The UAE has positioned itself as a global leader in sustainable development, driven by its Net Zero 2050 Strategic Initiative, the Year of Sustainability (2024), and its successful hosting of COP28 in 2023. At the heart of this transformation is the UAE banking and financial sector, which plays a pivotal role in mobilizing capital toward green and sustainable projects. The Central Bank of the UAE (CBUAE) has responded with a robust regulatory framework that moves sustainability from voluntary action to a core prudential requirement.
Established in 2019, the UAE Sustainable Finance Working Group (SFWG) — comprising the CBUAE, Securities and Commodities Authority (SCA), Dubai Financial Services Authority (DFSA), and Abu Dhabi Global Market (ADGM) Financial Services Regulatory Authority (FSRA) — has been instrumental in shaping the country's sustainable finance agenda. The SFWG's foundational Guiding Principles on Sustainable Finance (2020) laid the groundwork for integrating environmental, social, and governance (ESG) factors into financial decision-making across the UAE financial sector.
Building on this, the SFWG has introduced targeted principles and regulations tailored to climate-related risks, which are now central to how banks and financial institutions operate in the UAE.
1. Principles for the effective management of climate-related financial risks (November 2023)
Launched ahead of COP28 in Dubai, these Principles set minimum standards for all financial sector entities operating in the UAE. They define regulatory expectations for governance and risk management of UAE climate-related financial risks, covering both physical risks (e.g., extreme weather events impacting assets and operations) and transition risks (e.g., policy changes, technological shifts, and market repricing associated with the low-carbon economy).
Core expectations include:
2. Principles for sustainability-related disclosures (June 2024)
Issued in line with the Year of Sustainability, these Principles promote high-quality, decision-useful ESG disclosures in the UAE aligned with international best practices (including elements of TCFD and emerging ISSB standards). They apply to reporting entities across the UAE financial sector and emphasize four key considerations:
3. Climate-related financial risk management regulation (July 2025)
This binding CBUAE regulation establishes an overarching prudential framework, formalizing and expanding on the 2023 Principles. It mandates licensed UAE financial institutions to embed climate risk management across governance structures, internal capital adequacy processes (ICAAP), solvency assessments, and recovery planning. Institutions that have not yet fully implemented these requirements must submit detailed remediation plans with clear milestones.
These initiatives align with the UAE's ambitious target of mobilizing AED 1 trillion (approximately USD 272 billion) in UAE sustainable finance by 2030, announced at COP28, and complement the Guiding Principles Regarding Islamic Sustainable Finance for Shari'ah-compliant institutions operating in the UAE.
Compliance with these CBUAE guidelines is no longer optional — it is a regulatory imperative that directly impacts supervisory ratings, capital requirements, and market reputation. UAE banks must now:
The UAE's banking and financial sector is undergoing a fundamental shift towards sustainability — one that strengthens financial stability while contributing to national and global climate goals. The CBUAE's clear, progressive guidelines provide the roadmap; proactive UAE institutions that embrace them will thrive in the green economy of tomorrow.
BDO in the UAE can help your organisation navigate CBUAE sustainability regulations, implement climate risk frameworks, and develop ESG disclosure strategies aligned with UAE regulatory requirements — contact our team to find out how.
LET'S WORK TOGETHER
The regulatory foundation: UAE sustainable finance working group (SFWG)
Established in 2019, the UAE Sustainable Finance Working Group (SFWG) — comprising the CBUAE, Securities and Commodities Authority (SCA), Dubai Financial Services Authority (DFSA), and Abu Dhabi Global Market (ADGM) Financial Services Regulatory Authority (FSRA) — has been instrumental in shaping the country's sustainable finance agenda. The SFWG's foundational Guiding Principles on Sustainable Finance (2020) laid the groundwork for integrating environmental, social, and governance (ESG) factors into financial decision-making across the UAE financial sector.Building on this, the SFWG has introduced targeted principles and regulations tailored to climate-related risks, which are now central to how banks and financial institutions operate in the UAE.
Key CBUAE guidelines shaping the UAE banking sector
1. Principles for the effective management of climate-related financial risks (November 2023)Launched ahead of COP28 in Dubai, these Principles set minimum standards for all financial sector entities operating in the UAE. They define regulatory expectations for governance and risk management of UAE climate-related financial risks, covering both physical risks (e.g., extreme weather events impacting assets and operations) and transition risks (e.g., policy changes, technological shifts, and market repricing associated with the low-carbon economy).
Core expectations include:
- Governance and Oversight: Board-level responsibility for climate risks, with clear allocation of responsibilities to senior management.
- Integration into Strategy: Climate risks must be embedded in business strategy, capital and liquidity planning, and scenario analysis exercises.
- Risk Management Framework: Institutions are required to identify, assess, measure, mitigate, monitor, and report material climate risks as part of their overall enterprise risk management.
2. Principles for sustainability-related disclosures (June 2024)
Issued in line with the Year of Sustainability, these Principles promote high-quality, decision-useful ESG disclosures in the UAE aligned with international best practices (including elements of TCFD and emerging ISSB standards). They apply to reporting entities across the UAE financial sector and emphasize four key considerations:
- Robust internal policies, procedures, and systems for UAE sustainability reporting.
- Core disclosure qualities: transparency, materiality, relevance, and stakeholder engagement.
- Disclosures that accurately reflect the entity's operations in the areas of governance, strategy, risk management, and metrics & targets.
- Enhanced transparency for sustainability-related financial products and services.
3. Climate-related financial risk management regulation (July 2025)
This binding CBUAE regulation establishes an overarching prudential framework, formalizing and expanding on the 2023 Principles. It mandates licensed UAE financial institutions to embed climate risk management across governance structures, internal capital adequacy processes (ICAAP), solvency assessments, and recovery planning. Institutions that have not yet fully implemented these requirements must submit detailed remediation plans with clear milestones.
These initiatives align with the UAE's ambitious target of mobilizing AED 1 trillion (approximately USD 272 billion) in UAE sustainable finance by 2030, announced at COP28, and complement the Guiding Principles Regarding Islamic Sustainable Finance for Shari'ah-compliant institutions operating in the UAE.
Implications and opportunities for UAE banks and financial institutions
Compliance with these CBUAE guidelines is no longer optional — it is a regulatory imperative that directly impacts supervisory ratings, capital requirements, and market reputation. UAE banks must now:
- Strengthen board and executive oversight of ESG risks.
- Develop sophisticated climate scenario analysis and stress-testing capabilities.
- Enhance data governance to support robust, verifiable ESG disclosures.
- Integrate sustainability into product development, lending policies, and client engagement.
Looking ahead: UAE's green finance future
The UAE's banking and financial sector is undergoing a fundamental shift towards sustainability — one that strengthens financial stability while contributing to national and global climate goals. The CBUAE's clear, progressive guidelines provide the roadmap; proactive UAE institutions that embrace them will thrive in the green economy of tomorrow.BDO in the UAE can help your organisation navigate CBUAE sustainability regulations, implement climate risk frameworks, and develop ESG disclosure strategies aligned with UAE regulatory requirements — contact our team to find out how.
LET'S WORK TOGETHER