ADGM and other UAE regulatory authorities create a sustainable project taxonomy

The term "sustainable finance" refers to the practise of factoring in ESG (environmental, social, and governance) criteria when determining a company's financial direction.

Mercedes Vela Monserrate, head of sustainable finance at ADGM said“We are closely aligned to UAE initiatives, supporting Abu Dhabi, the UAE and global stakeholders in achieving Sustainable Development Goals and climate change objectives of the Paris Agreement.  With an internationally recognised 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 placed to develop a sustainable finance ecosystem catering to the needs of local and international investors.”

Monserrate stated that ADGM’s efforts have resulted in concerted collaboration by both the public and private stakeholders of the UAE to channel attention, resources and conversation on sustainable financing.

ADGM has published the United Arab Emirates' first set of Guiding Principles on Sustainable Finance, begun the world's first social bond project and the United Arab Emirates' first sustainable Real Estate Investment Trust, adopted a series of internal sustainable principles to improve ADGM's ESG practises, implemented the Gender Equality Initiative, and released the Sustainable Finance Platform so that investors and stakeholders can get timely access to critical information. Monserrate mentioned that ADGM is developing a taxonomy for environmentally friendly projects with other regulatory bodies in the United Arab Emirates.

“ADGM’s recent focus on developing standards for green-labeled financial products and services aims to help investors identify investments with a sustainability objective and ensure that financial institutions incorporate climate change risk into their risk management,” Monserrate opined. ADGM is the first ‘carbon neutral’ international financial center in the world which is also partnering with AirCarbon Exchange to create the world’s first fully-regulated carbon trading exchange and clearing house. “While voluntary carbon markets are only one component of the global climate finance structure, they have demonstrated considerable growth in the last few years, having surged from $146 million just four years ago to more than $1 billion this year. In this context, the creation of a regional voluntary carbon market in combination with the necessary regulatory framework would present yet another opportunity for the UAE financial sector,” added Monserrate.

 To support sustainability initiatives and innovations, ING is one of the banks that ADGM collaborates with on 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 climate impact of our operations and are sourcing 100 percent renewable electricity for the buildings we have management control over. We integrate sustainability in our procurement processes and have been compensating for our remaining carbon emissions since 2007,” stated Sebastian Frederiks, head of wholesale banking Middle East, ING Bank.