COP28 transformed ESG investment narrative in the Middle East: Abu Dhabi Securities Exchange’s strategy chief

As the largest capital market in the United Arab Emirates (UAE) and the second-largest market in the Middle East, ADX is home to big blue chips such as Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, ADNOC Distribution, Abu Dhabi Ports, ADNOC Drilling Company, ADNOC Gas, the list goes on. 

And while the energy sector features prominently on that list, ADX has firmly committed to driving sustainability in its financial markets. 

The exchange says all its listed companies issue sustainability reports.  

In this podcast, Eco-Business’ Middle East correspondent, Rachel Kelly sits down with Matthias Büchler, chief strategy and transformation officer at ADX to discuss sustainability as a key pillar of growth for ADX, and the role COP28 has played in shaping the environmental, social and governance (ESG) investment narrative in the region.   

ADX’s chief strategy and transformation officer Matthias Büchler. Image: Abu Dhabi Securities Exchange

Sustainability is a very broad term which can mean many things to many people. What does sustainability mean to you? 

Sustainability is a core pillar at ADX, in what we do and our direction. We’re a very important member of the Abu Dhabi financial ecosystem and have embedded ESG both in our strategy and day-to-day operations. It’s important to note we also have regulatory functions when it comes to ESG, so we inform and enforce reporting standards and requirements for the companies listed on ADX. We’re around AED 3 trillion (US$816 billion). To put this in perspective, that puts us in the world’s 20 largest exchanges, and we have many large blue chips listed with us. 

As you mentioned, sustainability plays an important role, from your perspective and your role as chief strategy and transformation officer, how does that integrate with your strategy as an exchange? Given your size and the types of listings that you have in Abu Dhabi? 

An exchange is a platform, and we bring together different market participants who have various needs across the capital market. So, what then is our role, and how do we embed it? 

First, we need to be part of the ecosystem, and we need to talk with one voice. ESG wouldn’t work if everybody did their own thing. So, we have a very strong view and commitment towards cooperation.  What do we do along these lines? First, we are an active member of the United Nations’ Sustainable Stock Exchanges initiative where we participate and implement their outcomes.  

Secondly, we are also part of something that might not be as well known, the GCC (Gulf Cooperation Council) Exchanges Committee, together with the colleagues from the other exchanges, we have established a unified set of ESG disclosure metrics for listed companies. There are 29 standards aligned with the World Federation of Exchanges and the United Nations Sustainable Stock Exchanges Initiative.  

I think this is extremely important, because what you ultimately want is familiarity, especially as we have had several very large IPOs (initial public offerings) in 2023 and 2024 that attracted international investors, and they in particular want to be familiar with the ESG standards. Therefore, the operation and adoption of international best practices is crucial for us.  

How would you describe the attitude towards sustainability for listed companies and corporates in in the region? 

For Abu Dhabi specifically, the leadership and government have taken a very strong position on the importance of ESG. I think this was reflected in COP28, and the support from Abu Dhabi-based companies.  

The tone has been set at the top, and you can see that we as the regulator are adopting this clear commitment. We are talking to the listed companies and encouraging them to adopt it. Now, the good news is that the listed companies themselves are very proactive when it comes to ESG adoption and reporting. As in any exchange, there’s obviously a slight difference between the organisation’s capacity and capability, not everybody has a fully-fledged, dedicated ESG team. But we are very happy to say that as of today, all our listed companies, regardless of size, industry, business model are issuing ESG reports to our standards.  

Büchler speaking at an ADX event. Image: Abu Dhabi Securities Exchange

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Just to repeat, from looking at the current sustainability reports, all listed companies are issuing ESG reports?  

All our companies issue reports to our standards. You asked about evolution, which is a great question on where we’re heading. There are the 29 standards previously mentioned in terms of disclosure. Over time, this will evolve, meaning the standards and requirements will broaden and deepen for ESG reporting. So we took the approach, where this is the bare minimum we expect everyone has to comply. And from there on, we will build. 

What kind of training do you conduct to support listed companies on the path to improving sustainability reporting standards? 

We actively listen to the investors’ requirements, whether they are local, retail or institutional and other market participants, so we can come up with the best option that serves the whole market ecosystem.  

What we actively provide to our listed companies specifically, is that we regularly update them on our direction in terms of regulatory requirements. We have roundtables with them, we bring in industry experts and lots of discussion with members on the benefits of green capital and their impact.  

Is there demand for sustainable products from local investors?  

When it comes to listed companies, to cash equities, as an emerging market, there’s a lot of education we must do. To create awareness among the investors that the disclosures exist, what they consist of, where to find them, what their meaning is and so on. So, we have a very active role in investor education. And I would say, as a market, we are at the nascent stage.  

But we have seen, increasingly, demand on our website and publications in terms of active reading and downloads. We also have webcasts with our listed companies around, where we interview their chief financial or sustainability officers, and we’ve seen a great pick-up by the retail portion of the market, around these educational and awareness initiatives.  

Students visiting the Climate Finance Hub in the Green Zone at Expo City Dubai which hosted the largest United Nations climate change gathering in history. Image: Jessica Cheam / Eco-Business

You mentioned COP 28 earlier, how much do you think it moved the needle when it comes to ESG investing in the region? 

COP 28 not only moved the needle, it was an absolute game changer, locally and internationally. We can clearly see that it has massively accelerated and propelled ESG adoption and support here in Abu Dhabi and in the UAE. 

Moving on from equities. Now I wanted to talk to you about green debt instruments. At ADX you have got a number of green debt instruments. Can you talk to me about how these have also been received by the market? 

Green debt instruments have been tremendous success stories here at ADX. Let me be specific. We have seven green debt instruments, denominated in US dollars and dirhams. The dollar-denominated instruments are around US$9 billion, and the others around AED 2 billion (US$544 million). 

To highlight a few key transactions, we had Mubadala with the green bond that was oversubscribed nine times both locally and internationally. ADIB (Abu Dhabi Islamic Bank) launched the US$500 million green senior sukuk, again five times oversubscribed. And we also had a dirham-denominated green sukuk issued by the First Abu Dhabi Bank, and green bonds by Aldar Properties. All these bonds were massively oversubscribed locally and internationally. I think this shows that there’s a real demand from retail, institutional, local and international investors for these instruments. And there is a significant amount of trust in ADX and the fact that when we bring something to the market, it is a real, green instrument that meets reporting and regulatory requirements. And therefore, is a good investment from an ESG point of view.  

We’ve spoken about equities; we’ve spoken about debt. What else have you got in the pipeline when it comes to sustainability? 

Our pipeline is a continuous evolution of where we are today. So, where do we want to further build? 

First and foremost, increase the reporting requirements relevant to market participants. Secondly, we want to continuously drive education for retail and international investors. What is ESG at ADX? What does it mean? What does it consist of? Education comes first to drive adoption. 

Furthermore, we are positive in seeing more green debt instruments coming online. All this together shows that ESG is not a trend for us. In the UAE, ESG is here to stay, and it has become a relevant investment decision criterion. 

If you were to look 10 years down the line. What do you think ADX would look like, and how would sustainability have shaped that? 

In 10 years’ time, as a hypothetical frame timeframe, I would say that you will have a much higher standardisation of ESG reporting, of ESG disclosure. Today across the capital markets on an international basis, I would say there are too many standards, views, approaches, so you will see little consistency. ADX will be part of that journey, and we will be one of the early adopters of a standardised framework. Our list of companies will be very proactive in moving into an international standard reporting framework. 

This transcript has been edited for brevity and clairty