Saudi Arabia’s sovereign wealth fund is getting a move on with green bond issuances

Good morning, MENA. And if you are in the finance end of climate, this is not an issue you want to miss.

THE BIG CLIMATE STORY- Saudi Arabia’s sovereign wealth fund has kicked off its long-awaited maiden green bond issuance, multiple news outlets noted yesterday. The advisers on the multi-tranche, USD-denominated offering have already started making calls to investors.

ALSO- Egypt’s Climate Resilience Fund has launched and is on the lookout for pre-seed startups that tackle climate-focused agritech solutions as it looks to raise USD 25 mn. We speak below to the founders about their plans and targets.

^^We have more on these stories and more in this morning’s news well, below.

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THE GREAT DEBATE- Qatar joins Saudi, UAE in calling for a slower divestment from fossil fuels: Qatar’s Energy Minister said “that emotional demands to ‘cancel’ hydrocarbons” are “unrealistic … and harmful to a realistic energy transition,” the Qatar News Agency wrote earlier this week. Geopolitical turmoil has hindered the transition towards clean energy, Saad bin Sherida Al Kaabi said at the Asia Green Growth Partnership Ministerial Meeting. Al Kaabi, who is also the president and CEO of QatarEnergy, said that “cleaner forms of hydrocarbons, with appropriate carbon abatement solutions, are an essential part of a reliable and a responsible transition” — pointing, naturally enough, to natural gas.

This is not the first time we have heard this: The UAE and KSA aren’t yet ready to do a 180 on fossil fuels, either. Senior officials have argued for continued fossil fuel investment, saying that current renewables capacity can’t meet energy demand.

So what now? The answer: investing in renewable energy while also relying on “cleaner” sources like natural gas to “manage intermittency issues — when the sun is not shining, or when the wind is not blowing,” Al Kaabi suggested. This statement was made after QatarEnergy signed agreements for the construction of the world’s largest blue ammonia project, worth some USD 1 bn, we previously wrote.

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WORTH READING- MENA’s cement and construction sectors need 2030 targets, as opposed to 2050 or 2060, World Cement Association CEO Ian Riley tells Zawya Projects in a Q&A. Although 2050 and 2060 net zero targets are an important step, MENA’s cement sector has made little progress in emission reduction so far.

SOUND SMART- Average CO2 output per ton of cement in our region is 35% higher than the global average, Riley says.

We need better public policy to drive change: The absence of economic incentives for cement producers to adopt sustainable technologies is one of the biggest obstacles to doing better, says Riley. In developing countries in the region, weak currencies and the rising costs of inputs are also factors.

He notes that adopting sustainable processes at cement plants will not require significant additional capex and can be furthered through policies that could potentially halve the CO2 footprint of concrete. Riley adds that more transparency in emission data reporting is a first step to encouraging sustainability in cement production.

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What’s happening with PPAs in Egypt? Power purchase agreements (PPA) hit two birds with one stone: They ease the transition to renewable energy while mitigating the financial burden it incurs. Egypt’s El Gouna, did just that in 2020 when it signed a PPA for 16% of its energy needs with SolarizEgypt. PPAs have become increasingly attractive as challenging economic conditions have taken a toll on investments in solar.

Want to read more? Check out Going Green, our weekly dive into Egypt’s green economy, in EnterpriseAM.

SPEAKING OF EGYPT- The country’s new “green” building codes for social housing got props from the World Bank. In an article entitled “Egypt’s green social housing supports climate efforts and improves quality of life for citizens,” the World Bank praised the program’s Green Pyramid Rating System (GPRS), which rates seven areas related to a building’s construction, including building materials and resources, as well as water and energy efficiency — noting that “green buildings can reduce energy consumption by 24-50%.” “Housing for All” is Egypt’s first national green building initiative.

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THE COUNTDOWN TO COP-

Egypt gets USD 6.2 mn in support of COP27 : Egypt signed an agreement with the United Nations Development Programme (UNDP), the European Union delegation to Egypt, the embassies of Denmark and Switzerland, and the African Foundation for Climate Change and Sustainable Development for USD 6.2 mn in funding to support the country’s COP27 presidency, according to an emailed UNDP statement on Tuesday. The project will see Egypt receive technical expertise and consultations to plan and organize the summit for November.

There are 40 days left until COP kicks off with the two-day world leaders’ summit opening on 7 November. Thematic days then run 9-17 November, starting with finance day.

HAPPENING TODAY-

The two-day World Green Economy Summit (WGES) in Dubai kicks off today. The gathering will focus on four different priority areas: energy, finance, food security, and youth, organizers note. Some 25 ministers from around the world will host a roundtable discussion at WGES. You can register for the event here.

The energy transition webinar series hosted by our friends at HSBC continues today and will run until Thursday. The series looks at the “latest climate analysis in relation to the global energy market and transition to net zero” throughout various sessions covering energy security, what is required to ensure the success of COP27, financing and investment needs for the energy transition, and the scaling up of renewables in the region, among other topics. You can still register for the series here.

WANT MORE on the region’s energy transition? Catch this op-ed in EnterpriseAM by HSBC’s Group Head, Center of Sustainable Finance and Head of Climate Change Middle East, North Africa and Turkey, Zoe Knight, on the capital that’s needed to help drive that shift.

Leaders in Construction KSA takes place at the Sheraton Riyadh Hotel. Tamer Shafik, vice president for business development at Orascom Construction, will give a keynote presentation at the half-day event on “sustainability as a key pillar for construction sector evolution,’’ the event’s organizers said. You can register for the event here.

The Global Manufacturing and Industrialisation Summit (GMIS) will also start today in Pittsburgh, US. The event, which runs through Friday, 30 September, is co-chaired by the UAE’s Industry and Advanced Technology Ministry and the United Nations Industrial Development Organization, and will see the participation of Sanad, ICT Fund, Etihad Rail and Emirates Global Aluminum (EGA). You can register for the event here.

Schneider Electric’s live webinar on net-zero data center operations takes place today at 4pm UAE (3pm Riyadh, 2pm CLT). The event will dive into how firms can chart a course for their data center operations to reach net zero emissions through digital transformation and measurement best practices. You can register here.

CIRCLE YOUR CALENDAR-

The American University in Cairo and UNICEF Egypt are jointly hosting a seminar entitled “The Road to COP27: Shifting behaviors to address climate change in Egypt” on Thursday, 29 September at the AUC’s New Cairo Campus. The seminar will look at how Egypt can use evidence-based solutions to address climate change and ensure financing and resources are effectively allocated. The event will be attended by UN Climate Change High-Level Champion for Egypt Mahmoud Mohieldin, Egypt’s Environment Minister Yasmine Fouad and executive director of the International Monetary Fund Jeremy Hopkins. You can register here.

Fitch Solutions is hosting a webinar on Saudi Arabia’s energy transformation next Thursday, 29 September. You can register here.

Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays and news triggers.

KSA’s sovereign wealth fund is moving ahead with its first green bond offering: Saudi Arabia’s Public Investment Fund (PIF) has hired banks to coordinate its maiden issuance of multi-tranche, USD-denominated green bonds, according to reports out of Riyadh yesterday. Advisers on the bond sale have already started making calls to investors.

What we know of the planned issuance: The green bonds will be issued in five-year and ten-year tranches, and could potentially issue tranches of longer tenors, depending on market conditions, Reuters noted. The issuer will be GACI First Investment Company — a PIF-owned special purpose vehicle set up in the Cayman Islands — and guaranteed by PIF.

What we don’t know: How big is the sale? Reuters noted earlier this month that PIF was planning an offering in the USD bns.

Advisers: BNP Paribas, Citigroup, Deutsche Bank, Goldman Sachs and JPMorgan are joint global coordinators and bookrunners, while HSBC, Credit Agricole, First Abu Dhabi Bank, Mizuho, SMBC Nikko, SNB Capital, Societe Generale and Standard Chartered are also bookrunners, Reuters and Bloomberg note.

Where’s the money going? PIF “will use proceeds from the bond sale to finance, refinance or invest in one or more green projects like renewable energy,” Bloomberg reported yesterday, citing information given in the bond prospectus.

PIF released a green financing framework (pdf) back in February, saying that the projects it plans to fund with the proceeds from the issuance, include renewable energy projects, green building initiatives, and clean transport projects. PIF is also working with BlackRock on developing an ESG framework, according to Bloomberg.

PIF “has been monitoring the market for months to find ‘a window’ in which to pull the trigger on the issuance,” Reuters reported earlier this month.

It follows ADCB’s first-ever issuance of USD 500 mn in early September: Abu Dhabi Commercial Bank (ADCB) raised USD 500 mn in its maiden green bond issuance, we reported earlier this month. The issuance was 3.8x oversubscribed, drawing over USD 1.9 bn in orders from a mix of regional and international investors, with “a very strong following from European accounts.”

MENA, say hello to the Climate Resilience Fund: The Danish-Egyptian Climate Resilience Fund (CRF) launched this week with the aim of investing in agritech and nature-enabled solutions across MENA. The fund’s general partners Hossam Allam (LinkedIn) and Sherief Kesseba (LinkedIn) tell us that climate-focused agritech is at the forefront of the fight against climate change.

The fund is looking to raise USD 25 mn over the next two years from development finance institutions and family offices outside of Egypt, Allam said.

What type of projects do they want to back? Tech-enabled projects that the CRF finds interesting include precision farming (which uses data to help farmers optimize their yields), B2B agriculture marketplaces, and agrifoods. Startups in fields including regenerative and circular agriculture, seawater farming and forestry can also expect to pique the interest of the fund. “You don’t think of North Africa as a forestry destination, but if you introduce seawater and look at mangrove forestry, there is an interesting suite of solutions there,” Allam tells us.

Venture building is also in the plan: If the GPs and team members find an idea that they like but that hasn’t been turned into a proper business, they will bring together founders and a team that can take the idea forward, Kesseba tells us. “We’re a venture fund, so we want to invest in existing startups…If there is no founder coming to us with a needed solution, we will venture-build that solution,” Allam says.

The primary focus is pre-seed stage startups: The CRF is looking to fund startups at the pre-seed stage (pun most certainly intended) with ticket sizes ranging from USD 50-500k, Allam says.

The future goes beyond MENA: The fund will focus on Egypt and MENA at first, but the aim is to expand throughout Africa in two years’ time, Kesseba says.

MENA’s climate startup scene is still nascent, but the GPs are hoping to help shape and build it. “The space in Egypt and Africa reminds me of the early stages of the startup ecosystem in Egypt — competent founders without the proper business acumen, who don’t think of themselves as startup founders,” Allam tells us. The GPs believe that if you start investing in the sector, activity will happen and a pipeline will start to emerge in the next 6-7 years.

COP27 will be an important platform for the development of VC funding in this space: “One of the problems of impact investment in climate is that the market does not adequately value climate or our ecosystem,” Allam says. He’s optimistic that COP27 will put an economic value on what climate is, which will then make it much easier for venture capital firms to raise and deploy funding.

Beeah, Green Planet snag 10-year contract to revamp Sharm’s waste management: The UAE’s Beeah Group and Egypt’s Green Planet will be upgrading Sharm El Sheikh’s waste management infrastructure over the coming 10 years to ultimately turn it “into a sustainable, smart city of the future,” WAM reported yesterday. The statement did not disclose the size of the contracts awarded.

Eliminating landfills at COP City: Beeah and Green Planet will collect and recycle cooking oil, at first, but will expand to recycle all solid waste in a bid to eliminate the use of landfills. RFID-tagged bins and a GPS-enabled garbage collection fleet are also part of the plan. The coastal city will also benefit from an awareness campaign to educate people about the environment.

This is not Beeah’s first rodeo in Egypt: The company already launched operations in the New Administrative Capital in 2020, according to a 2021 statement. The mega project, for which Beeah will introduce 30k waste collection points, will cater to 2 mn residents in its first phase.

Cable manufacturer Ducab Group will connect the 2 GW Al Dhafra solar plant to the national grid, WAM reported yesterday. The cable manufacturer was awarded an engineering, procurement & contracting (EPC) contract to connect the world’s largest solar plant to the TRANSCO grid — the Abu Dhabi Transmission and Despatch Company. When the Dhafra facility comes online, it will provide electricity for approximately 160k homes using 3.5 mn solar panels. The company did not disclose financial information on the project.

OVER IN KSA, Al Jubail desalination plant will install panels to supply it with 110 MW of solar energy, the Saudi Press Agency reported Monday. The Saline Water Conversion Corporation (SWCC) will install some of the solar panels on water to reduce the facility’s energy consumption to 2.16 KWh per cubic meter, down from 2.7 KWh. The PV cells will reduce carbon emissions while cutting down on operational costs. The company has not announced the financial details of the project.

More lava, please: Harnessing the geothermal power of volcanoes in Canada could generate enough clean electricity to help the country give up on fossil fuels, senior research scientist with the Geological Survey of Canada Steve Grasby told the Canadian Broadcasting Corporation. Volcanoes such as Mount Meager raise the temperatures of underground water reservoirs to a scalding 260°C. These heat levels may be powerful enough to generate enough steam to help the country in its transition to renewable energy sources, according to Grasby. The company hopes to use the heat to produce green hydrogen and says the clean energy from the volcano can power as many as 100k homes.