UAE accelerates climate finance integration with new regulatory toolkit for transition planning

The United Arab Emirates has taken another step forward in embedding climate considerations into its financial system, most recently with the release of the fourth statement from its Sustainable Finance Working Group. As reported by Al-Ittihad, this statement reaffirms the UAE’s dedication to aligning financial activities with its national climate targets, including the National Green Agenda 2015–2030, the National Climate Change Plan 2017–2050, and the strategic goal of reaching net zero emissions by 2050.

This latest statement, coordinated by the Financial Services Regulatory Authority of the Abu Dhabi Global Market, outlines progress across four main workstreams: sustainable corporate governance, sustainability-related disclosures, the development of a UAE sustainable finance taxonomy, and climate transition planning. It follows a progression of regulatory guidance and consultations that the group has issued since its inception and brings together recent technical work into a set of operational principles for market actors.

On governance, the group published the “Principles for Effective Management of Climate-Related Financial Risks” in November 2023. These principles, according to the statement, offer a thorough approach for integrating climate risks into the business strategies and risk management processes of financial institutions operating in the UAE. The goal is for boards and senior management to take explicit responsibility for climate-related strategies and oversight, something I think is pretty important to ensure accountability.

As for disclosure, the working group’s “Sustainability-Related Disclosure Principles for Reporting Entities” (2024) aim to boost transparency and consistency in ESG reporting. The guidance clarifies what factors are material, and how, when, and what to disclose. Plus, it seeks to ensure that UAE practices align with international standards, including those set by the International Sustainability Standards Board, as the statement notes.

The third workstream involves creating a UAE-specific sustainable finance taxonomy, basically, a classification system that can work across markets. The group mentions that this taxonomy is designed to meet local needs but will remain compatible with international taxonomies, making cross-border investments easier and smoother.

The fourth area focuses on practicalities around corporate transition planning. The recently published “Climate Transition Planning Principles,” building on a 2025 consultation paper, provide a structured way for companies to develop, govern, and disclose credible transition plans. These principles emphasize scenario analysis, integrating transition efforts into existing governance and risk frameworks, and directing capital toward activities that support the UAE’s climate commitments.

Senior officials used the occasion of this release to underline institutional support. Khaled Mohammed Balama, the Central Bank of the UAE’s governor, highlighted that the bank will keep playing a leading role in the working group, emphasizing the importance of incorporating climate risks into supervisory and governance frameworks without sacrificing financial stability or the UAE’s role as a global financial hub. Meanwhile, Ahmed Jasim Al Zaabi, Chairman of the Department of Economic Development in Abu Dhabi and of the Abu Dhabi Global Market, described the statement as a move from mere ambitions to real action, attributing this shift to regulatory frameworks and active market engagement.

The Ministry of Finance also expressed cross-government backing. Younis Haji Al Khouri, the Undersecretary, assured that fiscal and financial policies will support the UAE’s long-term sustainability goals, and a just transition toward net zero. Waleed Saeed Al Awadi, CEO of the Securities and Commodities Authority, stressed that the new transition principles will help companies align their strategies with the country’s climate ambitions. And Mark Steward, CEO of the Dubai Financial Services Authority, referred to the transition planning principles as a “landmark” moment for sustainable finance.

All these signals, well, they expand on clear indicators of market activity and previous commitments. For example, data from the UAE Banks Federation shows that six leading banks in the country reported AED 190 billion in green financing by August 2023. During December 2023, the federation added that these banks aim to support AED 1 trillion worth of sustainability projects by 2030, an effort to bridge the financing gap for emissions reduction and adaptation. On the international stage, UAE officials highlighted sustainable finance initiatives at COP28 and the G20. Minister Mohamed Hadi Al Hussaini, for one, announced in July 2024 that UAE banks have been encouraged to intensify sustainable financing by 2030, and that the country intends to back multilateral resilience financing mechanisms.

Reporting from the Central Bank underscores how far the UAE has come in developing sustainable financial instruments. The 2024 annual report points out how Islamic banks have contributed to the issuance of sustainable sukuk, and mentions that these instruments have gained significant market share since the debut green sukuk in 2019. Additionally, the Islamic Finance Report 2023 underscores rapid growth in sustainable finance, with ongoing efforts to align these products with global ESG norms.

State-backed lenders are also echoing these priorities. The Emirates Development Bank’s 2024 annual report highlights a notable increase in lending to small and medium-sized enterprises, a move aimed at promoting economic resilience and channeling financing into sectors that can support the low-carbon future.

Of course, despite all this momentum, the working group’s recent paper does acknowledge that the road ahead is complicated. Implementing consistent disclosure practices, creating a UAE-specific taxonomy compatible internationally, and making sure transition plans are credible, not just window dressing, are going to require sustained regulatory effort and private-sector buy-in. For market participants, that means developing detailed methodologies for emissions measurement, scenario analysis, and capital allocation aligned with transition goals, otherwise, the principles risk remaining just words.

All in all, the group presents its work as a toolkit, designed to help steer capital flows and foster accountability. The transition principles are intended to guide financial activity toward projects and investments aligned with the UAE’s climate targets and aligned with best international practices. Whether this lofty aim will be achieved swiftly enough to support the UAE’s 2050 net-zero goal is, of course, another matter. It really depends, well, I mean, on how quickly policies are rolled out and how eager banks, managers, and companies are to disclose, measure, and act on these transition pathways.

Source: Noah Wire Services