How ADGM is developing a sustainable finance industry in the UAE

Over the years, Abu Dhabi Global Market (ADGM), which celebrated its seventh anniversary this month, has implemented several sustainable finance initiatives to preserve the UAE’s economy and environment for future generations.

Sustainable finance refers to the process of incorporating environmental, social and governance (ESG) considerations into investment decisions in the financial sector.

Mercedes Vela Monserrate, Head of Sustainable Finance at ADGM, noted that the international finance hub aims to develop a vibrant sustainable finance center that supports capital accumulation and the creation and issuance of products to achieve positive economic, social and environmental goals to reach.

“We are closely associated with UAE initiatives and support Abu Dhabi, the UAE and global stakeholders in achieving the Sustainable Development Goals and climate change targets of the Paris Agreement. With an internationally recognized regulatory regime, direct application of common law and proximity to some of the world’s largest sovereign wealth funds, institutional investors and private wealth, ADGM is ideally positioned to develop a sustainable financial ecosystem that serves the needs of local and international investors. ”

Monserrate noted that ADGM, in line with national and international initiatives, has placed environmental and social objectives at the forefront of its own strategy.

Since 2019, initiatives such as the Sustainable Finance Agenda, the Sustainable Finance Working Group and the Abu Dhabi Sustainable Finance Declaration have been launched to develop a booming center for sustainable finance.

“The Abu Dhabi Declaration calls for cooperation and collective action to create a thriving sustainable finance industry not only in the UAE but across the region. In line with this agenda, ADGM continues to incorporate sustainability principles into its regulatory framework to be the first international financial center in the region to build an ESG framework.”

Monserrate said ADGM’s efforts have resulted in concerted collaboration from both the UAE’s public and private stakeholders to channel attention, resources and conversations on sustainable finance.

“To further our commitment to sustainable finance, ADGM will launch several new initiatives.”

In the past, ADGM published the first UAE Guiding Principles on Sustainable Finance, launched the Abu Dhabi Sustainable Finance Forum, the first Social Bond Project and the UAE’s first Sustainable Real Estate Investment Trust, adopted a set of internal Sustainable Principles to support the ADGMs enhance existing ESG practices, launched the Gender Equality Initiative and Sustainable Finance Platform for investors and stakeholders to have real-time access to essential sustainable finance data specific to the UAE and the wider region, reflecting international standards and customizable indicators contain.

Monserrate noted that ADGM is working with its peer regulators in the UAE to develop a taxonomy for sustainable projects.

“To support the adoption and growth of sustainable finance, ADGM is expanding its regulatory framework to include clear ESG and sustainable finance requirements in its regulatory framework.

ADGM’s recent focus on developing standards for green-labelled financial products and services aims to help investors identify investments with a sustainability objective and ensure financial institutions integrate climate change risk into their risk management.”

First “carbon neutral” financial center

ADGM is the world’s first “carbon neutral” international financial center. It is also working with AirCarbon Exchange to create the world’s first fully regulated carbon trading exchange and clearing house.

“Although voluntary carbon markets are just one component of the global climate finance structure, they have shown remarkable growth in recent years, going from $146 million four years ago to more than $1 billion this year. In this context, the creation of a voluntary regional carbon market combined with the necessary regulatory framework would represent another opportunity for the UAE’s financial sector.”

To support sustainability initiatives and innovation, ING is one of the banks that ADGM works with in three areas of sustainable finance, namely regulation, collaboration and capacity building.

“At ING, sustainability is at the heart of what we do. We monitor and manage the impact of our activities on the climate and use 100 percent renewable electricity for the buildings we control. We are integrating sustainability into our procurement processes and offsetting our remaining carbon emissions since 2007,” said Sebastian Frederiks, Head of Wholesale Banking Middle East, ING Bank.

“We can achieve the greatest impact with our funding. We are committed to aligning our loan portfolio to achieve the Paris Agreement’s 1.5 degree climate target or net zero by 2050. We call our strategy to achieve this goal the Terra Approach. It focuses on the nine highest-emitting sectors in our loan book: oil and gas, renewable and conventional energy, automotive, marine, aviation, steel, cement, residential mortgages and commercial real estate.”

Frederiks stressed that following the decision to host the UN Climate Change Conference COP 28 in the United Arab Emirates, there has been a “further acceleration” in client requests for ESG support.

ING supports ADGM and the UAE in achieving their sustainability and climate goals.

“In January 2019, ING was one of the first 25 signatories to the Abu Dhabi Sustainable Finance Declaration. Since then, ING and ADGM have continued to work very closely together on sustainable finance issues. ING can play a role by funding change, sharing our knowledge and offering our innovative solutions. We actively use all of this for our bank customers in the UAE. For example, we organize ESG awareness sessions for directors, we share risk and due diligence best practices, we support sustainability-related lending facilities and leverage our extensive ESG distribution network for green bond investors.”

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