening investors’ buy-in. Many corporate clients already want to understand how to curate ESG guidelines and policies with long-term relevance; a fair enquiry when there are 600 reporting standards worldwide, according to Ernst & Young. Those who commit to designing the most appropriate and thorough system today will reap the reward as ESG credentials will carry great favor with investors, especially from 2025.
Streamlining the sell
Momentum to craft a mixed energy basket is undoubtedly moving fast, but more can be done. For one, more clarity is needed on the follow-through of climate commitments made at recent COPs – the world’s biggest annual climate gatherings. This applies to COP27 in Egypt last November and COP28 in Dubai in ten months, as investors are very reassured by seeing tangible steps emerge from high-level dialogue. This is especially true for those being asked for big-ticket financings in relatively new energy markets, like circular markets and green hydrogen.
Other much-needed actions include ironing out policy frameworks and reporting standards, from carbon pricing to carbon capture and storage (CCS) and more. There are far more questions in the energy transition than answers; investors want to see strategies that aim to reverse this global status. Of course, such frameworks and standards must meet international best practices, but it is equally crucial that they factor in local and regional nuances. Not only does this make them more useful and applicable, but it helps borrowers capture the attention of many types of investors.
Investors’ need for greater visibility extends to the hydrocarbon sector – pivotal to sustaining energy security – especially as the Russia-Ukraine war affects supply-demand dynamics. With the International Energy Agency (IEA) expecting global oil demand to rise by 1.9mn barrels a day this year, to a record high of 101.7mn barrels a day, garnering investors’ support to both expand and green hydrocarbon operations simultaneously is key.
Ramping up Environment, Social and Governance (ESG) efforts is another sure route to deepening investors’ buy-in. Many corporate clients already want to understand how to curate ESG guidelines and policies with long-term relevance; a fair enquiry when there are 600 reporting standards worldwide, according to Ernst & Young. Those who commit to designing the most appropriate and thorough system today will reap the reward as ESG credentials will carry great favor with investors, especially from 2025.
