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05 Dec 2023, 09:32 am

The UAE Sustainable Finance Working Group Issues Third Public Statement

  • The third Public Statement issued during COP28 emphasises three pivotal objectives of the UAE’s SFWG, namely, enhancing sustainability-focused corporate governance, bolstering transparency in sustainability reporting, and formulating a sustainable finance taxonomy specific to the UAE.

Members of the UAE Sustainable Finance Working Group (SFWG) issued their third public statement describing the significant milestones achieved in the drive towards supporting the UAE's sustainable finance agenda.

The SFWG was established in 2019 to support the development of sustainable finance in the UAE and to facilitate regulatory cooperation amongst the UAE authorities on practices and frameworks that can enable the finance sector to deliver on this goal. Its members include ministries (the Ministry of Finance, Ministry of Economy, Ministry of Climate Change and Environment, the Office of the UAE's Special Envoy for Climate Change), financial regulators (Central Bank of the UAE, Securities and Commodities Authority, Financial Services Regulatory Authority of Abu Dhabi Global Market, Dubai Financial Services Authority), and UAE exchanges (Abu Dhabi Securities Exchange, Dubai Financial Market, and Nasdaq Dubai).

This third public statement builds upon the foundational releases of 2021 and 2022, outlining three key objectives: enhancing sustainability-focused corporate governance and climate financial risk management (Workstream One); bolstering transparency through sustainability reporting (Workstream Two); and contributing to formulating a sustainable finance taxonomy in the UAE (Workstream Three).

In 2023, the SFWG made substantial progress across all three Workstreams:

  • Workstream One released the Principles for the Effective Management of Climate-related Financial Risks urging financial firms to integrate climate-related financial risks into their business strategy and risk management. The Principles cover aspects such as management responsibilities, monitoring, reporting, and stress testing.
  • Workstream Two published the Principles for Sustainability-Related Disclosures for Reporting Entities aiming to encourage transparency and reporting quality on environmental, social, and governance (ESG) matters. The Principles highlight the importance of integrating sustainability into investment decisions and cover aspects such as internal reporting systems, transparency, materiality, verification, and assurance of sustainability reports.
  • Workstream Three published a summary of Design Principles to guide and underpin the UAE Taxonomy's development aiming to create a common sustainability language across the UAE, advocate a qualitative approach to evaluate climate change efforts and use of a traffic-light classification system. These principles recommend minimum safeguards to encourage adherence to the Taxonomy and consider aspects such as social issues, and competition. The SFWG aims to integrate the Workstream’s outputs with existing UAE economic classification systems and sustainability initiatives to enhance the Taxonomy’s usability, interoperability, credibility, and effectiveness in promoting a green economy.

The SFWG’s roadmap of initiatives aligns seamlessly with the UAE's established commitments, including the UAE Green Agenda 2015-2030, the National Climate Change Plan of the UAE 2017-2050, the UAE Net Zero by 2050 Strategic Initiative, and the UAE's hosting of COP28. Going forward the SFWG will focus on a gradual and coordinated implementation strategy to support the UAE's transition to net zero emissions.

His Excellency Khaled Mohamed Balama, Governor of the Central Bank of the UAE, said: “The progress by the Sustainable Finance Working Group this year highlights the importance of this cooperation among ministries, regulators and other authorities in advancing the sustainability agenda of the UAE. It is vital that we continue to coordinate policy responses to ensure the gradual, orderly and measured transition to net zero in the UAE. The Central Bank remains dedicated to supporting the work of the Sustainable Finance Working Group to collectively achieve our commons goal of promoting the resilience of the nation’s economy.”

His Excellency Dr Sultan Al Jaber, UAE Minister of Industry and Advanced Technology, Chairman of Masdar, and COP28 President-Designate said, “The UAE Sustainable Finance Working Group plays a crucial role in supporting the UAE’s sustainable finance agenda. The Third Public Statement is proof of the joint efforts its members have made in creating a robust framework for governance, disclosures and principles to further develop the UAE Sustainable Finance Taxonomy. These are key pillars to support the sustainability-related regulations which will accelerate the growth of a sustainable finance ecosystem in the UAE. This progress reinforces the UAE’s position as a leading sustainable finance hub and ambassador of the COP28 finance agenda as we seek to advance on the Net Zero 2050 ambitions further locally, regionally and globally.” 

His Excellency Ahmed Jasim Al Zaabi, Member of the Abu Dhabi Executive Council and Chairman of the Abu Dhabi Department of Development (ADDED) and Abu Dhabi Global Market (ADGM) said, "SFWG's 2023 achievements demonstrate the UAE authorities' strong and collective commitment to sustainable finance and environmental-related progress. With a focus on corporate governance, transparent disclosure, and the progressive design of the UAE sustainable finance taxonomy, SFWG's work establishes a foundation for UAE's strategic transition planning in the financial sector. It reaffirms the nation's global dedication to sustainability in the ‘Year of Sustainability’ and beyond, coinciding with its role as the host of COP28."

His Excellency Younis Haji Al Khoori, Undersecretary of MoF said, “The UAE Ministry of Finance, through the UAE Sustainable Finance Working Group, strives to accelerate local reforms and position the UAE as a frontrunner in Sustainable Finance globally. The Ministry of Finance reiterates its commitment to ensuring a systematic and well-planned transition within the UAE. We emphasize the importance of the imperative placement of sustainability objectives at the centre of public policy, guiding intergovernmental collaboration as we endeavour to advance sustainable finance in the UAE and achieve our net-zero ambitions.”

Her Excellency Dr Maryam Al Suwaidi, CEO of the Securities and Commodities Authority said: “The UAE Authorities are proud to be making significant progress on adopting the Principles related to sustainability, as we move forward with our plans to provide exemplary guidance to the capital market participants in the UAE to enable them to play a bigger role in the wider national sustainability agenda. Adequate transparency in relation to the actual or potential impact of climate change and other environmental, social and governance factors is essential in informing investment decisions, fostering efficient functioning of capital markets and promoting financial stability, while driving the values of sustainability and social responsibility.  These Principles are aligned with the best practices and standards which are now being adopted globally.”

Ian Johnston, Chief Executive of the Dubai Financial Services Authority (DFSA), said:At the DFSA, we believe that sustainable finance is not just a commitment on our agenda; it has become part of our regulatory DNA. We are, together with other UAE regulators, architects of a financial landscape where ESG considerations are integral. By shaping frameworks like the UAE Principles on climate risk and disclosures, we are not only meeting international standards, but ensuring that Dubai’s financial hub is a beacon of sustainable practices, fostering resilience and innovation.”

For more details, click here to read the full document of ‘2023 Public Statement on Sustainable Finance in the UAE’.

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