As the United Arab Emirates works towards achieving net zero, one financial centre proposes a supporting sustainable finance regulatory framework.
Financial centre Abu Dhabi Global Market (ADGM) has published a consultation paper on a proposed ‘Sustainable Finance Regulatory Framework’. The paper aims to outline measures which enable the growth of a sustainable finance ecosystem in the UAE capital. It also plans to support the country in reaching net zero greenhouse gas emissions.
The framework covers rules on sustainability-orientated investment funds, managed portfolios and bonds. The paper also includes a framework for environmental disclosures by ADGM companies.
This proposal intends to grow a vibrant and thriving sustainable finance hub within Abu Dhabi. ADGM explained that developing its sustainable finance hub can play a role in supporting the allocation of capital to economic activities that help the achievement of net zero emissions targets, both locally and globally.
Abu Dhabi Global Market’s proposals
A number of regulatory frameworks have been proposed as ADGM looks to cover a range of areas:
- Framework for ‘green’ investment funds to direct capital towards environmentally sustainable activities. This includes a framework which would see more climate transition investment funds direct capital to entities that are on the way to reducing greenhouse gas emissions.
- Regulation for green and climate portfolio management services
- Regulation for green bonds and sustainability-linked bonds offered in the ADGM financial centre
- To build on ADGM’s current disclosure requirements and create the most comprehensive ESG disclosure framework in the country
- ADGM is to begin covering disclosure by listed companies, regulated financial services firms and large private commercial entities
If approved, these frameworks are to advance ADGM’s sustainability agenda. Such regulations exist to advance the transition to net zero. Providing transparency to protect investors’ interests is also another benefit of such regulations.
Establishing a leading financial centre
Ahmed Jasim Al Zaabi, chairman of ADGM, explained the importance of the proposals. He said: “Sustainable finance is a strategic priority and a focus sector for ADGM as we seek to contribute to advancing the UAE’s net zero greenhouse gas emissions target and prepare for the UAE to host COP28 in 2023.
“With considerable effort and resources, ADGM is dedicated to fostering a sustainable finance ecosystem. We are already seeing the fruits of this, evidenced by sustainability-focused products and services establishing here and the approaching launch of the world’s first regulated voluntary carbon exchange and clearing house. This proposed regulatory framework will enhance our position as the leading sustainable finance hub in the Middle East, Africa, and South Asia (MEASA) region.
“With an internationally recognised regulatory framework and proximity to a number of the world’s largest sovereign wealth funds, institutional investors, and private wealth, ADGM is well-positioned to host financial products and services that will make a positive impact on the UAE’s (and global) efforts to achieve net zero.”
ADGM’s proposed framework looks to establish minimum standards for a wide range of sustainability-orientated investment products and services. The financial centre displayed a belief that setting standards will increase transparency and investor confidence in the green credentials of such products and services. The overarching aim appears to be to advance the goal of making the financial centre a leader in sustainable finance.
