GITEX Impact Council on Decarbonising through regulations in finance will publish a White Paper with recommendations for financial institutions, regulatory authorities, and policymakers on how the UAE could regulate the finance sector to decarbonise and its likely impact.

CONTEXT

Regulators are becoming aware of the connections between sustainable growth and financial markets. By supplying credit and financial resources, financial institutions can either be crucial enablers of sustainable economic growth or catalysts for catastrophic climate events. Reforms in financial regulations to direct the flow of capital away from high-carbon investments and towards diversifying investments to ESG-focused industries are growing at an unprecedented pace. This is despite the continued debate in the industry about the merits and even definition of ESG-focused investing, which could easily become a marketing and greenwashing tool for many with little to no impact. 

On the other hand, there is also growing awareness that climate change presents financial risks, which necessitates the need for financial markets to have high-quality information on the impact of climate change on their investments. This includes the risks and opportunities presented by rising temperatures, climate-related policy, and emerging technologies. In the past few years, frameworks and regulations pressing companies to disclose information related to financial risks faced by the company in the context of climate change has increased substantially.

Policy interventions around the world

The Task Force on Climate-Related Financial Disclosures (TCFD), established in December 2015, has developed a set of voluntary climate-related financial risk disclosures to be made by companies globally which would help inform investors and other members of the public about the risks associated with climate change. 

In Europe, under the European Commission’s Sustainable Finance Action Plan laid out by the commission in 2018, there are two key ESG regulations – the Sustainable Finance Disclosure Regulation (SFDR) and the EU Taxonomy. The SFDR came into effect on March 10, 2021, preceded by the EU Taxonomy, which entered into force on July 12, 2020. They put in place a ‘comply or explain’ requirement for premium listed companies to make climate-related disclosures. 

Governments in Belgium, Sweden, and the UK – through disclosure of climate-related financial risks – are also encouraging information disclosure by firms and investors. French authorities and regulators have mandated the disclosure of climate-related financial risks by listed firms, banks and credit providers, and investors under France’s Energy Transition Law for Green Growth. The Bank of Japan, through green central bank financing, provides concessional loans to banks that further lend to environment and energy businesses. China requires banking institutions to report loan balances in 12 green sectors based on international sustainability standards and has established a monitoring and evaluating system for green credit.

It is perceived that regulatory authorities and banks that can position themselves as pioneers and sustainability leaders in green finance are likely to improve their reputation and inspire greater trust among stakeholders. Regulatory trends in the past few years that are pressing  for ESG investing and the prospect of more regulations to follow holds significant value for financial institutions around the world. In the Middle East, in particular, not only do the complex and mounting global regulations on ESG-related investing impact the regional economy, but regional financial institutions are also questioning the possibility of ESG-related regulations making an appearance in the Middle East region.

GITEX Impact Councils are the world’s foremost multistakeholder and interdisciplinary knowledge networks dedicated to promoting innovative technologies to shape a more resilient, inclusive, and sustainable future. The GITEX Impact Council on Decarbonising through regulations in finance will publish a White Paper with recommendations for financial institutions, regulatory authorities, and policymakers on how the UAE could regulate the finance sector to decarbonise and its likely impact.

The White Paper will be launched at GITEX Impact, which will be held from 16 – 20 October 2023, Dubai World Trade Centre, Dubai, U.A.E.

GITEX Impact Council members for Decarbonising through regulations in finance are:

1. Dr. Gireesh Shrimali, Head of Transition Finance Research, University of Oxford (UK)
2. Varad Pande, Partner, Omidyar Network (India)
3. Ismail Douiri, Co-CEO of Attijariwafa Bank (Morocco)
4. Jayne Plunkett, Chief Risk Officer, AIA Group (Hong Kong)
5. Vish Narain, Managing Partner, Pulsar Capital (UAE)
6. Hisham Khazinder, Co-Founder and Managing Director of Qalaa Holdings (Egypt)