Abu Dhabi Wealth Fund Mubadala Acquires 20% Stake in ACX

Abu Dhabi wealth fund Mubadala Investment Company has acquired a strategic stake in Singapore-based AirCarbon Exchange (ACX), which is establishing a carbon credits trading exchange and trading house in the emirate.

Mubadala, the $284 billion Abu Dhabi sovereign fund, will acquire at least a 20% stake in AirCarbon Exchange. The acquisition supports the plan of the oil-rich OPEC member to enable companies to trade and finance carbon credits.

Mubadala said that the deal with ACX has been successfully done but they didn’t disclose any financial details.

The executive director of UAE Clusters at Mubadala Badr Al Olama said that the UAE is leading the transformation of the financial ecosystem. This recent investment is a testament to its role in contributing to that change.

He further noted that:

“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…”

ACX uses blockchain technology to securitize carbon credits. It will soon begin its first carbon exchange operations in the United Arab Emirates.

Regulating Carbon Credits Trading in Abu Dhabi

Emissions trading schemes in carbon markets are tools to reduce greenhouse gas emissions. They place a cap or limit on the amount countries or firms can emit. If they exceed those limits, they can buy permits in the form of carbon credits from others.

Carbon credits are known as carbon offsets in the voluntary carbon markets. The market for these instruments can grow to over $50 billion by 2030, according to some estimates.

The UAE has been spending billions of dollars to increase oil and gas production. But the Arab’s 2nd largest economy also plans to invest about $165 billion in clean and renewable energy to reach net zero emissions by 2050. Doing so makes it the first nation in the Middle East to have a net zero pledge.

Abu Dhabi’s stake in ACX is part of UAE’s net zero strategies and efforts to offset its emissions. The move is also a preparation for hosting the next climate change summit COP28.

In February this year, ACX partnered with the Abu Dhabi Global Market (ADGM) to set up the first regulated carbon credits trading exchange in the capital. ACX also plans to set up a regulated recognized clearing house called ACX Clearing Corporation for clearing and settling commodities and their derivatives.

ADGM will regulate carbon credits and offsets as emission instruments in the country. It will also issue licenses for exchanges to operate both spot and derivative markets.

In January, ADGM revealed that it had achieved carbon-neutrality status by offsetting its carbon emissions in 2021. As such, it becomes the “world’s first international financial center to become carbon neutral”.

ADGM’s chairman Ahmed Al Zaabi remarked that:

“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.”

Financing the Green Transition in UAE

Governments around the world are pursuing net zero emissions goals. New initiatives have been announced at this year’s COP27 summit in Egypt that just concluded. And a lot of investments are necessary to achieve those net zero targets – about $50 trillion.

Also, the world needs to cut GHG emissions by about 51 billion tonnes each year to reach net zero by 2050.

The International Monetary Fund urges the investment industry to scale up efforts to finance the green transition and mitigate the climate crisis.

Saudi Arabia and other Gulf Arab states have been boosting their green credentials.

In October, Saudi Arabia’s sovereign wealth fund, the Public Investment Fund, had auctioned off 1.4 million tonnes of carbon credits. It’s the Middle East’s first carbon offset auction and the largest-ever in the world.

Oil giant Saudi Aramco, mining firm Ma’aden, and Olayan Financing Company bought the largest number of carbon credits.

And the investment of Mubadala in ACX is the most recent commitment to finance green transition in UAE. Through the initiative, Abu Dhabi aims to attract inflows from global capital markets through carbon credits as investors seek for more ESG-compliant investments.

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