ESG Reporting in the UAE: Why Sustainable Finance Matters Now | Ghalib Consulting

ESG Reporting in the UAE: Why Sustainable Finance Matters Now

Introduction: The Day Everything Changed

I still remember sitting with a Dubai-based family business owner in early 2025. For fifteen years, he had built a successful logistics company, and like many UAE entrepreneurs, he prided himself on operational excellence. But that morning, he wasn’t talking about fleet efficiency or warehouse utilization. He was staring at a letter from his bank—a request for comprehensive ESG data before they would consider renewing his credit facility.

“Suddenly,” he told me, “everything we’ve built depends on numbers I’ve never tracked.”

His story is playing out across boardrooms throughout the UAE. The era of voluntary sustainability reporting has ended, and ESG Reporting in the UAE has become a business imperative that touches everything from banking relationships to regulatory compliance .

The Regulatory Earthquake: Federal Decree-Law No. 11 of 2024

When the UAE introduced Federal Decree-Law No. 11 of 2024 in May 2025, it marked a historic shift. The UAE became the first country in the MENA region to enforce climate-related corporate accountability through legislation .

This isn’t another voluntary framework. It’s the law.

The scope is unprecedented. Every state-owned, state-funded, and commercial entity operating in the UAE—including those in free zones—must now measure, report, and actively reduce greenhouse gas emissions . The message from leadership is clear: sustainability is no longer a choice but the foundation of future business success .

What the Law Actually Requires

For businesses, this translates into four core obligations :

1. Comprehensive GHG Inventory Creation: Centralizing energy, fuel, and operational data across entire value chains
2. Measurement, Reporting & Verification (MRV): Deploying robust systems ensuring data traceability and accuracy
3. Active Decarbonization: Moving beyond measurement to actual emission reduction strategies
4. Climate Risk Disclosure: Publicly reporting how climate change might affect business operations

The penalties for non-compliance are substantial—fines of up to AED 2 million, increasing to AED 4 million for repeated infractions . But experienced advisors suggest the commercial consequences may bite harder and faster than regulatory fines .

Beyond Penalties: The Commercial Reality

Jomy Joseph, Director at CoralDune Partners and former Regional Director for UL Solutions in the Middle East and Africa, puts it succinctly: “Even before enforcement is felt directly, the market itself is already moving in the same direction as the regulation” .

What does this mean practically?

Companies without compliant carbon accounting systems are already finding themselves excluded from tenders where sustainability disclosure is part of the qualification process. Major customers increasingly demand verified emissions data from suppliers. Banks subject borrowers to greater scrutiny based on ESG credentials .

One Abu Dhabi-based construction firm discovered this firsthand when they lost a significant government contract despite offering the lowest bid. The winning competitor had documented sustainability credentials; they did not.

The UAE’s Coordinated ESG Architecture

What makes ESG Reporting in the UAE unique is the sophisticated institutional framework supporting it. The UAE Sustainable Finance Working Group, comprising national financial regulators, ministries, and financial markets, has systematically built the infrastructure for sustainable finance .

Four Pillars of Progress

During Abu Dhabi Finance Week 2025, the Working Group issued its fourth statement, revealing progress across four critical workstreams :

Pillar 1: Sustainability-Driven Corporate Governance
The “Principles for Effective Management of Climate-Related Financial Risks” provide a comprehensive approach for integrating climate risks into business strategies and risk management frameworks within financial institutions .

Pillar 2: Sustainability-Related Disclosures
The “Sustainability Disclosure Principles for Reporting Entities” aim to enhance transparency and consistency in ESG reporting, aligning local practices with global standards including the International Sustainability Standards Board (ISSB) .

Pillar 3: UAE Sustainable Finance Taxonomy
The Working Group continues developing a taxonomy tailored to UAE market needs, ensuring international interoperability. This includes a color-coded “traffic light” system with minimum social safeguards .

Pillar 4: Climate Transition Planning
Newly issued “Climate Transition Planning Principles” provide a structured framework for UAE financial institutions and corporates to prepare, govern, and disclose credible climate transition strategies .

The ISSB Alignment: Speaking the Global Language

A significant development has been the UAE’s embrace of IFRS S1 and S2 sustainability disclosure standards. These form the global baseline for investor-grade ESG reporting, and UAE regulators are systematically aligning with them .

For private companies, this creates both challenge and opportunity. While not yet mandatory as a blanket requirement, banks and investors increasingly expect ISSB-aligned information packages. The roadmap points toward external assurance becoming the norm by 2026 .

What This Means for Different Company Types

Source: Based on Virtuzone analysis of UAE regulatory frameworks 

The MAJRA Factor: National Recognition for ESG Excellence

Beyond compliance, the UAE has created mechanisms to recognize and reward genuine sustainability leadership. The National CSR Fund—MAJRA—recently announced that nearly 300 companies have completed the mandatory Impact Declaration through the Sustainable Impact Digital Portal .

This represents the first phase in applying for the Impact Seal, a federal recognition for companies demonstrating measurable contributions to the UAE’s sustainable development. The response has been significant—approximately 160 applications for the second cycle, including 100 from SMEs and 60 from large corporates .

Sarah Shaw, CEO of MAJRA, observes that “the increasing engagement with the Impact Declaration and applications for the Impact Seal reflect a growing institutional commitment within the private sector toward transparency and measurable action” .

The Technology Revolution in ESG Reporting

Traditional approaches to ESG reporting—spreadsheets, manual data collection, fragmented systems—simply cannot meet the demands of regulated reporting under investor scrutiny . This has sparked a technology revolution.

AI-Powered Solutions

SustainInsight, launched in the UAE with AI-powered capabilities, functions as a “Bloomberg of sustainability”—a central intelligence hub consolidating all ESG data. Companies can upload documents directly into the platform, which uses AI and Optical Character Recognition to automatically generate reports aligned with international frameworks .

The platform includes predictive analytics to highlight decisions that may jeopardize sustainability targets, and a supplier rating model allowing firms to benchmark partners against ESG standards .

Sahen Ahuja, CEO of SustainInsight, notes: “With the UAE’s ESG regulations evolving fast, companies know they need to stay compliant. However, it can be challenging to put positive action into practice. We’ve streamlined the entire process so organizations can navigate the complex landscape with ease” .

From Spreadsheets to Systems

Jomy Joseph argues that spreadsheets, while familiar, were never designed to support long-term regulated reporting. Modern AI tools can automate data capture from invoices, fuel logs, utility bills, and ERP systems, classify it correctly, and flag anomalies before numbers reach management .

“The real issue is not the tool, but the outcome,” Joseph explains. “Can the organization produce numbers that are consistent year after year, backed by evidence, and ready to be checked?” 

A Practical Roadmap for UAE Businesses

Drawing on insights from regulators, industry experts, and companies already on this journey, here is a practical path forward for ESG Reporting in the UAE :

Phase 1: Foundation (2025)

• Conduct gap assessment against IFRS S1/S2 requirements
• Establish emissions baseline with clear calculation methodologies
• Map data sources and assign clear ownership
• Document everything—methodology books, data lineage, control processes

Phase 2: Capability Building (Late 2025)

• Implement data systems with proper controls
• Develop scenario analysis approach for climate resilience
• Draft pilot disclosures and conduct internal reviews
• Engage with assurance providers early

Phase 3: Assurance Readiness (Early 2026)

• Conduct pre-assurance walkthroughs
• Remediate gaps identified in testing
• Prepare comprehensive evidence packs
• Integrate ESG reporting with financial reporting timelines

Phase 4: External Assurance (Late 2026)

• Publish disclosures with limited assurance opinion
• Establish continuous improvement cycle
• Link ESG performance to management incentives

The Board’s New Responsibility

Perhaps the most significant shift is the elevation of ESG to board-level accountability. Regulators increasingly emphasize the critical role of boards and senior management in ensuring accountability for climate transition planning and integrating climate considerations into overall business strategy .

This means sustainability data now belongs in the same category as financial data—something boards and executives must understand, trust, and use to make decisions .

For many organizations, this requires cultural change. ESG can no longer be siloed in sustainability departments. It must become embedded in governance frameworks, risk management, and long-term financing plans .

Looking Ahead: The Future of Sustainable Finance in the UAE

The UAE’s sustainable finance journey is accelerating. Key developments to watch include :

• Sector-specific regulatory requirements as the Working Group refines implementation guidance
• Carbon credit market development through the National Register for Carbon Credits
• Continued international alignment ensuring UAE companies can compete globally
• Enhanced enforcement as regulatory capacity builds
• Supply chain ripple effects pushing requirements down to smaller companies

The direction is unmistakable. As one DFSA official noted, the UAE is moving from ambition to execution, translating national climate objectives into a financial ecosystem aligned with climate commitments and long-term economic vision .

Conclusion: From Compliance to Competitive Advantage

Returning to my logistics client—eight months after that anxious morning, his company has transformed. They now have robust data systems, clear reduction targets, and a sustainability story that differentiates them from competitors. When a major multinational sought logistics partners for their UAE operations, his early ESG work made him the obvious choice.

“Sustainability reporting felt like another burden,” he told me recently. “Now I realize it gave us a seat at tables we couldn’t access before.”

That’s the reality of ESG Reporting in the UAE today. Yes, compliance is mandatory. Yes, the penalties for failure are real. But for businesses that embrace this transformation, the opportunity is genuine. In a market moving decisively toward sustainability, credible ESG performance isn’t just about avoiding penalties—it’s about positioning for growth in the low-carbon economy.

The question is no longer whether your business will need robust ESG reporting. It’s whether you’ll lead or follow.

How Ghalib Consulting Can Support Your ESG Journey

At Ghalib Consulting, we help UAE businesses navigate the complex landscape of ESG reporting and sustainable finance. Our services include:

✅ ESG Readiness Assessments – Understanding where you stand against regulatory requirements
✅ Sustainability Reporting Frameworks – Building systems that generate credible, auditable data
✅ Regulatory Compliance Support – Navigating Federal Decree-Law No. 11 and exchange requirements
✅ Board-Level ESG Advisory – Embedding sustainability into governance and strategy
✅ Assurance Preparation – Getting ready for 2026 external assurance requirements

With deep expertise in both financial reporting and sustainability frameworks, we bridge the gap between compliance and competitive advantage.

📞 Contact us today to discuss your ESG reporting needs: