06 Nov 2023

Sustainable Finance Developments in the UAE in the lead up to COP28

Authored by: Catriona McDevitt

In light of the rapidly approaching COP28 which is being held in Dubai at the end of November and further to our previous articles discussing sustainable finance in the UAE (https://www.hadefpartners.com/News/589/Road-to-COP28--The-Growth-of-Sustainable-Finance-in-the-UAE and https://www.hadefpartners.com/News/592/Road-to-COP28--Latest-Development-in-UAE-Sustainable-Finance), we summarise some of the key developments regarding sustainable finance in the UAE during 2023.


In July 2023, the Abu Dhabi Global Market (ADGM) implemented its sustainable finance regulatory framework, comprising the region’s most comprehensive environmental, social and governance (ESG) requirements for ADGM companies. It provides a regulatory framework for funds, discretionary managed portfolios, bonds and sukuks. The regulatory framework came into effect in July with immediate effect, highlighting the importance of advancing the green agenda both in Abu Dhabi and in the UAE and helping accelerate the transition of the UAE to net zero greenhouse gas emissions by enabling capital to be channelled towards financing such transition. The implementation of the new framework also cements ADGM’s position as a leading sustainable financial hub and a natural hub for sustainable finance activities.

The framework sets out mandatory ESG disclosures for ADGM companies that meet specific conditions, including (without limitation) with reference to the amount of annual turnover and amount of assets under management during a financial year. Certain entities are exempt from the ESG disclosures requirements, including (i) foundations, (ii) limited liability partnerships and (iii) general and limited partnerships. Any ADGM entity that doesn’t meet the specified conditions may still choose to comply with the requirements on a voluntary basis - it will be interesting to see how many do.

The ADGM will confer a designation in recognition of those products and services that are aiding the transition and that purport to meet its minimum standards, as well as permitting ADGM’s “designation mark” to be used in marketing materials and client communications. The intention is that such designation mark will provide investors with confidence that such products and services meet ADGM’s minimum standards and hence encourage investors to direct capital towards the green transition.

In addition to the new sustainable finance regulatory framework, there are various ongoing initiatives of the ADGM such as the Abu Dhabi Sustainable Finance Declaration, which currently comprises over 100 signatures and the School of Sustainable Finance at the ADGM Academy. There were also amendments to the capital markets regulatory framework last year which introduced an “environmental instrument” as a class of financial instrument, allowing carbon offsets to come under its regulatory framework and facilitating the establishment of AirCarbon Exchange, the worlds’ first regulatory voluntary carbon exchange platform, to be established in the ADGM.

The combination of these strategic objectives together with the new regulatory framework for sustainable finance, the comprehensive ESG disclosure requirements and regulation of carbon offsets show that the ADGM is at the forefront of advancing the green and sustainable finance agenda of the UAE and establishing the ADGM as one of the region’s leading hubs for sustainable finance.


The Dubai Sustainable Finance Working Group (DSFWG) was established in July 2019 in order to facilitate Dubai’s transition to the most sustainable financial hub in the Middle East, Africa and South Asia (MEASA) region. The DSFWG comprises more than 30 member institutions across the public and private sectors and focuses its efforts on four strategic pillars, namely (i) Responsible Business Operations, (ii) Responsible investing, (iii) Growing Sustainable Finance and (iv) Gender diversity and inclusion. In March 2023, a Sustainability-Linked Loans Guide was published by various members of, and as part of, the DSFWG, which provides an introduction to sustainability-linked loans and their growing importance in the MENA region. As the guide notes, sustainability - linked loans, in which the commercial terms of a borrower’s loan are linked to the achievement of specific sustainability goals, are increasingly being used to fund projects that contribute to a more sustainable future. The goal of the guide is to provide a general overview of the key concepts of sustainability financing as well as to increase the alignment of the MENA market with global best practices in the sustainability lending market.


In 2021, the Dubai Financial Services Authority (DFSA)  launched its Sustainable Finance Roadmap 2021-2024, covering its supervisory remit and setting out how the DFSA intends to respond to the current and potential impact of ESG issues on the financial sector.

The DFSA has set out its areas of focus in its DFSA Business Plan 2023/2024, which include the incorporation of ESG considerations in corporate governance and risk management; defining the desired approach to corporate ESG disclosures and reporting; and creating a potential UAE ESG taxonomy.

A focus of the DFSA is also on ESG-related capital markets, (both bond and sukuk markets), in order to ensure that its guidance is transparent and discourages Greenwashing, in line with continually evolving international standards.

A number of DFSA Publications on ESG-related topics have been released in 2023, including in relation to Greenwashing, which appears to be synonymous with discussions globally around sustainable finance and which presents a significant obstacle to tackling climate change.

Greenwashing is essentially misleading the public that a company or entity is doing more to protect the environment than it actually is and in doing so, promotes false solutions to the climate crisis that distract from- and delay - concrete and credible action. Greenwashing is a priority issue for most regulators globally, given the demand for sustainable finance and sustainable linked products.

The DFSA is working with the UAE Government, UAE regulators and the wider stakeholder community to create a comprehensive and pragmatic regulatory framework that highlights the UAE’s approach to sustainable finance and positions the UAE at the forefront of sustainable finance discussions both in the region and globally.

UAE Sustainable Finance Working Group

In September 2023, members of the UAE Sustainable Finance Working Group (SFWG), launched a consultation on proposed Principles for Sustainability - Related Disclosures for Reporting Entities. The SFWG  comprises a number of members including ministries (Ministry of Finance, Ministry of Economy, Ministry of Climate Change and Environment, the Office of the UAE’s Special Envoy for Climate Change), financial services regulators (the UAE Central Bank, the Securities and Commodities Authority, the Dubai Financial Services Authority of the Dubai International Financial Centre and the Financial Services Regulatory Authority of the ADGM) and UAE exchanges (Abu Dhabi Securities Exchange, Dubai Financial Market and Nasdaq Dubai).

The consultation sets our four Principles (the Disclosure Principles) that the signatories will treat as minimum guidance for their respective disclosure frameworks in relation to sustainability - related matters. The objective of the Disclosure Principles is to help prepare relevant entities in the UAE to achieve high quality and relevant ESG disclosures, which will promote transparency in sustainability - related matters in order to enable investors to make informed decisions about entities and products.

Following - and subject to the outcome of - public consultation on the Disclosure Principles, the SFWG aims to issue the Disclosure Principles in November 2023.

The SFWG have considered a variety of reporting initiatives and frameworks which are currently being used in the UAE, and include industry based, regionally or globally recognised frameworks and standards, operating on a voluntary basis, including those issued by the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), the International Integrated Reporting Council (IIRC), the Task Force on Climate related Financial Disclosures (TCFD), the Climate Disclosure Standards Board (CDSB) and the International Sustainability Standards Board (ISSB). There is also a recognition of an international movement towards greater uniformity, for example the issuance of the ISSB disclosure standards,which may create a global baseline framework in the future.

The SFWG notes that while the Disclosure Principles are endorsed by the SFWG as a whole, it will be up to each Authority to determine how best to incorporate the Disclosure Principles in their respective regulatory frameworks. This may involve consideration of a number of factors including, without limitation, (i) which reporting entities the requirements apply to, (ii) whether to use voluntary, ‘comply or explain’ or mandatory processes for the reporting entities and (iii) the timeline to implement disclosure requirements in the particular jurisdiction.

The Disclosure Principles are set out below:

  1. Reporting Entities should put in place adequate policies, procedures and systems allowing them to report on sustainability - related matters.
  2. In disclosing information about their sustainability - related risks and opportunities, Reporting Entities should consider including a number of factors such as (i) transparency, (ii) materiality, (iii) relevance, (iv) comprehensiveness, (v) consistence and comparability, (vi) clarity, (vii) frequency and timeliness, (viii) stakeholder engagement, (ix) verification and assurance, (x) integration and (xi) continual review and improvement.
  3. Sustainability - related disclosures should reflect the way in which an entity operates, including in the areas of governance strategy and risk management and incorporate relevant metrics and targets. While additional specific disclosure requirements may apply depending on the type of Reporting Entity, the following minimum disclosures would be expected from the Reporting Entities – (i) governance, (ii) strategy (iii) risk management and (iv) metrics and targets.
  4. To improve transparency and quality of sustainability - related, product level disclosures, market participants should consider the following elements when dealing and offering sustainability - related practises - (i) naming, (ii) labelling and classification, (iii) objectives disclosure, (iv) strategies disclosure, (v) risk disclosure, (vi) marketing materials and (vii) monitoring and reporting.

It is clear that the UAE, both on a federal level and within the financial freezones of the DIFC and the ADGM, is striving towards developing and implementing a number of principles and frameworks to be used in respect of ESG requirements and sustainable finance and clearly is at the forefront of the region in doing so in order to establish itself as a regional leader in sustainable finance. Although significant progress has been made across a number of areas, there is still a long way to go, both regionally and internationally, in order to prevent Greenwashing and ensure that the regulatory frameworks and requirements surrounding sustainable finance are pragmatic, transparent and consistent globally.

It has been an exciting year of developments in this regard and we look forward to watching further enhancements in this field.

For any queries, please contact the Banking and Finance team.


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