Fintech meets sustainability: The rise of green finance

Khaleej Times

31-03-2025

In an era where climate change poses an increasingly urgent challenge, the world is turning to finance as a critical tool for driving sustainable growth and mitigating environmental risks. As the global economy remains heavily reliant on fossil fuels and non-renewable resources, the need to transition to a low-carbon, sustainable economy has never been more pressing. Green finance and sustainable finance are emerging as key instruments in this transformation, channeling capital into projects that foster sustainability and reduce the negative environmental impacts of traditional industries.
Both green finance and sustainable finance aim to shift the financial system towards environmentally friendly investments. Green finance focuses specifically on funding projects that benefit the environment, such as renewable energy and energy efficiency, while sustainable finance encompasses a broader range of activities that integrate environmental, social, and governance (ESG) criteria into investment decisions. Together, they play a pivotal role in addressing climate change by driving investments in clean technologies, sustainable infrastructure, and climate-resilient businesses.
The urgency of this transition cannot be overstated. With rising greenhouse gas emissions and the global dependence on fossil fuels, the financial sector's role in combatting climate change has become crucial. Redirecting investments towards sustainable ventures is not only essential for environmental preservation but also for creating a resilient global economy that promotes long-term social well-being.
Climate-Smart Investments
The GCC is strategically positioning itself as a leader in the sustainable finance landscape. As the demand for sustainable finance surges globally, the region is leveraging these financial tools to diversify its economies, reduce reliance on oil, and accelerate progress toward net-zero emissions.
A recent report by KPMG Lower Gulf and First Abu Dhabi Bank (FAB), titled 'The Sustainable Finance Imperative', highlights the transformative role of sustainable finance in the GCC's economic growth. The report emphasizes that climate-smart investments, expected to total $23 trillion across emerging markets, are reshaping the region's economic future, creating new opportunities for diversification, job creation, and long-term resilience. By focusing on green investments, the GCC is on track to add up to $2 trillion to its regional GDP by 2030, primarily through sectors such as renewable energy and sustainable infrastructure.
FAB, the UAE's largest bank, has already made significant strides in facilitating sustainable financing projects, reaching Dh216 billion in sustainable and transition financing — 43% of its 2030 target of Dh500 billion. This demonstrates the growing demand for ESG-focused financing solutions, driven by both corporate priorities and consumer expectations.
The rise of green finance is not only fostering sustainability but also spurring economic growth and job creation in the region. According to the report, green investments are expected to create over one million jobs by the end of the decade. The UAE alone has committed $16.8 billion towards renewable energy initiatives, with a particular focus on diversifying its energy sources and reducing carbon emissions.
Leveraging Green Finance for a Greener Future
The financial landscape in the UAE has been rapidly evolving, particularly with the growing emphasis on sustainability and green finance. As the world moves toward greener solutions, fintech platforms have emerged as powerful enablers in promoting sustainable investments.
Anita Nouri, CEO and Founder of Green Growth Planning and Consultancy (GGPC), highlights that fintech plays a crucial role in leveraging sustainable investment. 'Green finance leverages and promotes sustainable investment, and fintech platforms offer eco-friendly finance solutions that make it easier for investors to participate in these opportunities,' She notes.
These platforms provide an accessible avenue for investors to align their financial goals with environmental objectives, fostering a broader commitment to sustainable growth.
Blockchain technology is another key player in the green finance ecosystem, enabling fractional ownership of green projects. This technological advancement opens up investment opportunities to a more diverse group of investors. By breaking down barriers to entry, blockchain allows for a more inclusive and equitable approach to sustainable investments.
As Nouri explains: 'Blockchain enables fractional ownership of green projects, making it easier to attract diverse investors.' This innovative solution provides an added layer of security, reducing risk and ensuring that investors can have confidence in the projects they support. The transparency and traceability offered by blockchain technology are particularly valuable in the green finance sector, where trust and credibility are essential.
Enhancing Transparency and Promoting Genuine Green Projects
In the quest for genuine sustainable investments, digital platforms have emerged as a cornerstone for promoting transparency in green finance. These platforms allow for faster issuance of green bonds and other sustainable financial solutions, ensuring that the process is both efficient and reliable. Transparency is crucial in detecting and eliminating false claims of sustainability, a challenge that has plagued the industry in the past.
Nouri emphasises: 'Transparency helps detect false claims of sustainability, ensuring only genuinely green projects receive funding.' In a market where greenwashing is a concern, digital platforms provide a much-needed solution by offering clear and accurate reporting on both financial performance and environmental impact. This ensures that only projects with verifiable, positive environmental outcomes are backed by investors.Artificial Intelligence (AI) and data-driven analytics are reshaping the landscape of sustainable finance. These technologies enable investors to make more informed decisions by analysing vast amounts of data, identifying ESG-friendly investments, and assessing their long-term impact. By providing a deeper understanding of the environmental and financial implications of potential investments, AI-driven analytics ensure that investors can align their portfolios with their sustainability goals.
The Role of Regulations
As the UAE pushes toward a more sustainable future, regulations play a pivotal role in creating an environment conducive to green finance. According to Nouri, the UAE's regulatory measures are collectively designed to support the integration of environmental considerations into the financial sector. 'There are regulatory measures that collectively aim to create a robust ecosystem for green finance in the UAE, encouraging financial institutions and businesses to adopt sustainable practices and contribute to the nation's environmental objectives.'
One of the most notable developments is the Abu Dhabi Global Market (ADGM), which has implemented a comprehensive regulatory framework that includes Environmental, Social, and Governance (ESG) disclosure requirements for entities within its jurisdiction. This regulatory move ensures that companies are held accountable for their environmental impacts while fostering transparency and investor confidence in sustainable ventures.
In addition to ADGM's framework, the Central Bank of the UAE has introduced several regulations guiding the country's financial sector toward sustainability.
Moreover, the UAE Sustainable Finance Working Group (SFWG) has developed guiding principles on sustainable finance, which provide voluntary guidelines for integrating ESG factors into the governance and strategy of financial institutions. 'These voluntary principles aim to integrate ESG factors into the governance, strategy for financial institutions,' says Nouri, emphasising the importance of keeping up to date with evolving regulations.
Fintech and ESG
While regulatory frameworks are essential, fintech firms have also become critical players in ensuring compliance with ESG standards while maintaining profitability. With their ability to harness cutting-edge technologies like Artificial Intelligence (AI) and automation, fintech firms are finding innovative ways to integrate ESG practices into their business models, driving both sustainability and profitability.
Nouri explains that fintech firms are increasingly turning to automated ESG reporting tools and AI-driven investment strategies to stay ahead of regulatory demands.
'Fintech firms ensure compliance with ESG standards while staying profitable by integrating automated ESG reporting tools, using AI to assess sustainable investments, and offering green financial products like carbon credit trading or green bonds,' she notes. These green financial products not only meet the growing demand for eco-conscious investments but also help mitigate risks associated with environmental challenges, positioning fintech firms to attract a new generation of investors.
Moreover, fintech innovations are enhancing accessibility and transparency in the green finance sector, giving investors a clearer picture of the sustainability impact of their investments. This innovation, according to Nouri, is driving the UAE's growth as a regional leader in sustainable finance.
'With fintech driving innovation, accessibility, and transparency in green finance, the UAE is well-positioned to become a regional leader in sustainable investments and climate-conscious financial solutions. By embedding ESG into their core strategies, companies can enhance their reputation, cut costs, unlock new revenue, and future-proof their operations,' she explains.
For fintech firms, embracing ESG not only opens the door to new revenue streams, but it also offers a way to mitigate risks and future-proof their operations in an uncertain, rapidly changing world.
'ESG-aligned companies are increasingly favored by institutional investors and can boost stakeholder trust,' Nouri adds, underscoring the long-term benefits of sustainability for businesses that integrate it into their core values.
A Bright Future Ahead
The UAE-based fintech firms are steadily gaining traction on the global stage, thanks to a combination of strong government support and progressive regulatory frameworks that emphasise sustainability and digital innovation. Nouri highlights this momentum, stating: 'The UAE is quickly becoming a hub for fintech in the MENA region, attracting investment and talent while leveraging its strategic location to bridge markets between East and West.'
The country's unique position enables local firms to tap into a dynamic ecosystem where east meets west, propelling them to greater prominence. However, Nouri emphasises that to compete with established global players, the UAE-based fintech firms must scale their solutions, enhance cross-border partnerships, and continue focusing on niche sectors like green finance and digital payments.
'It is a growth market that is finding its footing in the region,' she adds, noting that while the foundation is strong, sustained innovation and growth will be key to achieving a global impact.