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Mubadala takes ‘strategic stake’ in Singapore’s AirCarbon Exchange

Mubadala Investment Company has acquired a “strategic stake” in Singapore-based AirCarbon Exchange (ACX), which is setting up a carbon trading exchange and carbon clearing house in Abu Dhabi.

The Abu Dhabi fund said on Thursday that the transaction with ACX had been successfully completed. Financial details were not disclosed.

In March, the Abu Dhabi Global Market teamed up with ACX to create the “world’s first fully regulated” carbon trading exchange in the emirate.

ADGM will regulate carbon credits and offsets as emission instruments, and issue licences for exchanges to operate both spot and derivative markets.

Carbon credits, also known as carbon offsets, are permits that allow companies to emit a certain amount of carbon dioxide or other greenhouse gases. The market for the financial instrument could be worth more than $50 billion by 2030, according to consultancy firm McKinsey.

“The UAE continues to be a leader in leveraging the path to a lower carbon economy to safeguard the environment, drive down emissions and create lasting economic opportunities,” Ahmed Al Zaabi, chairman of ADGM, said on Thursday.

“The investment by Mubadala in ACX is a great testament to the commitment towards climate action, which will enable investors and businesses to voluntarily purchase verified emissions reductions in the form of carbon credits within the progressive ecosystem of ADGM.”

ACX also plans to set up a regulated recognised clearing house — which will be known as ACX Clearing Corporation — for clearing and settling commodities and commodity derivatives.

Last month, the Public Investment Fund, Saudi Arabia’s sovereign wealth fund, said it auctioned 1.4 million tonnes of carbon credits at the Middle East’s first carbon offset auction.

Top crude exporter Saudi Aramco, Olayan Financing Company and Saudi Arabian Mining Company bought the largest number of credits in the auction.

While governments globally are pursuing carbon neutral goals, significant investment is required to achieve those targets. About $50 trillion in incremental investments is required by 2050 to achieve net-zero goals and cut greenhouse emissions by about 51 billion tonnes a year, according to officials.

Last year, the International Monetary Fund also urged the $50 trillion global investment funds industry to step up efforts to finance the transition to a greener economy and help mitigate the effects of climate change.

In 2021, the UAE, the Arab world’s second-biggest economy, became the first country in the Middle East to set a net-zero target, which it seeks to achieve by 2050. It plans to invest $160 billion in clean and renewable energy sources over the next three decades.

Through the initiative, the UAE aims to attract inflows from global capital markets as investors increasingly seek environmental, social, and governance-compliant products.

The country has also urged public and private companies to adopt carbon neutral measures. In January, ADGM announced that it had achieved carbon-neutrality status by offsetting its carbon emissions in 2021, becoming the “world’s first international financial centre to become carbon neutral”.

“The UAE is spearheading the transformation of the financial ecosystem, and this investment is a testament to our role in contributing to it,” said Badr Al Olama, executive director of UAE Clusters at Mubadala Investment Company.

“By investing in Air Carbon Exchange and pioneering the future of environmental commodities, we demonstrate our ability to combine impact with investments that support both the decarbonisation and diversification of the UAE economy.”

Updated: November 17, 2022, 8:13 AM

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