ADGM publishes Consultation Paper on comprehensive sustainable finance regulatory framework

Published on November 11, 2022

Abu Dhabi Global Market (ADGM) today announced the publication of a Consultation Paper on a proposed comprehensive Sustainable Finance Regulatory Framework, covering rules on sustainability-orientated investment funds, managed portfolios and bonds as well as a framework on environmental disclosures by ADGM companies.

The measures contained in the paper aim to enable an accelerated growth of a sustainable finance ecosystem in the jurisdiction and support the UAE’s transition to net-zero greenhouse gas emissions.

This proposed comprehensive regulatory framework intends to build upon ADGM’s existing efforts to foster a vibrant and thriving sustainable finance hub within its jurisdiction, stemming from ADGM’s beliefs in its development as a hub for sustainable finance that can play a critical part in supporting the allocation of capital to economic activities that help the achievement of net-zero emissions targets, both locally and globally.

To facilitate this, the proposed framework will establish minimum standards for a wide range of sustainability-orientated investment products and services, which are set to help nurture transparency and investor confidence in the green credentials of those products and services, advancing ADGM’s drive to become a leading centre of sustainable finance.

The proposals encompass:
• The region’s first regulatory framework for green investment funds to channel capital towards environmentally sustainable activities.

• An innovative regulatory framework for climate transition investment funds to channel capital to assets and entities that are on a path to reducing their greenhouse gas emissions.

• A regulatory framework for green and climate transition discretionary portfolio management services.

• A regulatory framework for green bonds and sustainability-linked bonds offered in ADGM.

• Building upon ADGM’s existing disclosure requirements to create region’s most comprehensive environmental, social and governance (ESG) disclosures framework, to now cover disclosure by listed companies, regulated financial services firms and large private commercial entities.

In addition to proposing a framework for companies to undertake ESG disclosures, ADGM is leading by example by becoming the first international financial centre in the world to be carbon-neutral. Another example is also in the process of facilitating through its regulatory framework the establishment of the world’s first regulated voluntary carbon exchange and clearing house, where carbon offsets (Environmental Instruments), while traded and settled as Spot Commodities, are treated as regulated Financial Instruments within ADGM.

ADGM will facilitate the growth of an ecosystem of environmentally conscious companies that demonstrate sustainability as a core facet of their business models, such as by disclosing their ESG data and taking measures to become carbon-neutral.

Ahmed Jasim Al Zaabi, Chairman of ADGM, 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 COP 28 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.”

This Consultation Paper highlights the significant efforts being made by ADGM to advance the sustainability agenda through its regulatory framework to provide transparency in order protect investors’ interests. These changes will be essential components of our regulatory framework to help advance the transition to net-zero.

Source: WAM, Amjad Saleh/ Khoder Nashar