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Standard Chartered working on developing ESG Frameworks

Business Wednesday 11/October/2023 17:03 PM
By: Times News Service
Standard Chartered working on developing ESG Frameworks

Muscat: Standard Chartered Oman is currently working with several clients on developing environmental, social and governance (ESG) Frameworks, according to Hussain Al Yafai, CEO of Standard Chartered Oman.

In an exclusive interview with the Times of Oman he further said, “Two of such frameworks have already been completed in the electricity and telecommunications sectors. There are an additional six more currently at various stages of completion across a number of sectors including logistics, tourism and hospitality, mining and natural resources.”

Elaborating about Standard Chartered’s first-ever green guarantee for a solar project in Oman, he said that in September 2023, Standard Chartered issued its first-ever green guarantee for China Energy Engineering Shanxi Electric Power Engineering Company (CEEC-SEPEC) in Oman.

The green guarantee is for a solar project in Oman, where CEEC-SEPEC is the main EPC contractor. The project aims to develop and operate a state-of-the-art solar power plant, contributing to Oman's renewable energy targets and reducing carbon emissions.
“Standard Chartered’s guarantee not only demonstrates its confidence in CEEC- SEPEC's project but also reinforces its commitment to fostering a greener and more sustainable future,” he added.

When asked whether this was Oman’s first green guarantee issued for a solar project, Hussain Al Yafai said, “Yes, this is a first-of-its-kind deal for the Sultanate of Oman. We are proud to have forged this deal in support of Oman’s green agenda and as part of Standard Chartered’s wider commitment to continuously provide clients with innovative solutions that meet their sustainability objectives.”
“That said, this isn’t the first green deal we’ve worked on in Oman. We’ve supported Oman Shipping Company on a sustainable finance deal worth $35 million in 2020,” he further added.

Hussain Al Yafai said that Standard Chartered has played a pivotal role in several notable deals in Oman.
“Earlier in 2023, the Bank served as the Sole Ratings Advisor and Global Coordinator for Energy Development Oman (EDO) during its inaugural $1 billion Sukuk Issuance. This transaction marked a historic milestone for EDO as it ventured into capital markets with its first benchmark USD Sukuk issuance.

“Moreover, it represented the first issuance from Oman in that year and the first USD-denominated transaction for an Omani Government-Related Entity since 2021,” he added.

Standard Chartered was also appointed as Deal Manager by the Oman Government, through the Ministry of Finance, as part of a liability management exercise in which the Government sought to repurchase outstanding securities, potentially totalling up to $1 billion. The exercise sought to support the Oman Government's strategic objective of reducing its debt burden and enhancing its debt-to-GDP ratio, a critical metric in its pursuit of attaining an investment-grade rating.

Speaking about the advantages of issuing green guarantees, Hussain Al Yafai said, “The biggest advantage of green guarantees is that they de-risk the financing of the underlying project. By providing a guarantee, the risks to the funders of the solar project are reduced, meaning they accept a lower rate of interest on their funding, ultimately reducing the cost of the project.”

“Lowering the costs of renewable energy projects is vital in increasing the flow of climate finance to developing countries like Oman,” he pointed out.

Green guarantees are an important financial innovation that are playing a prominent role in financing the energy transition in developing countries. “They encourage investors to move into new markets that may have traditionally been seen as more challenging. As such, green guarantees can accelerate the inflow of more private capital into these markets,” he added.

Hussain Al Yafai further elaborated on such guarantees and said, “Credit guarantees are established financial instruments used to lower credit risk and the price of credit. In recent years, these guarantees have incorporated criteria linked to sustainable finance. A green guarantee is linked to projects that meet climate goals such as renewable energy projects.”

“However, there can also be ‘blue guarantees’ linked to projects that provide access to water and water-related infrastructure. There can also be guarantees linked to other sustainability objectives like access to housing, small enterprise development, or women's economic empowerment,” he added.

Speaking about the beginnings of green guarantees, Hussain Al Yafai said, “While there has been a significant increase in the combined global market for green, social and sustainability bonds over the last five years, the developing world has not been the beneficiary of these financial flows.”

This is despite the urgent need for these countries to invest in the energy transition, climate adaptation and resilience. Reasons for this are varied but include investor concerns about the risks of investments in developing countries and emerging markets.
“Green guarantees have been introduced to lower this risk for investors. Initially, led by Development Finance Institutions, they are increasingly being issued by commercial banks,” he added.

Standard Chartered has been a proponent of this instrument in support of the region’s climate transition, having recently issued a green guarantee with Siemens Energy in Qatar to reduce the State’s carbon footprint.