ADGM Implements Sustainable Finance Regulatory Framework

Following the teaser of the imminent implementation of the ADGM Sustainable Finance Regulatory Framework (the “Framework”) during the Legislative Update Session held on 21 June 2023, the Financial Services Regulatory Authority (“FSRA”) announced that the Framework has now come into effect as of 4 July 2023.

The Framework provides for a green labelling system for funds, bonds, and sukuks as well as establishes the region’s most comprehensive ESG disclosure requirements. This underlying policy is a significant step towards asserting the ADGM’s position as a sustainable finance hub and mobilizing capital investment for a local carbon transition and net zero economy.

The implementation of the Framework follows suit the significant feedback from stakeholders and industry support that the FSRA has received in response to Consultation Paper No. 6 of 2022 (please click here to read the Feedback Statement).

The Feedback Statement highlights the key differences between the proposed legislative and regulatory changes as outlined in Consultation No. 6 of 2022 and the Framework. These include the following:

• Exempt Funds also subject to the third party attestation requirement when investing in taxonomy-aligned assets. In contrast, Qualified Investor Funds are permitted to self-attest a portfolio’s alignment to a taxonomy.
• The availability of the designation of green bonds and sukuks, as well as sustainability-linked bonds and sukuks extends to Exempt Offers.
• Currently, no fees will be charged to obtain a designation under the Framework.

The ADGM has committed to a periodic review of the Framework and to consider its further enhancements. Notably, post-implementation of the Framework the ADGM will assess companies’ readiness to set a date for moving from a ‘comply or explain’ ESG disclosure model to a mandatory ESG disclosure requirement in the future.

How can we help?

The Framework features amongst the ADGM’s series of regulatory initiatives to promote sustainable finance solutions and increase investor confidence in green and sustainability-linked investments in this steadily expanding market.

At Al Tamimi & Company we are well equipped to advise fund managers, issuers, investors, and other companies on the Framework’s green labelling system and ESG disclosure requirements.