Abu Dhabi Global Market introduces regulatory framework for sustainable finance

Image: ADGM

Abu Dhabi Global Market (ADGM) has implemented its sustainable finance regulatory framework with immediate effect.

The framework covers rules on sustainability-orientated investment funds, managed portfolios and bonds as well as requirements for environmental, social and governance (ESG) disclosures by ADGM companies.

The measures will speed up the growth of a sustainable finance ecosystem in the jurisdiction and support the UAE’s transition to net zero greenhouse gas emissions.

In order to recognise products and services that are aiding the transition to net zero, ADGM will confer a designation on those that purport to meet its robust minimum standards.

It will also permit its ‘designation mark’ to be used in marketing materials and client communications, catalysing investors to channel capital towards the green transition.

A feedback statement has also been issued that reflects on the positive feedback received and addresses the key issues raised in response to the consultation paper and through associated stakeholder engagements.

The overwhelming support for its proposals from industry, including stakeholders who indicated their plans to launch products under the proposed framework, crystallised ADGM’s intention to proceed with one of the first and most comprehensive sustainable finance frameworks in the region.

The framework and its stakeholders are further supported by knowledge acceleration initiatives such as the School of Sustainable Finance and the Research Centre at the ADGM Academy.

Dr Sultan Al Jaber, President Designate of COP28 UAE, said, “I warmly welcome ADGM’s regulatory framework for sustainable finance. The lack of available, accessible, affordable finance is putting the world’s climate goals and sustainable development at risk and addressing this issue is one of the top priorities of the COP28 Presidency. To make transformational progress, we need to shift gears in mobilising private finance.

“ADGM endeavours in advancing such a crucial initiative and in establishing a global hub for sustainable finance are highly commendable. This initiative will play a vital role in mobilising capital for the transition to net zero not only in the UAE, but also in EMDEs, and will enable increased green transactions from local and global financial institutions.”

“I also welcome the ongoing work of the Sustainable Finance Working Group, chaired by ADGM and composed of UAE regulatory authorities, Federal Ministries and exchanges. These initiatives encompass joint efforts to advance frameworks for ESG disclosures, measures to require sustainability-focused corporate governance and the development of a UAE green taxonomy. Finance is the key to turn good intentions into real results. The Paris Climate Agreement set our collective ambition, and we need initiatives such as ADGM’s Sustainable Finance Regulatory Framework to help us keep 1.5C within reach.”

Ahmed Jasim Al Zaabi, chairman of Abu Dhabi Global Market, said, “We believe our regulatory framework for sustainable finance is the most comprehensive in the Middle East and South Asia region, and comparable in scope and content with the most comprehensive regulatory frameworks globally.

“Our requirements, particularly those which set minimum standards for sustainability-focused products and services, will help to channel capital into projects and activities that advance the country’s transition to net zero. We are grateful to market participants for their feedback, which reflects the excellent relationship between ADGM and its stakeholders within our sustainable finance ecosystem. Their engagement will continue to be essential as ADGM actively supports the UAE’s progress towards its goal of net zero by 2050 and the continuing development of Abu Dhabi’s green falcon economy.”

Framework supported by ongoing initiatives of ADGM

The new sustainable finance regulatory framework is complemented by several ongoing initiatives of ADGM such as the Abu Dhabi Sustainable Finance Declaration which has over 100 signatories, and the School of Sustainable Finance at the ADGM Academy.

ADGM FSRA’s regulatory amendment to the capital markets framework last year, introduced an environmental instrument as a class of financial instrument, allowing carbon offsets to come under its regulatory framework and AirCarbon Exchange, the world’s first regulated voluntary carbon exchange platform, to be established in the financial centre.