UAE’S ESG COMPLIANCE FRAMEWORK: MANDATORY REPORTING AND VISION 2030 ALIGNMENT

Introduction

The United Arab Emirates (UAE) has strengthened its Environmental, Social, and Governance (ESG) regulations, aligning with the UAE Vision 2030 and Net Zero by 2050 strategies. A key development in this landscape is the mandatory ESG reporting requirement for companies listed on the Dubai Financial Market (DFM) and Abu Dhabi Securities Exchange (ADX), introduced by the Securities and Commodities Authority (SCA).

With growing investor demand for transparency and sustainability, businesses operating in Dubai and Abu Dhabi must integrate ESG principles into their corporate strategies. This article explores UAE’s ESG regulations, compliance frameworks, and the necessary steps for businesses to ensure full adherence.

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Mandatory ESG Reporting in the UAE

1.?? UAE Securities and Commodities Authority (SCA) ESG Standards

In 2020, the SCA issued a Board Decision requiring public joint stock companies listed on DFM and ADX to publish annual sustainability reports detailing their long- term strategies and the impact of their activities on the environment, society, economy, and governance.

This ensures standardized, transparent, and comparable sustainability reporting.

?2.Climate Risk Disclosure: Adoption of TCFD Guidelines

As of 2025, the Abu Dhabi Global Market (ADGM) has implemented a regulatory framework mandating Environmental, Social, and Governance (ESG) disclosures for certain entities.

This framework, enacted on June 21, 2023, requires companies registered within ADGM that meet specific turnover or assets under management (AUM)

thresholds to prepare and submit ESG disclosures. Entities not meeting these thresholds may choose to comply voluntarily.

The framework mandates that in-scope companies align their ESG disclosures with globally recognized standards. While the Task Force on Climate-related Financial Disclosures (TCFD) is a prominent framework, ADGM allows entities to select any globally recognized standard that aligns with their business operations.

Therefore, while adherence to TCFD guidelines is not explicitly mandated, companies are encouraged to adopt such frameworks to ensure comprehensive and transparent ESG reporting.

In summary, as of 2025, companies operating within ADGM that meet the specified criteria are required to submit ESG disclosures in accordance with a globally recognized standard, which may include the TCFD framework.

3. Carbon Neutrality Commitments

The UAE has announced its Net Zero by 2050 Strategic Initiative, making it the first country in the Middle East to commit to a carbon-neutral plan. However, while the government encourages organizations to develop net-zero strategies, there is currently no mandatory requirement for all companies to formalize such commitments.

Businesses must develop measurable carbon footprint reduction plans, track Scope 1, 2, and 3 emissions, and transition to renewable energy solutions.

The Key Environmental and ESG Regulations in Dubai and Abu Dhabi

Beyond financial disclosures, companies must comply with broader UAE environmental laws, including:

?? Federal Law No. 24 of 1999 (Environmental Protection): Covers air quality, waste management, and marine pollution.

?? Federal Law No. 12 of 2018 (Waste Management): Requires sustainable disposal and promotes circular economy principles.

?? Dubai Clean Energy Strategy 2050: Targets 75% clean energy adoption by 2050.

?? Executive Council Decision No. 58 of 2017 (Abu Dhabi): Enforces strict penalties for environmental violations.

Non-compliance with these laws results in regulatory fines, reputational risks, and operational constraints.

GRI Framework: Simplified Explanation

The Global Reporting Initiative (GRI) is an international standard for ESG reporting, helping businesses disclose their environmental and social impacts in a structured and transparent manner.

Key Features of GRI:

???? Materiality: Companies report on sustainability issues most relevant to their operations.

?? Standardized Metrics: Covers emissions, waste management, labor practices, and corporate governance.

?? Global Recognition: Used by governments, investors, and regulators to evaluate sustainability performance.

By adopting GRI-based ESG reporting, UAE companies enhance their corporate reputation, regulatory compliance, and investor trust.

Operational Implications of Non-Compliance Failure to adhere to ESG reporting and sustainability requirements may result in:

?? Regulatory sanctions imposed by the UAE government.

? Diminished investor confidence, as ESG transparency is crucial for financial markets.

??? Reputational liabilities, damaging brand credibility in a sustainability-focused business landscape.

To support businesses in their transition, the UAE government has introduced fiscal incentives encouraging the integration of ESG principles into corporate strategies.

The United Arab Emirates (UAE) has implemented several initiatives to encourage companies and entities to integrate Environmental, Social, and Governance (ESG) principles into their corporate strategies. These measures aim to promote sustainable development and responsible business practices across the nation.

Sustainable Finance Frameworks

The UAE has established comprehensive frameworks to facilitate sustainable finance:

UAE Sustainable Finance Framework 2021-2031:

This framework lays the foundation for green investments by standardizing ESG reporting, enhancing the supply of green projects, and promoting sustainable finance through collaborations.

Abu Dhabi Global Market (ADGM) Sustainable Finance Regulatory Framework:

Implemented in 2023, this framework mandates ESG disclosures for companies exceeding specific thresholds, promoting transparency and accountability.

Tax Incentives and Benefits

To support businesses in their ESG endeavors, the UAE offers various fiscal incentives:

·????????? Energy Tariff Incentive Program (ETIP 2.0): Launched by the Abu Dhabi Department of Economic Development, this program provides preferential gas and electricity rates to manufacturers demonstrating efficient energy management.

·????????? Green Tax Incentives: The UAE is exploring environmental tax incentives to encourage eco-friendly practices among businesses and individuals, promoting investments in renewable energy and energy-efficient technologies. However, as of now, there are no direct sustainability incentives in the form of tax credits, subsidies, or other business incentives.

ESG Reporting and Disclosure Initiatives

While the Dubai Financial Market (DFM) has been active in promoting sustainability, specific details about a "Sustainability Strategic Plan 2025" are not readily available. The DFM encourages listed companies to adopt ESG best practices and provides guidelines to facilitate transparent sustainability reporting.

The UAE emphasizes the importance of ESG reporting:

·????????? Dubai Financial Market (DFM) Sustainability Strategic Plan 2025: Limed at promoting ESG best practices among listed companies, this plan encourages transparent sustainability reporting.

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Sustainable Finance Instruments

The UAE is actively developing sustainable finance instruments:

·????????? Green Bonds and Sukuk: Etihad Rail has indeed introduced a sustainable finance framework to potentially issue green bonds for low-carbon infrastructure. This aligns with the UAE's broader commitment to sustainable development. By implementing these initiatives, the UAE government demonstrates its commitment to fostering a sustainable business environment, encouraging companies to align their strategies with ESG principles for long-term growth and competitiveness.

Green Bonds and Sukuk: Definitions and Differences Green Bonds

Green bonds are fixed-income financial instruments designed specifically to raise capital for projects with environmental benefits.

These projects can include renewable energy, sustainable water management, energy efficiency, and climate adaptation initiatives. Issuers of green bonds can be governments, corporations, or financial institutions, and the proceeds must be exclusively used for green projects.?

Key Features:

a.?????? Investors receive regular interest payments (coupons) and the principal at maturity.

b.?????? Bonds are typically certified under green bond principles, ensuring funds are directed toward sustainability initiatives.

c.?????? Regulatory frameworks, such as the Climate Bonds Standard, guide the issuance of green bonds.

Green Sukuk (Islamic Green Bonds)

Green Sukuk are Shariah-compliant financial instruments issued to fund environmentally sustainable projects, similar to green bonds. However, unlike conventional bonds, Sukuk follow Islamic finance principles, which prohibit charging interest (riba) and require that investments are backed by tangible assets.

Key Features:

a.?????? Instead of paying interest, Sukuk investors earn returns based on the profit generated from the underlying assets.

b.?????? Issuers must ensure that both the structure of the Sukuk and the use of proceeds comply with Islamic finance rules.

c.?????? Green Sukuk are commonly issued in Muslim-majority markets, including the UAE, Saudi Arabia, and Malaysia.

Why Are They Important?

Green Bonds and Green Sukuk play a crucial role in financing the transition to a low-carbon economy. They provide investors with ethical and sustainable investment opportunities while enabling companies and governments to secure funding for green projects.

In the UAE, entities like Etihad Rail and the Dubai Islamic Bank have already issued green Sukuk, supporting the country’s Net Zero by 2050 commitment.

What Should Companies Do to Ensure Compliance to ESG?

Businesses must take proactive steps to align with UAE ESG regulations:

a. Implement ESG Audits

?? Conduct internal ESG assessments to evaluate compliance with SCA, TCFD, and UAE environmental laws.

?? Identify gaps in sustainability performance and develop improvement strategies.

b. Invest in ESG Reporting Systems

?? Deploy ESG data management software to track carbon emissions, energy usage, and waste disposal.

?? Adopt internationally recognized reporting standards like GRI, SASB, and TCFD.

c. Engage in Carbon Accounting Neutralization and Offsetting

?? Measure Scope 1, 2, and 3 emissions using the Greenhouse Gas (GHG) Protocol.

?? Invest in renewable energy solutions and carbon offset projects to meet net-zero targets.

d. Regulatory ESG Compliance Consulting

Regulatory Compliance Consulting is a strategic advisory service that ensures companies and entities operate within the framework of applicable laws, industry standards, and regulatory requirements.

It encompasses legal, operational, and ethical guidance to mitigate risks, enhance corporate governance, and foster sustainable growth.

At its core, this service helps businesses avoid legal penalties, reputational damage, and operational inefficiencies by proactively identifying compliance gaps and implementing robust policies, processes, and training programs. It extends across multiple domains, including:

? Environmental & ESG Compliance – Ensuring adherence to environmental regulations, carbon reporting, and sustainability commitments (ISO 14001, GRI, UAE & GCC ESG? Frameworks).

? Corporate Governance & Ethics – Implementing anti-corruption, anti-money laundering (AML), and governance frameworks (ISO 37001, FCPA, OECD Guidelines).

? Financial & Tax Compliance – Ensuring adherence to international financial reporting??? and???? tax???? laws,???? such???? as??? VAT??? and???? corporate??? tax???? regulations.

? Health & Safety Compliance – Maintaining workplace safety standards (ISO 45001, OSHA).

? Cybersecurity & Data Privacy – Aligning with GDPR, UAE’s PDPL, and other data security laws to prevent breaches and financial losses.

Why Should Companies Invest in Compliance Consulting?

·???????? Risk Mitigation & Legal Protection

Non-compliance can result in severe penalties, lawsuits, and even business shutdowns. Regulatory compliance consulting helps companies navigate complex legal frameworks and avoid costly violations.

·???????? Competitive Advantage & Market Access

Global markets demand regulatory transparency. Companies that demonstrate compliance gain trust from investors, partners, and customers, opening doors to new business opportunities.

·???????? Financial Stability & Cost Savings

Fines, legal disputes, and regulatory breaches lead to financial setbacks. A strong compliance framework prevents costly disruptions and improves operational efficiency.

·???????? Reputation & Brand Protection

Today’s consumers and investors prioritize ethical businesses. Proactively managing compliance enhances brand reputation and stakeholder confidence, making the company a preferred partner in any industry.

·???????? Long-Term Sustainability & ESG Integration

Regulations are evolving towards sustainable and socially responsible business practices. Investing in compliance ensures that a company is future-proof, resilient, and aligned with global ESG trends.

A Smart Investment, Not an Expense

Regulatory Compliance Consulting is not just about avoiding penalties; it’s a growth strategy. It transforms compliance from a regulatory burden into a driver of innovation, operational excellence, and market leadership.

?? Future-Ready Companies Invest in Compliance ??

?? Compliance = Trust, Growth, and Sustainability ??

Conclusion

With ESG reporting now mandatory for UAE-listed companies, businesses must proactively align with SCA regulations, adopt TCFD climate risk disclosure, and implement net-zero strategies.

By investing in ESG reporting systems, sustainability audits, and regulatory compliance consulting, companies secure long-term growth, financial resilience, and regulatory approval in the UAE’s evolving green economy.

The UAE’s commitment to Vision 2030 and Net Zero by 2050 presents a clear mandate: sustainability is no longer optional. It is a business imperative!!!

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CAROLINE DE PAULA BALBINO

ESG LEAD & LEGAL COMPLIANCE AUDITOR ISO 14001 CONSULTANT

BRAZIL – UAE

References

1.????? UAE??? Ministry??? of??? Climate????? Change??? and??? Environment??? (MOCCAE).??? "UAE Sustainable?????? Finance?????? Framework?????? 2021-2031".???????? Available???????? at: https://www.moccae.gov.ae/assets/24b84d14/UAE_Sustainable_framework_ 21.pdf.aspx

2.????? Clyde & Co. "The 'G' in ESG: Understanding Governance in the UAE". Available at: https://www.clydeco.com/en/insights/2024/06/the-g-in-esg

3.????? Cleary Gottlieb. "Sustainable Finance Law in the United Arab Emirates". Available at: https://www.clearygottlieb.com/-/media/files/lexology-in- depth-sustainable-finance-law-united-arab-emirates.pdf

4.????? Insights Middle East. "Sustainable Practices in the UAE". Available at: https://ae.insightss.co/sustainable-practices-in-the-uae

5.????? Al Tamimi & Company. "Steps Taken by UAE Towards Sustainable Development and ESG Compliance". Available at: https://www.tamimi.com/law-update- articles/steps-taken-by-uae-towards-sustainable-development-and-esg- compliance

6.????? Reuters. "UAE’s Etihad Rail Launches Sustainable Finance Framework for Green Push".???????????????? Available????? at:????? https://www.reuters.com/sustainability/sustainable- finance-reporting/uaes-etihad-rail-launches-sustainable-finance-framework- green-push-2024-08-14

7.????? Financial Times. "Abu Dhabi Clean Energy Vehicle Raises $1bn with Green Bond". Available at: https://www.ft.com/content/976a331c-c66e-4699-a2d6- fbd0f90bcfb0

8.????? Reuters. "UAE Pledges to Cut Emissions by 47% by 2035". Available at: https://www.reuters.com/world/middle-east/short-take-uae-pledges-cut- emissions-by-47-by-2035-2024-11-07