The UAE Banks Federation (UBF) acknowledges the increasing significance of Environmental, Social, and Governance (ESG) factors within the financial sector and is taking a leading role in sustainable finance to meet the net-zero targets by 2050, according to its top official.
Jamal Saleh, Director-General of UBF, stated that UAE banks are becoming leaders in adopting policies and regulations that are expected to bolster green finance in the coming years. "UBF advocates for the incorporation of ESG awareness into lending and borrowing practices. We foresee a regulatory requirement for banks to fully integrate ESG risks into their risk management systems," Saleh told Khaleej Times in an interview.
He emphasized that UBF recognizes the criticality of addressing climate change and has initiated steps to support the sector under the direct oversight of the Central Bank of the UAE. The UBF views ESG not just as a compliance necessity but as a strategic imperative for the UAE banking sector, acting as a catalyst for sustainable economic growth and a cornerstone of the UAE’s Green Agenda 2030 and net-zero 2050 goals.
The Central Bank of the UAE has established the UAE Sustainable Finance Working Group (SFWG) in 2019 and Guiding Principles on Sustainable Finance in 2021, reflecting the nation’s dedication to supporting the transition to a net-zero economy. These developments highlight the growing importance of ESG policies and products in the future profitability of UAE banks.
In 2023, the green bond market experienced an unprecedented surge, with $310 billion issued in the first half of the year, accounting for 59% of the total Global Sustainable Bond Market (GSSSB), which is projected to reach approximately $1 trillion by the year-end. UAE banks, in alignment with the Central Bank of the UAE’s vision, are emerging as leaders in adopting policies and regulations that are expected to further strengthen green finance.
UBF recognizes the importance of addressing climate change challenges and has taken steps to support the sector under the direct supervision of the Central Bank of the UAE. As the sole representative of UAE banks, UBF provides a platform for knowledge sharing and collaboration on ESG best practices. UBF is working closely with the Central Bank to advance ESG policies within the banking sector.
The UAE banking sector has committed to allocating Dh1 trillion to sustainability projects by 2030, a historic step towards the UAE’s green economy goals. UBF is committed to providing strategic guidance, facilitating knowledge sharing, and advocating for supportive policies to empower banks in their sustainability journey.
UBF is actively driving the integration of ESG factors into UAE banks’ operations by encouraging green financing and bond issuance, promoting sustainable practices across the value chain, and supporting carbon footprint reduction. In collaboration with the Central Bank of the UAE and other stakeholders, UBF is developing a robust ecosystem and accountability standards while fostering a culture of sustainability within the banking sector.
UBF promotes integrating ESG consciousness into lending and borrowing policies. To align with government climate change plans, banks need to establish robust criteria and governance processes for managing sustainable transactions. This includes fostering open banking initiatives and driving sustainability efforts prioritizing ESG principles.
Through its high-level ESG committee, comprising experts from UBF member banks, the Federation’s initiatives reinforce green finance principles and frameworks, aligning with the UAE’s commitment to sustainability in the banking and financial sector. The UAE banking sector is poised to lead the way towards a greener and more sustainable future through collaboration, innovation, and regulatory alignment.
