Sustainable finance: Performing with a sense of responsibility
Abu Dhabi's Securities Exchange is developing environmental, social and governance guidelines for locally-listed companies
Sustainable finance is growing both in terms of its significance and the amount of capital deployed to it. The 17 Sustainable Development Goals (SDGs) of the 2030 United Nations Agenda for Sustainable Development aim to mobilise efforts towards equitable economic growth, social inclusion and environmental protection, all interconnected and crucial for the well-being of individuals and societies.
ADX is one of the signatories of the Abu Dhabi Sustainable Finance Declaration and a member of the United Nations Sustainable Stock Exchange Initiative (SSE). In addition, ADX is also an active member of a UAE working group that was recently formed to advance sustainable practices and investments.
The group comprises government agencies, financial regulatory authorities and stock exchanges working to set up frameworks designed to facilitate sustainable investment in the UAE.
A direct and concrete result of this collaboration is the UAE Sustainable Finance Principles (SFP), which were revealed last week at the 2nd Abu Dhabi Sustainable Finance Forum earlier this month. The forum is part of Abu Dhabi Sustainability Week and highlights the progress being made on Abu Dhabi’s Sustainable Finance Agenda.
The principles are designed to support the implementation of sustainable priorities and facilitate the country’s transition to a more sustainable economy.
As one of the signatories of the SFP initiative, ADX’s main objective is to advance the UN’s SDGs through sustainable finance, which will require the increased use of new financial instruments and policies that will help to develop sustainable investment portfolios, catering the needs of local and international investors. SFP will encourage building up investment opportunities and increasing the quality and depth of sustainable investments in the UAE and the wider region.
The principles will play an instrumental role in fuelling the UAE finance sector’s sustainable transition.
Alongside ADX’s role in the development of the new framework, we have announced the launch of our first annual sustainability report which will be issued during the first half of 2020. Moreover, ADX created (ESG) disclosure guidelines in July 2019. Our objective is to encourage the UAE’s financial firms, debt issuers and corporates to develop strategies to incorporate ESG considerations in their business activities, decision-making, risk frameworks and in the context of exploring new investment opportunities. ADX’s aim is also to stimulate demand for green financial assets by further developing an ESG guideline for its listed companies.
SFP will provide investors with a sustainable trading environment and contribute to asserting transparency through clearly-defined sustainable objectives. It represents the first stage of a phased approach adopted by the UAE’s finance authorities, which will first invite organisations to apply the principles on a voluntary basis and provide feedback to the authorities.
Based on these preliminary implementation phases and feedback received ADX will consider the adoption of additional guidelines and policies tailored to different economic sectors. And, at a later stage, these policies may be supplemented by a sustainable finance taxonomy tailored to the UAE regulations.
The initiative confirms our commitment to drive sustainability in financial markets. Our objective is to encourage listed companies to follow our example and adopt societal sustainability practices in order to enforce their sustainability standards.
Throughout the development and implementation of SFP we have a clear road map ahead of us. First, and with backing from other entities, ADX will set standards for Special Purpose Vehicles (SPV) specifically dedicated to financing sustainable projects like green bonds. As an example, the Department of Energy (DoE) is working collaboratively with Abu Dhabi Global Market (ADGM) and ADX to establish a policy and regulatory framework that will encourage and facilitate the issuance of green bonds in Abu Dhabi. Green bonds bring opportunities to harness the power of these new capital sources but ask for customisation given the different resilience challenge and regulatory requirements. SFP will provide ADX with the opportunity to create a sustainable investment ecosystem in the organisation that will encourage sustainable financial product innovation.
With the creation and issuance of a new range of products and services, ADX aims to develop the Exchange as a vibrant sustainable investment hub that supports capital formation, raising and deployment to achieve positive economic, social and environmental objectives.
Khalifa Salem Al Mansouri is the chief executive of ADX
Updated: January 21, 2020 12:03 PM