What is COP?
The Conference of Parties (COP) is an annual International summit designed to bring together global leaders to discuss and work towards developing solutions in sync with the Paris Climate Agreement. One of the most important aspects of each COP summit is the focus on NDCs (Nationally Determined Contributions), wherein the goals and efforts of each of the participating countries are highlighted.
COP28 is scheduled to be held in Dubai (UAE) from 30 November 2023 to 12 December 2023 – a landmark in itself considering the fact that the UAE is primarily a ‘petrostate’ and heavily depends on oil and natural gas to support its economy.
However, the Emirate Kingdom has been one of the most active participants in the COP summits with COP27 witnessing an unprecedented 1000 delegates from the UAE – the most by any nation. In addition, the UAE has also taken significant steps towards restructuring its financial dependency on fossil fuels and is actively pursuing Alternative & ‘Green Energy’ options.
2023 will see Dubai’s state-of-the-art Expo City host the COP28 International summit, where the UAE will position itself as a leader in renewable and sustainable energy.
Developing Sustainable Finance is crucial to this commitment
Sustainable Finance is the process of taking into account environmental, social, and governance (ESG) considerations when making investment decisions in the financial sector, leading to increased longer-term investments into sustainable economic activities and projects. In recent years, it has become a powerful movement led by Regulators, Institutional Investors, and Asset Managers, especially in the GCC region.
Sustainable Investing includes a range of activities, from investing in green energy projects to investing in companies that demonstrate social values such as social inclusion or good governance by having, for example, more women on their boards. A commitment towards developing Sustainable Finance leads to the creation of products such as ‘green bonds’ and ‘green investment funds’.
Climate Change is no longer a matter of debate and every nation on Earth understands this very well. With so much human commercial activity, directly and indirectly, contributing to climate change, it has become clear that the current market structures in play are not sustainable in the long run. Historically companies and large enterprises have always prioritized profits over other considerations. However, the growing climate crisis is becoming so apparent that today’s investors are demanding that companies do more in terms of ESG (Environmental Social Governance) and ESG matrices.
ESG (Environmental Social Governance):
Long seen as a beacon for ‘Free Market Economics’, the UAE has displayed remarkable vision and foresight in ensuring that Sustainable Finance is not just restricted to niche segments, but rather made an integral part of the region’s drive towards COP28. The Government has announced numerous action plans – with the 2 recent announcements from the DIFC and ADGM being the most significant.
Abu Dhabi Global Market (ADGM) highlighted this commitment to developing systems of Sustainable Finance when it and the Z/Yen Group recently announced a partnership between the Global Green Finance Index (GGFI) and ADGM.
The Global Green Finance Index is an organization that measures the evolution of ‘Green Finance’ across the world, by ranking the depth and quality of such financial activities undertaken in Financial Centers.
A key focus area for ADGM is Sustainable Finance and it is this focus that led to path-breaking initiatives such as the UAE Guiding Principles on Sustainable Finance, The Executive Certificate in Sustainable Finance, The Abu Dhabi Sustainable Finance Declaration, and the Abu Dhabi Sustainable Finance Forum.
Furthermore, a Sustainable Finance platform named the Abu Dhabi Global Market Sustainable Finance Platform has been initiated to fast-track the objectives of ADGM across 5 Sustainable Finance verticals:
1. Responsible Banking
2. Responsible Investing
3. Sustainable Products
4. ESG Disclosure
5. Sustainable Capital Markets.
Another leading Financial Center in the UAE – the Dubai International Financial Center (DIFC) has also been at the helm of these initiatives. In 2019, the DIFC and DFM (Dubai Financial Market) set up the DSFGW (the Dubai Sustainable Finance Working Group) – which in September 2022, announced the introduction of a ‘self-assessment tool’ for measuring the quality and maturity of ESG policies and practices in companies. This self-assessment tool will help companies benchmark themselves against 5 levels of maturity and provide a strategy on how to further enhance their ESG principles and practices
In the following month, the DIFC also announced a strategic 1-year partnership with the Global Ethical Finance Initiative (GEFI) – a collaboration that comes in the leadup to the United Nations Framework Convention on Climate Change’s 28 Conference of Parties (COP28), scheduled to be held in Dubai in 2023.
The UAE has also become the first GCC country to announce a net-zero carbon commitment – the Net Zero by 2050 Strategic Initiative – to attract investment from global capital markets as investors increasingly seek ESG-compliant investments.
The road ahead
COP28 will be a landmark event for not just the UAE, but the wider MENA region, as it will mark the region’s commitment to addressing the climate crisis. This is of particular significance to a region that has for a long now seen its economy majorly dependent on fossil fuels and energy. The UAE’s commitment to developing relationships that can further foster the adoption of sustainable finance in the region, its net-zero carbon commitment, and the hosting of COP28 are evidence of its vision of embracing ESG factors and addressing the climate crisis.
