Abu Dhabi clean energy vehicle raises $1bn with green bond

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Renewable energy investment

Masdar green bond to fuel emerging markets push

Abu Dhabi’s state-backed green energy group Masdar today announced that it had raised $1bn with its second green bond issuance on the London Stock Exchange — the latest sign of Gulf states’ strategic diversification into renewable energy.

The issuance, which was five times oversubscribed, is part of a larger initiative through which Masdar aims to raise up to $3bn from the bond market to deploy 100 gigawatts of renewable energy capacity by 2030.

Masdar, which is also known as Abu Dhabi Future Energy Co, has amassed a portfolio of projects that are either operational, under construction or under development, worth more than $30bn. Masdar says the new bond proceeds will go “exclusively to new greenfield renewable energy projects”.

“Every single dollar is going towards the development of a new renewable energy project,” chief financial officer Mazin Khan told me, in contrast with other issuers who may “take proceeds from green bonds and use them in M&A or acquisitions of existing projects, which are not really making a difference”.

Masdar is funded by the United Arab Emirates’s sovereign wealth fund Mubadala, its power and water utility Taqa, and its oil company Adnoc. Last month it bought Greece’s biggest renewables company, Terna Energy, in a €3.2bn ($3.4bn) deal — and has said it is on the hunt for more acquisitions.

After hosting last year’s COP28 climate summit, the UAE launched Altérra, a $30bn climate-related investment fund, which says it aims to catalyse $250bn of investment for “climate change action”.

Critics have been quick to note that when the UAE funds ventures such as Masdar and Altérra, it draws on deep resources as one of the world’s biggest producers of fossil fuels. The UAE was the eighth-biggest oil producer in the world last year, according to the US Energy Information Administration.

It is not alone. Saudi Arabia’s sovereign wealth fund PIF started issuing green debt in 2022, and the Saudi government itself, which unveiled a green financing framework this year, may soon begin selling green bonds.

Asked whether Masdar’s petrostate backing threatens the credibility of its green bond issuance, Khan pointed to the UAE’s record as a major global investor in renewables.

“Just the fact that we, as Masdar, exist, and have been given the mandate to reach 100GW [of renewables] by 2030, with shareholders primarily represented by Adnoc, Taqa and Mubadala, which are sovereign entities — I think that speaks for itself,” he said. “The UAE is continuing to invest quite heavily in the transition.”

Proceeds from a $750mn green bond Masdar issued a year ago have been used to finance five projects in Uzbekistan, one in Azerbaijan, and a 1,800MW project in the UAE. This week’s issuance would also finance projects in the UAE, Khan said, as well as in Germany, where Masdar recently co-invested in an offshore wind farm in the Baltic Sea.

Overall, Khan said, the green bond programme represented “a success story for investing in the global south” — although Masdar has not used proceeds from its prior green bond issuance for investments in countries in the southern hemisphere.

Asked which countries he was referring to, Khan pointed to the Commonwealth of Independent States (CIS) region, which includes Uzbekistan and Azerbaijan. Khan said that the fund’s investments in developing nations give investors the opportunity “to invest in those countries without necessarily taking the credit risk exposure of those countries.”

Developed countries that produce fossil fuels, Khan added, “should be stepping up, and should be doing more, as compared to other countries who are not necessarily such big producers”.

Whether states such as the UAE should be classed as developing countries is a question of growing political importance, as the world’s largest economies seek to tap the Gulf states and China to help provide green financing for poorer countries.

“I wouldn’t necessarily explicitly say the UAE is part of the developed world,” Khan said. “It can be subjective.”

Whether or not Masdar uses the green bond to fund renewables south of the equator, however, Gulf countries are taking on more risk in emerging markets at a time when multilateral development banks, and European development finance institutions in particular, have come under criticism for risk metrics and stringent rules that dampen their investments in regions such as Africa. Gulf countries, by contrast, announced more than $53bn of foreign direct investment in Africa last year, according to FDI Intelligence.

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