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UAE businesses would be better complying with a set of ESG standards rather than chase all those out there. Image Credit: Shutterstock

Dubai: UAE businesses could soon have some ESG (Environmental Social Governance) benchmarks to comply with.

Rather than leave it to businesses to decide how to make their contribution to sustainability, a set of unified benchmarks will make it easier for them to follow – and help with the UAE’s own path to Net Zero on carbon emissions by 2050, according to a top official at DIFC.

“Globally, there are about 1,100 ESG-related standards,” said Christian Kunz, Head of Group Strategy and Innovation at Dubai International Financial Centre. “So, rather than the UAE adopt all these benchmarks, the focus could be on a few of them - say, 10 – making up the national benchmark.

“With the COP28 to be hosted by UAE, there will be more clarity on the pathway towards Net Zero, and how or whether there should be benchmarks or regulations to meet them.”

COP28 will be the latest edition of the UN’s Climate Change Conference, which the UAE will play host to. The event is scheduled for late 2023 and Expo City Dubai will be the venue.

Move beyond intentions

Currently, the UAE and its various government agencies have set clear targets on their plans towards getting to the Net Zero point. Energy giant ADNOC is already several years into developing processes that would reduce the impact of operations on the environment. Leading business groups have also integrated ESG practices as part of their operational goals, and green/sustainable financing is starting to catch on.

UAE-based investment firms, at least the big ones, are following global practices in what and where they put their monies. This has meant greater inflows into renewable/clean energy initiatives and the like.

But the impression is that while these efforts have the government and the big private players leading the way, the ESG movement needs to get more broad-based. This is where it needs to get past voluntary efforts, and which requires regulatory requirements to be brought in – and adhered to.

Would ESG efforts become part of a business’s reporting requirements, much in the way the financials get done? “Things have to go past just the voluntary,” said Kunz. “Public-private partnerships could be one solution, and so would all actions related to COP28. There are already a number of working groups drawing up a plan of action.”

DIFC’s got a role too

The DIFC along with DFM is part of a 23-member group under the Dubai Sustainable Finance Group. Within this come five working groups, responsible for areas such as reporting standards, lending on sustainability norms, etc.

“The Group offers broad guidelines on what’s needed to be done on sustainability, at least from the financing side of it,” said Kunz. “Taken together, these actions at the national level or within groups spread the word on how to action ESG.”

In other words, walk the talk towards a green future…