The Abu Dhabi Global Market (ADGM) has taken a significant stride towards becoming a leading sustainable finance hub by implementing its comprehensive Sustainable Finance Regulatory Framework in July 2023, less than 8 months after the initial consultation was issued for comments.
These regulations encompass rules for sustainability-oriented investment funds, managed portfolios, bonds, and stringent requirements for Environmental, Social, and Governance (ESG) disclosures by ADGM companies. This bold move reinforces ADGM's position as a natural hub for sustainable finance activities, supporting the UAE's transition to net-zero greenhouse gas emissions.
Key features of ADGM's Sustainable Finance Regulatory Framework include:
Green and Climate Transition Funds: ADGM now has a framework to channel capital towards financing the transition to net-zero emissions. Recognising products and services that meet robust minimum standards, ADGM will confer a designation, allowing the use of the ADGM "designation mark" in marketing materials and communications. This mark provides investors with confidence in the products and services supporting the green transition.
Stakeholder Engagement: ADGM places a strong emphasis on stakeholder engagement, reflected in a feedback statement that addresses key issues raised during the consultation period. The overwhelming support from industry stakeholders for ADGM's proposals reaffirms its commitment to developing one of the most comprehensive sustainable finance frameworks in the region.
Post-Implementation Review: ADGM plans to conduct a post-implementation review in 2025 to refine its regulatory framework further. Input from stakeholders will continue to shape ADGM's ecosystem into a world-class hub for sustainable finance, aligning with the UAE's net-zero strategic initiative.
Knowledge Acceleration Initiatives: ADGM's efforts are bolstered by knowledge acceleration initiatives like the School of Sustainable Finance and the Research Centre at the ADGM Academy, reinforcing its commitment to sustainable finance education and research.
These regulatory actions align with ADGM's focus on sustainability in the year the UAE hosts COP28. The framework supports the mobilisation of capital for the transition to net-zero emissions, not only in the UAE but also in emerging markets and globally.
These are building blocks, but a lot more can and must be done from a regulatory perspective to bring about greater change and impact for ESG moving forward. The ADGM framework can very much act as a guiding light for other jurisdictions likely considering similar issues.