Member News

Paris Agreement and Sustainable Development Goals (SDGs)

The UAE was an early ratifier of the Paris Agreement in 2016. It submitted its first Nationally Determined Contribution (NDC) to the UNFCCC in 2015, aiming to increase clean energy to 24% of the total energy mix by 2021. 

The UAE's second NDC, submitted in 2020, targets a 23.5% reduction in greenhouse gas emissions by 2030. Efforts to meet these goals include boosting clean energy reliance, improving energy efficiency, expanding carbon capture, conserving blue carbon ecosystems, promoting sustainable agriculture, and adopting environment-friendly waste management practices.

Federal Law No 12 of 2018 on Integrated Waste Management ensures proper waste disposal and imposes penalties on improper waste handling.

The UAE committed to the UN's Sustainable Development Goals (SDGs) in 2015, addressing issues such as access to clean energy, food security, quality education, healthcare, sustainable economic growth, and environmental protection. 

Vision 2021

Launched by His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vision 2021 outlines six major challenges for the UAE:

1. Cohesive society and preserved identity

2. Safe public and fair judiciary

3. Competitive knowledge economy

4. First-rate education system

5. World-class healthcare

6. Sustainable environment and infrastructure 

Vision 2040

The Dubai 2040 Urban Master Plan, launched in March 2021, envisions doubling green spaces and public parks, with nature reserves and rural natural areas constituting 60% of the emirate's total area. It also includes green corridors linking service areas, residential areas, and workplaces to promote sustainable mobility. 

UAE Green Agenda 2015-2030

Approved in January 2015, the UAE Green Agenda 2015-2030 includes five strategic objectives: 

1. Competitive Knowledge Economy

2. Social Development & Quality of Life

3. Sustainable Environment & Valued Natural Resources

4. Clean Energy & Climate Action

5. Green Life & Sustainable Use of Resources. 

The agenda promotes sustainable environmental practices, green manufacturing, alternative fuels, and green jobs. 

Importance of sustainability for businesses and incentives to green industries

The UAE's Green Growth Strategy promotes the global concept of a green economy. The strategy aims to make the UAE a hub for green products and technologies, diversify energy sources, and support long-term economic growth. The Dubai Green Fund, with AED 100 billion, supports clean and alternative energy sources with investments including the Mohammed Bin Rashid Al Maktoum Solar Park, Dubai International Airport, and Economic Zones World (JAFZA).

First Abu Dhabi Bank (FAB) committed USD 10 billion to environmentally and socially sound business activities by 2026, issuing its first Green Bond in March 2017. Green Bonds, guided by the Green Bond Principles (GBP), help finance sustainable projects, providing clear processes for issuers and investors.

In 2019, FAB also arranged the region's first SDG loan for Etihad's Eco-Residence in Masdar City. By March 2020, FAB allocated Green Bonds to nine UAE-based projects, including solar plants, green buildings, and district cooling. Internationally, FAB financed renewable energy projects in Morocco and a green building in France. FAB also issued a landmark HKD750 million five-year Green Bond and its first CHF-denominated Green Bond.

Globally, the green bond market is projected to reach USD 500 billion annually by 2021, indicating a growing shift towards renewable energy and sustainable projects. 

ESG and sustainability

The term ESG, which is Environmental, Social and Governance, is mainly used by the investment community to assess the performance of companies on key environmental, social, and governance factors that may affect financial performance. With responsible investment gaining momentum, there is a greater demand for ESG information from companies.

Most of the world’s largest institutional investors – including sovereign wealth funds, are increasingly allocating capital to companies that are well prepared to benefit from the transition to a green economy, as they wish to protect their portfolios against risks associated with ESG issues.

Just like credit rating agencies, ESG rating agencies have become popular of late, whereby such agencies evaluate publicly disclosed qualitative and quantitative non-financial data and transpose this information into ESG scores, ratings, and insights that are used by investors to inform their investment decisions.

The way a company handles its ESG issues, can affect its long-term performance and its valuation. In view of this, ESG due diligence has become common in merger and acquisition transactions. Under an ESG due diligence, sustainability experts would typically identify the risks and opportunities with respect to the ESG information of a potential transferor company.

Abu Dhabi Securities Exchange (“ADX”) and Dubai Financial Markets (“DFM”) are also promoting sustainability reporting among listed companies. Both exchanges are actively positioning themselves as leading sustainable financial markets in the Middle East, being members of the United Nations Sustainable Stock Exchange Initiative. Recently, the DFM launched its Sustainability Strategic Plan 2025 aimed at underpinning its continuous efforts to promote ESG best practices amongst listed companies and other stakeholders.”

Conclusion

Based on the above, the UAE is evidently taking major steps to address climate changes, achieve its NDCs, promote ESG compliance and sustainable development in all aspects.

 For further information on this topic, please contact:

• Omer Khan, Partner - Corporate Structuring 

• Jogan Punjabi, Associate – Corporate Structuring