Abu Dhabi Global Market (ADGM) today announced the publication of a Consultation Paper on a proposed comprehensive Sustainable Finance Regulatory Framework, covering rules on sustainability-orientated investment funds, managed portfolios and bonds as well as a framework on environmental disclosures by ADGM companies.
The measures contained in the paper aim to enable an accelerated growth of a sustainable finance ecosystem in the jurisdiction and support the UAE’s transition to net-zero greenhouse gas emissions.
This proposed comprehensive regulatory framework intends to build upon ADGM’s existing efforts to foster a vibrant and thriving sustainable finance hub within its jurisdiction, stemming from ADGM's beliefs in its development as a hub for sustainable finance that can play a critical part in supporting the allocation of capital to economic activities that help the achievement of net-zero emissions targets, both locally and globally.
To facilitate this, the proposed framework will establish minimum standards for a wide range of sustainability-orientated investment products and services, which are set to help nurture transparency and investor confidence in the green credentials of those products and services, advancing ADGM’s drive to become a leading centre of sustainable finance.
The proposals encompass:
• The region’s first regulatory framework for green investment funds to channel capital towards environmentally sustainable activities.
• An innovative regulatory framework for climate transition investment funds to channel capital to assets and entities that are on a path to reducing their greenhouse gas emissions.
• A regulatory framework for green and climate transition discretionary portfolio management services.
• A regulatory framework for green bonds and sustainability-linked bonds offered in ADGM.
• Building upon ADGM’s existing disclosure requirements to create region’s most comprehensive environmental, social and governance (ESG) disclosures framework, to now cover disclosure by listed companies, regulated financial services firms and large private commercial entities.
In addition to proposing a framework for companies to undertake ESG disclosures, ADGM is leading by example by becoming the first international financial centre in the world to be carbon-neutral. Another example is also in the process of facilitating through its regulatory framework the establishment of the world’s first regulated voluntary carbon exchange and clearing house, where carbon offsets (Environmental Instruments), while traded and settled as Spot Commodities, are treated as regulated Financial Instruments within ADGM.
ADGM will facilitate the growth of an ecosystem of environmentally conscious companies that demonstrate sustainability as a core facet of their business models, such as by disclosing their ESG data and taking measures to become carbon-neutral.
Ahmed Jasim Al Zaabi, Chairman of ADGM, said, “Sustainable finance is a strategic priority and a focus sector for ADGM as we seek to contribute to advancing the UAE’s net-zero greenhouse gas emissions target and prepare for the UAE to host COP 28 in 2023. With considerable effort and resources ADGM is dedicated to fostering a sustainable finance ecosystem. We are already seeing the fruits of this, evidenced by sustainability-focused products and services establishing here and the approaching launch of the world’s first regulated voluntary carbon exchange and clearing house.
"This proposed regulatory framework will enhance our position as the leading sustainable finance hub in the Middle East, Africa, and South Asia (MEASA) region. With an internationally recognised regulatory framework and proximity to a number of the world’s largest sovereign wealth funds, institutional investors, and private wealth, ADGM is well-positioned to host financial products and services that will make a positive impact on the UAE’s (and global) efforts to achieve net-zero.”
This Consultation Paper highlights the significant efforts being made by ADGM to advance the sustainability agenda through its regulatory framework to provide transparency in order protect investors’ interests. These changes will be essential components of our regulatory framework to help advance the transition to net-zero.
Source: WAM, Amjad Saleh/ Khoder Nashar
Dubai: A new course has been launched to enhance sustainability in Dubai’s tourism sector as the UAE prepares to host COP28 (Conference of the Parties) Climate Change Conference, at Expo City Dubai in 2023, which will further address climate change to create a more sustainable and progressive economic future.
The Dubai College of Tourism (DCT) and Dubai Sustainable Tourism (DST), both part of Dubai’s Department of Economy and Tourism (DET), have upgraded the ‘Dubai Sustainable Tourism’ course that is available on DCT’s innovative learning platform, Dubai Way.
With a range of new modules, including educational segments, focused on water and energy saving, how to implement a Green Team and effective procurement, the much-sought after DCT course will now empower participants with the knowledge on how to abide by and operate with sustainable principles across the travel and hospitality sectors.
Dubai Way is a world-class training platform offering a broad range of educational and awareness programmes for people employed in tourist-facing roles across the tourism ecosystem. Supporting those who interact with visitors on a day-to-day basis, Dubai Way offers specialist training focused on history, culture and heritage and customer service, all of which are critical to delivering exceptional experiences for visitors to Dubai.
More than 2,000 students have graduated from the sustainability course since its launch, highlighting the necessity and effectiveness of this programme, with hundreds more students set to graduate in 2023.
The impact
Since the launch of the sustainability course in 2019, it has contributed significantly towards boosting the city’s sustainability credentials, within the wider DST initiative to position Dubai as tourism destination focused on and implementing sustainable practices.
For example, a number of hotels have developed water bottling plants, installed solar panels and implemented water saving initiatives. In recent years, the tourism sector has also witnessed a proliferation of on-site farms, generating locally sourced greens as well as hotels supporting local suppliers of fresh produce, poultry, seafood and dairy products, aligned with UAE’s food security initiatives.
Case studies
In addition to new content, the enhanced DCT course also features best practice case studies from hospitality and tourism leaders including; Atlantis The Palm, Four Seasons Resort Dubai at Jumeirah Beach, Armani Hotel Dubai, Hilton Garden Inn, Mall of the Emirates and JA Resort Jebel Ali.
It also includes information on the pioneering sustainability initiative ‘Dubai Can’ launched in February 2022 Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Dubai Crown Prince and Chairman of The Executive Council of Dubai. The module focuses on educating tourism professionals and future sector leaders about the Dubai Can initiative and the significant success it has witnessed since its launch, with the introduction of around 50 water filters in popular tourism destinations such as Kite Beach, Dubai Marina, JLT, Downtown Dubai, Dubai Harbour, Madinat Jumeirah and more.
Why it is important
Essa Bin Hader, general manager at Dubai College of Tourism, said: “The world class training programmes developed by Dubai College of Tourism are designed to empower our tourism workforce with in-depth knowledge that is so critical to ensuring that Dubai remains the preferred destination of tourists, as we continually strive to realise the vision of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE, and Ruler of Dubai, to make Dubai the most visited city in the world and a global liveability hub.
He said the highly popular Sustainable Tourism course also supports Dubai’s mission to become a leading sustainable destination in line with the UAE’s Net Zero 2050 initiative. “As we countdown to the UAE’s hosting of COP28 at Expo City in 2023, we expect staff at the numerous establishments across the tourism ecosystem to be aligned and aware of all the requirements, and their roles and responsibilities in achieving the UAE’s sustainability goals. The new courses that are being introduced by the college will further highlight the important role played by the Dubai Way platform to ensure that all those engaged within the tourism industry are gaining an understanding of how important is sustainability to the industry and how they can play a key part in achieving a greener future.”
Unique selling points
The Dubai Way platform provides the opportunity for all those engaged in the tourism industry to enhance their knowledge and skills, whilst also contributing to Dubai’s sustainable growth. By better understanding the tourism industry, Dubai’s unique selling points and the key pillars of the Dubai brand, tourism industry employees will be able to interact seamlessly with both visitors and residents from all cultures and nationalities, addressing queries and questions, and ultimately helping to leave a lasting impression of Dubai on visitors. Both the courses and the Dubai Way platform provide gifted young individuals the grounding they need to join the tourism workforce, and eventually contribute towards further enhancing the visitor experience.
Whilst Dubai is already globally associated with exceptional service and tourism offerings, the city continues to look to enhance its reputation and provide guests with even more extraordinary experiences. The range of courses available at DCT are focused on enhancing the knowledge and skills of Dubai-based talent and providing guests with unforgettable memories of the city. The courses span across various tourism trends and themes, encouraging prospective students to work together to promote Dubai to the world as a must-visit destination.
Sharjah Taxi, a subsidiary of Sharjah Asset Management Company, investment arm of the Government of Sharjah, is seeking to increase the number of its hybrid vehicle fleet cars that operate dually on both fuel and electricity. This decision is in line with the Emirate’s vision to rationalize the use of energy, in accordance with its development goals and agenda.
Sharjah Taxi had previously completed hybrid vehicle conversions towards 65% of its vehicle fleet in the Eastern Region, which now enjoys environmentally-friendly hybrid vehicles, and has significantly reduced pollution caused by vehicle exhausts. The company aims to reach 100% of hybrid vehicle conversion of its entire fleet of cars.
Khalid Al Kindi, Executive Director of Sharjah Taxi, stated: “Converting regular fleet vehicles to hybrid vehicles makes results in a substantial and effective contribution to securing an environmentally-friendly environment and providing a safe, clean, attractive, and sustainable environment that enhances the reputation and prestige of the Emirate of Sharjah. Such a step is consistent with the directions of the Sharjah Government, and is based on the vision and directives of His Highness Sheikh Dr. Sultan bin Muhammad Al Qasimi, Supreme Council Member and Ruler of Sharjah. The Emirate, in all fields and sectors, strives to remain environmentally-friendly and eco-conscious, according to the highest standards and specifications.”
He continued: “As part of our plan and strategy, we seek to convert about 60% of the Sharjah Taxi fleet operating at Sharjah International Airport and Sharjah City to environmentally-friendly hybrid vehicles by the end of the current year.”
He highlighted the ongoing global issue of environmental protection and preservation, and how the Emirate of Sharjah and State institutions have proactively acted with these goals in mind. ‘’Sharjah boasts manifestations of a clean environment throughout the Emirate, in work spaces, institutions, and public places, and continues to strive to keep the Emirate free of various forms of pollution,'' he said.
Source: Zawya
Khalifa Economic Zones Abu Dhabi (KEZAD) Group, the integrated trade, logistics, and industrial hub of Abu Dhabi, has signed an agreement with Renov8 Polymer Industries Ltd, part of leading manufacturer Just Right Inc, for the establishment of an advanced recycling facility at KEZAD’s Polymers Park. The move will boost Abu Dhabi’s transition towards a circular economy.
With business activities in over 47 countries, Just Right Inc is a global leader in the manufacturing of high-quality cladding solutions and printing media. Through its subsidiary, Renov8 Polymer Industries Ltd, which offers industrial recycling solutions to businesses globally, the group is expected to bring its best-in-class practices to Abu Dhabi to deliver one of the region’s most sustainable polymer projects.
Under the agreement, Renov8 Polymer Industries Ltd will invest AED 552 million ($150 million), to develop a 30,000sqm plot in KEZAD’s Polymers Park, as well as an expansion plot of 38,000sqm adjacent to the primary facility, for the recycling of mixed plastic waste.
In addition to supporting the broader UAE Net-Zero by 2050 strategy, the agreement seeks to advance the Abu Dhabi Industrial Strategy for which the transition towards a circular economy forms a cornerstone. The facility will also benefit from Abu Dhabi’s upcoming carbon trading exchange platform, set to be the world’s first fully regulated carbon trading exchange and carbon clearing house.
Mohamad Al Khadar Al Ahmed, Chief Executive Officer - Khalifa Economic Zones Abu Dhabi - KEZAD Group, said, “In line with our wise leadership’s industrial strategy, KEZAD Group is committed to supporting circular economy models in Abu Dhabi throughout our integrated business ecosystem. We take immense pride in welcoming Renov8 Polymer Industries Ltd to our family. The new facility will be a pioneering showcase of innovation and sustainability in plastic production and the remanufacturing of plastic waste.
“The KEZAD Polymers Park continues to attract a wide range of manufacturing and value-adding companies to Abu Dhabi, owing to the easy access to raw materials that it provides, and the direct links to global markets it offers. The project will add further value to the ecosystem while strengthening Abu Dhabi’s position as a sustainable and competitive industrial hub.”
Nilesh Jain, Founder & CMD, Renov8 Inc, said: “The signing of this agreement represents a significant milestone for us in our efforts to develop the first phase of our circular economic model, which will feature one of the most technologically advanced recycling facility for Polymers.
“In our endeavour to develop a sustainable polymers industry, we will deploy advanced manufacturing processes at the KEZAD facility to deliver a comprehensive ESG-driven business model. Renov8 will greatly benefit from the integrated platform that KEZAD offers, with proximity to Khalifa Port providing greater access to global consumer markets.”
Renov8 Polymer Industries, as part of Just Right Middle East’s existing manufacturing ecosystem, employs advanced production technology and processes with state-of-the-art factories that meet the highest technical standards, which are TÜV Sud & PSB compliant.
From rescuing left-over food at restaurants, to creating art from seabed litter, UAE-based advocates are hoping to inspire others to work and live more sustainably.
In Abu Dhabi’s fish market, the first thing people see as they walk in is an art installation of abandoned items collected from a shipwreck.
Inspired by days spent at her family’s beach house in the coastal area of al-Dhabiya, visual artist, Ayesha Hadhir, went shipwreck diving every weekend over a period of one year to save some of its sunken objects.
Called “Al Doobah,” the art installation not only represents the artist’s childhood memories, but also hopes to send a message about ocean sustainability.
"I really wanted to say to the people not to litter, this is the sea, we need to take care of it for ourselves and for our next generation,” said the artist.
“This is something that I want to evolve in my work, where rather than creating something new, finding something that already exists and producing a story or adding to the story with it,” added Hadhir.
Meanwhile in Dubai, executive chef at Teible restaurant, Carlos Frunze De Garza practices another form of sustainability in his kitchen.
To save left-over fruits and vegetables from the trash-bin, De Garza incorporates the items into new recipes, proving that every chef can avoid food-waste while still serving great food.
From making sauces to vinegars, oils and Kombucha tea, the executive chef described sustainability as a “lifestyle in the kitchen.”
"Look at one ingredient or one vegetable, look at how you can use it from the seeds to the core and make everything out of it, you can make peels, you can make salad, the seeds you can give it back to the farmers, who can regrow the seeds, then the cores or the peels, we can make something out of it, we can make oils, we can make vinegars, we can make sauces,” added De Garza.
Dozens of large jars of fermented fruits and vegetables are piled up inside the chef’s kitchen, as he uses his creations to add a twist to his dishes.
“We ferment and make our Kombucha, the liquid (of Kombucha), we use it to make granita (semi-frozen dessert), the core of it, we make it into a powder, which we use for dessert. Basically, everything the zaatar and the blueberry are used 100 percent with the powder and granita,” explained De Garza.
In addition to cooking sustainably, De Garza works closely with farmers as an advocate for sourcing ingredients locally and to make use out of wasted crops.
Mubadala Investment Company, the Abu Dhabi-based sovereign investor managing a global portfolio of assets valued at US$284 billion, has acquired a stake in Skyborn Renewables, the world’s largest private offshore wind developer, alongside Global Infrastructure Partners (GIP).
The acquisition of a 100 percent interest in Skyborn Renewables provides GIP and co-investors, including Mubadala, with access to the largest private offshore wind developer globally with a long track record of development and an established presence in Europe and Asia Pacific.
Headquartered in Bremen, Germany, Skyborn Renewables has an offshore wind track record of more than 7GW developed to date, and a portfolio of operating and under-construction projects in Germany, France, and Taiwan. The group currently has a 30GW pipeline of high diversified offshore wind projects in various stages of development.
The investment by Mubadala also includes the acquisition of a stake in GIP’s 50 percent interest in NY Bight Project called Bluepoint Wind, an innovative 1.6GW offshore project in the US that will provide investors with immediate access to the growing U.S. offshore wind market.
Offshore wind is expected to be one of the fastest growing renewable energy sectors over the next 15 years, with the current 27GW installed capacity set to grow to 290GW by 2035. The forecasted growth of the offshore wind market will require annual investments of $50 billion.
Khaled Abdulla Al Qubaisi, Chief Executive Officer of Real Estate and Infrastructure Investments at Mubadala, said, “Offshore wind is one of the most attractive and fastest growing segments within renewables, with the sector expected to grow 10-fold in the next decade.
Wind energy is an important component of the transition to clean, renewable power and as a responsible investor, we at Mubadala are proud to be a part of a consortium that is playing a leading role in addressing the global challenges of the climate crisis and energy security.”
The Skyborn Renewables and Bluepoint Wind investments are part of Mubadala’s rapidly growing clean and sustainable energy portfolio. In April this year, Mubadala was part of a BlackRock Real Assets-led consortium which agreed to invest $525 million into the renewable energy arm of India’s Tata Power.
Tata Power Renewable Energy, which will play a key part in India’s energy transition, is planning to increase its current 4.9GW clean energy capacity to more than 20GW over the next five years.
Leading sustainable energy partner for businesses to deploy over $1 billion worth of projects in the Middle East, Africa and beyond.
Yellow Door Energy (“YDE”), the leading sustainable energy partner for businesses, has today announced the closing of a new equity raise to continue its development of sustainable energy projects in the Middle East, Africa and beyond. The investment also includes a purchase of current shares, enabling the company’s initial investors to exit. The funding is substantially provided by YDE’s newest and now controlling shareholder, Actis, with existing shareholders International Finance Corporation (IFC), Mitsui & Co., Ltd. (“Mitsui”) and APICORP also increasing their equity commitments. With the closure of this landmark transaction, YDE’s business plan is fully funded and the management team is now focused on executing sustainable energy solutions over the next five years, with a portfolio value expected to exceed $1 billion, which will be funded through a combination of equity and debt securities.
Jeremy Crane, CEO and Founder of Yellow Door Energy, said: “This substantial investment will enable Yellow Door Energy to rapidly expand into new countries and deploy over $1 billion in projects across the region. We whole-heartedly welcome Actis as our majority shareholder and look forward to a fruitful collaboration. We would also like to express our gratitude to our existing shareholders – IFC, Mitsui and APICORP – for their continued investment and support for our business model of providing affordable, reliable and sustainable energy to visionary companies in the MEA region and beyond.”
Nalin Nayyar, CFO of Yellow Door Energy, added: “Our shareholders understand the importance of patient capital when investing in sustainable long-term infrastructure projects. With over $400 million in equity expected, Yellow Door Energy is fully funded and well positioned for the next phase of the company’s growth. We look forward to leveraging our shareholders’ expertise and benefiting from their continued synergies to add value to our business and customers.”
Lucy Heintz, Partner and Head of Energy Infrastructure at Actis, said: “We’re excited about the opportunity our partnership with Yellow Door Energy presents to contribute to the MEA region’s transition away from fossil fuels by deploying new solar PV technology. We see a clear opportunity to help Yellow Door Energy continue its growth journey and to build the region’s distributed solar sustainability leader.”
With operations in the UAE, Jordan, Pakistan, Saudi Arabia, Bahrain and South Africa, Yellow Door Energy has one of the largest commercial & industrial project portfolios in the region, with 106 megawatts in operation and 104 megawatts awarded and under construction. The company has key existing relationships with a large customer base of over 50 companies, including multi-national businesses such as Nestlé, Majid Al Futtaim, DHL, Mondelēz and Unilever.
The company’s mission is to be the sustainable energy partner of choice for leading businesses, helping them reduce costs and lower carbon emissions. This directly supports net zero emission targets set by countries and companies worldwide to mitigate the impacts of climate change.
DMCC – the world’s flagship free zone and Government of Dubai Authority on commodities trade and enterprise and master developer of the JLT District – has announced a range of sustainability projects to accelerate the decarbonisation of the Jumeirah Lakes Towers (JLT) community, in line with the Dubai Clean Energy and Net Zero Carbon Strategy 2050.
Following the announcement of the project earlier this year, DMCC signed a 20-year agreement with Etihad ESCO, a wholly-owned subsidiary of Dubai Electricity and Water Authority (DEWA) the Water, Energy, Technology and Environment Exhibition (WETEX) 2022 that will see the majority of the JLT Cluster’s car parking areas provided with solar car shades. Making JLT home to one of the UAE’s largest district solar car shade installations, the project will result in a significant reduction in DEWA tariffs for the district, generating savings each year for property owners, in turn making JLT more affordable for residents and tenants.
The signing ceremony was attended by HE Saeed Mohammed Al Tayer, Managing Director and Chief Executive Officer of DEWA.
DMCC will install solar panels at OneJLT, the DMCC Tea Centre, the DMCC Coffee Centre and the Jewellery & Gemplex building. Additionally, the JLT District car parks will be fitted with higher efficiency lighting and ventilation solutions to reduce energy usage. DMCC will also expand its work with Etihad ESCO through other projects that target a 30% increase in energy and water efficiency across the entire JLT community.
Feryal Ahmadi, Chief Operating Officer, DMCC, said: “Representing some of the most salient issues that we collectively face today, sustainability and decreasing carbon emissions have never been more important. This core belief is the driving force behind DMCC’s comprehensive sustainability strategy and this full suite of decarbonisation projects that we are announcing today. Through these projects, we look to deliver an increasingly positive impact to the 60,000 people and 21,000 businesses that call JLT home.”
Dr. Waleed Alnuaimi, Acting Chief Executive Officer, Etihad ESCO, added: “We are proud to partner with DMCC on such an important project. Installing solar panels across the JLT district fully supports the various sustainable energy strategies championed by the UAE, allowing Dubai to positively tip the scales for climate change globally.”
Sustainability and other ESG areas are a core focus for DMCC. DMCC became the first free zone in the GCC to commit to the United Nations Global Compact (UNGC), encouraging responsible business practice throughout the entire value chain. As part of its commitment to the UNGC, DMCC publishes an annual sustainability report that highlight’s the business district’s progress on sustainability targets.
Source: Press release
BOCA, the Dubai restaurant that has been pioneering in the field of sustainability, has found a way to incorporate their values into their uniforms thanks to Goshopia.
The award-winning restaurant approached Goshopia with an idea: to create a line of uniforms that are made from sustainable material and sourced responsibly, different to what was available in the market and would fit the demanding needs of a restaurant operation.
Goshopia is the leader of slow and sustainable fashion in the region. From the initial focus on fashion, the platform has grown to also offer accessories, beauty, home décor and soon corporate gifting. All following their 3 S’s or core values:
- Slow philosophy
- Sustainability
- Social Responsibility
Both companies share the same values and enthusiasm for the environment. The design process was totally collaborative, with BOCA’s and Goshopia’ s teams bouncing ideas, designs and selecting fabrics and colors.
The result is a line of uniforms that combine comfort, function, and beauty in a sustainable fabric that’s easy on the environment. The uniforms are designed and built to last using 100% hemp.
Hemp is a sustainable material that’s been used for centuries because of its durability and comfort. Totally biodegradable, it gets better with every wash. What’s more? Hemp is UV-resistant and anti-bacterial and requires less water to grow that other natural fibers. Also, can be recycled at the end of their lifecycle.
"It was an absolute pleasure working with the Goshopia team who brought our vision to life. Araceli, Goshopia’s founder is an incredibly passionate individual with a fantastic and talented team. They were continuously supportive and patient during the whole process and I can’t be prouder to see the new sustainable uniforms which represent BOCA’s ethos" comments Katarina Urbanova, BOCA's Restaurant Manager.
This is part of a larger effort by Goshopia to make their sustainable products available not only for direct consumers but also for business and corporations. Hence the birth of the new division of the company offering sustainable uniforms, eco corporate gifting and even plants to improve the air quality of the office or workspace.
Sustainability has a lot of angles. From recycled to organic materials, or the constant search of circularity and balance between what we get and what we give back to our planet. BOCA and Goshopia- both as pioneers in their respective fields- hope that these new uniforms will encourage other companies to embrace these very important values and be able to create a ripple effect and a greater positive impact.
BOCA, Dubai - SUSTAINABLE AT HEART
Tucked away in the heart of Dubai’s financial district, BOCA is a Modern European restaurant influenced by Spanish cuisine and with a strong commitment to sustainability and local sourcing.
In addition to sourcing ingredients locally and supporting local farmers and fishermen, BOCA has stepped up efforts to reduce waste with the help of its own Waste Officer. The restaurant continuously audits kitchen and bar operations, refuses single use plastic from suppliers and to customers, operates a demand-driven inventory, and prefers working with like-minded partners across the value chain. In its location in DIFC, Dubai, BOCA runs on 100% renewable energy and has just published its first carbon emissions report detailing its impact on the environment. BOCA is Gault&Millau 2022 UAE "Sustainable Kitchen of the Year". Gault&Millau is one of the world's most respected independent restaurant reviewers.
GOSHOPIA
GOSHOPIA is a one-stop shop with fashion, beauty, accessories, gifting, books, home decor, and now also corporate gifting. Centred around their 3S’s or core values: Slow philosophy, Sustainability and Social Responsibility, GOSHOPIA’s goal is facilitate your transition to an eco-friendlier lifestyle while staying in style. The company’s founder, Araceli Gallego, is also UAE Fashion Revolution Country Coordinator and is passionate about bringing better alternatives for all style-lovers in the region. For more information, interview requests or additional materials, please contact:
Araceli Gallego|hello@goshopia.com | +971 555752608 | @goshopia_official
ESG factors can have a significant impact on the attractiveness of commercial assets to occupiers, as well as investors
Dubai: Aging office buildings in Dubai and Riyadh present a unique investment opportunity as occupier expectations start turning increasingly green, according to a new report, The ESG Imperative – The View From The Middle East - https://bit.ly/3ehxPwC, by global property consultancy, Knight Frank.
As sustainability issues take centre stage globally, environmental, social and governance (ESG) considerations are growing in importance. With 40% of global greenhouse gas emissions traced to the buildings we occupy, the imperative to go green has never been stronger. Furthermore, ESG factors can have a significant impact on the attractiveness of commercial assets to occupiers, as well as investors.
WINNING THE WAR FOR TALENT
Faisal Durrani, Partner – Head of Middle East Research, Knight Frank, explained: “Occupying best-in-class office space is no longer a nice-to-have, but a need-to-have. Businesses are quickly discovering that to win the battle against the global talent shortage, a key tool is occupying world-class office space that effectively doubles as a showroom. This allows a business to showcase itself to potential clients as well as future talent, while offering a workspace that employees are proud to work in. This will be critical as we emerge from the pandemic.”
Knight Frank’s report points to Dubai’s office market, where there has been a sharp return to rental growth for locations that have higher concentrations of new, or relatively modern stock. Submarkets such as Business Bay, the DIFC and the Dubai Design District have all seen rents surpass pre-COVID levels, while older parts of the city where there is a higher concentration of older, more secondary stock are still struggling to return pre-pandemic lease rates. This is not necessarily due to a lack of demand in the market, says Knight Frank, but a lack of demand for older offices.
Durrani continued, “The flight to quality and sharpened focus on Grade A space is reflected in the fact that Grade A buildings in Dubai have occupancy levels in the high 80’s to low 90’s per cent, while in Riyadh, Grade A occupancy levels are hovering around the 97% mark.
“While the DIFC retains its position as Dubai’s financial heart and commands the highest office rents in the city, its buildings are rapidly aging. Indeed, 51% of the precinct’s 6 million square feet of office space was completed before 2010. The same is true for some other popular locations such as Dubai Internet City and Dubai Media City, where the average age of office buildings is 15 years across the 10.3 million square feet of office space in these areas. Similarly, in Riyadh 50% of office space on King Fahd Road and 84% of office space on Olaya Road is over 5-10 years old.”
ESG-LINKED REFURBISHMENT
Inevitably there will have been some refurbishment activity across these markets, but without extensive refurbishment that is ESG compliant, some buildings may start to see increasing voids and falling rents as occupiers gravitate towards more modern and green buildings.
Ben Walker, Partner – Head of Project and Building Consultancy, said: “All is however not lost for older buildings. Grade B buildings are often better located in that they are completed communities, with supporting infrastructure already in place. Clearly it will not necessarily be financially viable to refurbish all Grade B buildings, but the traditional demolish-and-rebuild approach in the region may soon be difficult to achieve as banks scrutinise the carbon footprint of new schemes before awarding development financing. Indeed, the carbon footprint of a refurbishment is far lower than the demolish and rebuild route”.
According to Knight Frank, average renovation or refurbishment costs for office buildings in Dubai currently range from approximately AED 280 psf and can be as high as AED 580 psf.
Walker added, “For refurbishment projects, a 40-50% uplift in the cost of the contract is the norm when attempting to achieve a LEED Silver rating. Clearly it may not always be possible to achieve a Platinum LEED rating as the cost may far outweigh any expected benefit and some older buildings may not be suitable to accept the retrofit needed.
“Overall, however, the message from businesses is clear: ESG credentials are quickly becoming a must have, especially for international blue-chip businesses. And this is not necessarily just LEED. It also includes WELL certification, which is focused on the experience of the occupants of a building, but also WiredScore Certification.
“Landlords may view this as lost cap-ex, but we have evidence from mature cities such as London where we have evidence to show clear rental premia associated with ESG-badged office buildings. There is no reason why we cannot expect to see the same in Dubai, particularly while internationally accepted, green-rated buildings remain in short supply”.
INVESTOR APPETITE
Knight Frank also highlights the investor appetite for green-rated buildings, with over US$ 120 trillion worth of real estate assets managed by funds that are signed up to voluntary climate-change disclosures.
“The region is yet to successfully attract global institutional capital in a meaningful way. The key reasons have been around the lack of assets of scale and market transparency. All that being said, investors are abandoning brown assets in favour of green-rated buildings. So, we have a clear opportunity to create these assets, attract strong covenants and deliver these green assets right into the hands of ESG-hungry funds.
“A significant test will come in the form of the US$80 billion 2024 IPO planned by the US$500 billion Saudi super-city NEOM, which has placed sustainability at the heart of its development objectives”, concluded Durrani.
