How does the UAE address ESG and Sustainable Development pain points?

How does the UAE address ESG and Sustainable Development pain points?

Written by – Hendrik van der Ham, Founder and Head of Operations – Bridges2000 b.v.

The United Arab Emirates has gained prominence as a global leader in advancing the cause of sustainability and responsible investing. This is largely because of the strong commitment to environmental, social, and governance (ESG) principles displayed by the UAE’s public and private sectors. In keeping with the global agenda, the country has increasingly sought to attract investors and businesses that share the commitment to ESG initiatives. With the UAE set to convene the 28th session of the Conference of the Parties (COP) 28 to the UNFCCC in the last quarter of 2023, sustainable development and green initiatives will drive all aspects of the economy.

The UAE was the first in the Middle East and North Africa (MENA) region to draft a unified national strategy for sustainable development, including the framework for incorporating ESG criteria into national policies. This strategy has been implemented across all levels of government, from federal ministries to local government bodies, as well as in numerous private-sector initiatives.

Some of the pain points faced worldwide that hinder sustainable development are unclear policies, absence of standardization, lack of government commitment and absence of achievable measurable targets. The UAE proactively addresses the issues by being part of global initiatives and clear, government-backed commitments, active monitoring and measurable standards.

UAE government ministries and agencies actively monitor the performance of local enterprises against ESG criteria. The Federal Competitiveness and Statistics Authority’s Corporate Governance Index, which rates companies on the basis of the strength of their sustainability and governance policies, primarily drives the oversight. Companies that underperform on the Corporate Governance Index may not be part of government-sponsored programs and initiatives. Also, public joint stock companies listed on the Abu Dhabi Securities Exchange (ADX) or the Dubai Financial Market (DFM) in the UAE (Listed PJSCs) are required to publish a sustainability report on long-term impacts of company strategies on environment, society, the economy and governance.

UAE businesses are also subject to a wide range of regulations and standards concerning sustainability. These range from the restriction of energy consumption and greenhouse gas emissions, to the enforcement of safety and labor standards and corporate social responsibility. The UAE has also established several private-sector initiatives to promote ESG investing, such as The Emirates Sustainable Investment Forum.

These efforts have seen the UAE become a leading force in encouraging ESG integration across the region. The UAE is also leading the charge in developing green bonds to finance sustainable development, having achieved the fastest growing green bond market in the world in 2020.

Given the UAE’s success in advancing ESG principles, the country is well-positioned to maintain its position as a regional leader in sustainability. That inturn is likely to further drive investment in the country’s sustainable development and ESG initiatives, contributing to its wider economic growth.

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