Sustainable approaches: What impact is ESG having in the UAE?

16 February 2022
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What are the new responsibilities?

Since 2020 public joint-stock companies (PJSCs) listed on the ADX or the Dubai Financial Market (DFM) in the UAE must publish a sustainability report. Reports need to cover the following:

  • The environment– the impact of the company’s operations on the environment and communities.
  • Society– how the company’s policies and operations contribute or could contribute to social justice, the well-being of workers and the surrounding community.
  • The economy and governance– how the company is contributing to the economic benefit of society and the local economy.

PJSCs must also comply with the Global Reporting Initiative (GRI) standards. The ADX has set down ESG reporting guidance to aid listed companies’ sustainability reporting. The guidance lists thirty-one ESG indicators following the recommendations of the Sustainable Stock Exchanges (SSE) Initiative and the World Federation of Exchanges (WFE).

Which type of companies pick this up and why?

Companies across a range of industries are picking up on ESG.  The Dubai Sustainable Finance Working Group has produced a plan to develop green financial instruments, promote responsible investing, grow sustainable finance, and increase diversity and inclusion. Companies participating in the project include Nasdaq Dubai, Emirates NBD, Societe Generale, the Dubai Islamic Bank and HSBC as well as real estate developer, DP World, and shipping firm, Aramex. ESG is not just for large companies, but SMEs also. Fatima Alnaqbi, head of the Strategy and Future Department at Ministry of Finance:

Even for SMEs, being ESG compliant has become an important requirement for them to set up their businesses, there is a good understanding and a strong belief that there is a strong correlation between the financial performance and ESG practice.”

What challenges remain?

Despite the progress that has been made, uptake and levels of reporting remain low. In 2020, 36% of the world’s 250 largest companies reported on their biodiversity impact. This compares with only 9% of UAE companies. In 2020, 76% of the world’s leading 250 companies reported on their carbon reduction targets, compared with only 11% of the top UAE companies. One obstacle is navigating various scoring systems, of which some may be unreliable due to a lack of standards or transparency.

 

Going forward

Climate change and social injustice issues that feature regularly in the news are increasing the significance of ESG organizations’ efforts to tackle environmental, social and governance issues. Pressure is growing on companies to provide more detailed ESG reporting. This is being driven by investors and consumers. The UAE has also decided to directly regulate company reporting, the impact of this approach remains to be seen.

Farrelly & Mitchell Sustainability and ESG Services

Our expert consultants deliver impact for our clients in sustainability across the world. Our highly experienced sustainability, ESG auditing and agribusiness due diligence consultants have the expertise to perform a deep dive into the environmental sustainability and social governance practices of an organisation, using global benchmarks and standards to substantiate data and impact claims.

UAE businesses who move to adopt ESG will have the opportunity to respond to the world’s demand for sustainable practices in food and agriculture in forging a more prosperous pathway. We can help to ensure compliance with reputable ESG and sustainability standards. Our research ensures environment-related risks are taken on board so that the possibility of assets declining in value due to negative environmental impacts is minimised. The overall impact of strengthened sustainable practices will enhance business reputation and present new opportunities.

Click here for more information on our sustainability and ESG services

Sustainable approaches: What impact is ESG having in the UAE?

16 February 2022

What are the new responsibilities?

Since 2020 public joint-stock companies (PJSCs) listed on the ADX or the Dubai Financial Market (DFM) in the UAE must publish a sustainability report. Reports need to cover the following:

  • The environment– the impact of the company’s operations on the environment and communities.
  • Society– how the company’s policies and operations contribute or could contribute to social justice, the well-being of workers and the surrounding community.
  • The economy and governance– how the company is contributing to the economic benefit of society and the local economy.

PJSCs must also comply with the Global Reporting Initiative (GRI) standards. The ADX has set down ESG reporting guidance to aid listed companies’ sustainability reporting. The guidance lists thirty-one ESG indicators following the recommendations of the Sustainable Stock Exchanges (SSE) Initiative and the World Federation of Exchanges (WFE).

Which type of companies pick this up and why?

Companies across a range of industries are picking up on ESG.  The Dubai Sustainable Finance Working Group has produced a plan to develop green financial instruments, promote responsible investing, grow sustainable finance, and increase diversity and inclusion. Companies participating in the project include Nasdaq Dubai, Emirates NBD, Societe Generale, the Dubai Islamic Bank and HSBC as well as real estate developer, DP World, and shipping firm, Aramex. ESG is not just for large companies, but SMEs also. Fatima Alnaqbi, head of the Strategy and Future Department at Ministry of Finance:

Even for SMEs, being ESG compliant has become an important requirement for them to set up their businesses, there is a good understanding and a strong belief that there is a strong correlation between the financial performance and ESG practice.”

What challenges remain?

Despite the progress that has been made, uptake and levels of reporting remain low. In 2020, 36% of the world’s 250 largest companies reported on their biodiversity impact. This compares with only 9% of UAE companies. In 2020, 76% of the world’s leading 250 companies reported on their carbon reduction targets, compared with only 11% of the top UAE companies. One obstacle is navigating various scoring systems, of which some may be unreliable due to a lack of standards or transparency.

 

Going forward

Climate change and social injustice issues that feature regularly in the news are increasing the significance of ESG organizations’ efforts to tackle environmental, social and governance issues. Pressure is growing on companies to provide more detailed ESG reporting. This is being driven by investors and consumers. The UAE has also decided to directly regulate company reporting, the impact of this approach remains to be seen.

Farrelly & Mitchell Sustainability and ESG Services

Our expert consultants deliver impact for our clients in sustainability across the world. Our highly experienced sustainability, ESG auditing and agribusiness due diligence consultants have the expertise to perform a deep dive into the environmental sustainability and social governance practices of an organisation, using global benchmarks and standards to substantiate data and impact claims.

UAE businesses who move to adopt ESG will have the opportunity to respond to the world’s demand for sustainable practices in food and agriculture in forging a more prosperous pathway. We can help to ensure compliance with reputable ESG and sustainability standards. Our research ensures environment-related risks are taken on board so that the possibility of assets declining in value due to negative environmental impacts is minimised. The overall impact of strengthened sustainable practices will enhance business reputation and present new opportunities.

Click here for more information on our sustainability and ESG services

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