ADGM Mandates ESG Disclosure for Financial Advisors in Abu Dhabi

Q: How do ADGM's ESG disclosure rules differ from those of the SCA or ADX?

The Securities and Commodities Authority (SCA) and Abu Dhabi Securities Exchange (ADX) frameworks primarily target listed onshore companies at the issuer level. ADGM goes further by embedding ESG disclosure obligations into financial intermediation activities - meaning the advisory and portfolio management process itself must reflect ESG integration, not only the underlying companies being reported on.

Q: What compliance risks do advisory firms face if they cannot meet ADGM's ESG standards?

Firms that cannot evidence clear ESG integration in their advisory processes risk regulatory scrutiny from the FSRA, including potential licensing consequences. Beyond regulatory exposure, firms that fall short of these standards face reputational risk with institutional investors that carry their own sustainability mandates - and cross-border firms face added complexity from the need to reconcile ADGM obligations with SCA, ADX and overseas requirements simultaneously.

ADGM Mandates ESG Disclosure for Financial Advisors in Abu Dhabi

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ADGM implements mandatory ESG disclosure for financial advisors enhancing investment transparency in Abu Dhabi.

ADGM has updated its ESG requirements to require financial advisory and portfolio management firms to produce explicit ESG impact statements alongside portfolio recommendations.
The changes extend ADGM's ESG Disclosures Framework - first enacted in June 2023 - directly into the advisory process for institutional, professional and high-net-worth clients.
Firms must disclose how ESG factors are integrated into investment research, asset selection, portfolio construction and ongoing stewardship - not merely label products as sustainable.
The broader framework covers ADGM-registered companies above roughly USD 68 million in annual turnover and asset managers with AUM above approximately USD 6 billion.
ADGM's approach aligns with international standards including TCFD, GRI, SASB and the new ISSB frameworks, and introduces double materiality concepts into UAE advisory practice.
Cross-border firms must map ADGM requirements against SCA, ADX and potentially DIFC or overseas rules - a significant compliance project for international groups.

FSRA Embeds ESG Directly Into the Financial Advisory Process

Abu Dhabi Global Market (ADGM) has updated its regulatory expectations for financial advisory and asset management firms, requiring them to produce explicit ESG (Environmental, Social and Governance) impact statements alongside portfolio recommendations. The changes build on ADGM's ESG Disclosures Framework - originally enacted on 21 June 2023 - but go further by extending obligations into the advisory relationship itself. The framework now aligns with leading international sustainability standards, including those published by the Task Force on Climate-related Financial Disclosures (TCFD) and the International Sustainability Standards Board (ISSB).

The Financial Services Regulatory Authority (FSRA), which licenses and supervises firms operating in ADGM, is the driving force behind this regulatory evolution. Firms are expected to embed ESG considerations throughout their investment research, portfolio construction and client communication processes - not simply apply sustainability labels to products after the fact. For senior professionals advising institutional and high-net-worth clients, the practical impact is significant, touching documentation, data sourcing, governance and the application of double materiality principles in portfolio analysis.

What the New ESG Rules Require

ADGM's updated guidance requires FSRA-licensed advisory firms and portfolio managers to disclose clearly how ESG factors have shaped investment decisions for recommended or managed portfolios. This is a substantive step beyond general sustainability reporting. It embeds ESG transparency into the advisory relationship, meaning clients receive formal impact statements as part of the recommendation process rather than as a separate corporate disclosure.

Those statements must cover three dimensions of portfolio characteristics. Environmental disclosures include greenhouse gas emissions, energy use and exposure to high-impact sectors. Social disclosures address labour practices, diversity metrics and community impact, while governance disclosures cover board independence, shareholder rights and anti-corruption controls. Firms must also address "double materiality" - reporting not only on how ESG factors create financial risk, but on how portfolio activities affect wider environmental and social outcomes. This concept mirrors emerging practices in advanced regulatory jurisdictions internationally.

Scope and Thresholds: Which Firms Are Affected

The ADGM ESG Disclosures Framework applies from the third financial year after a firm's incorporation or continuance into ADGM, so the number of in-scope entities is growing each year. The regime covers ADGM-registered companies with annual turnover above approximately USD 68 million and FSRA-licensed asset managers with assets under management (AUM - the total market value of investments managed on behalf of clients) above approximately USD 6 billion. Smaller entities may adopt the framework voluntarily.

The advisory-specific ESG impact statement requirements apply most directly to FSRA-licensed firms dealing with institutional, professional and high-net-worth clients. Robo-advisors and digital investment managers operating in ADGM are not exempt - ADGM has maintained a dedicated regime for digital advisory since 2019, which requires algorithms to be explainable, traceable and repeatable. The new ESG impact statement obligations now extend into those automated environments, meaning technology governance and ESG disclosure have become increasingly intertwined.

UAE-Wide ESG Context: SCA, ADX and a Coherent National Direction

ADGM's updated requirements sit within a broader UAE-wide push on sustainability. Onshore, the Securities and Commodities Authority (SCA) requires ESG and sustainability disclosures for listed companies. The Abu Dhabi Securities Exchange (ADX) has issued detailed ESG disclosure guidance aligned with IFRS S1 and S2, the Global Reporting Initiative (GRI) and GCC ESG metrics - covering environmental data such as Scope 1-3 greenhouse gas emissions, social indicators including health and safety, and governance structures including executive remuneration policies.

According to legal advisory firm Charles Russell Speechlys, ESG has become a strategic necessity for UAE businesses - not only to meet regulatory requirements, but to preserve access to international capital markets and institutional investors that carry their own sustainability mandates. ADGM distinguishes its approach by embedding disclosure obligations across financial intermediation activities, rather than limiting them to the issuer level. This integrated model has drawn interest from other jurisdictions studying ADGM's framework as a potential reference point.

ADGM's sustainable finance agenda dates to at least 2019, when it issued a Sustainable Finance Agenda Declaration linking financial regulation to the UAE's Net Zero by 2050 strategic initiative. The latest advisory disclosure requirements are part of that progression - a deliberate effort to position Abu Dhabi as a leading jurisdiction for sustainability-oriented financial services.

Operational Implications for Advisory and Compliance Teams

For compliance and operations teams, the updated requirements translate into several practical workstreams. Firms will need to build robust methodologies for assessing ESG risks and opportunities at the issuer, sector and portfolio level, and select appropriate external data providers and metrics. They will also need to capture clients' sustainability preferences formally and document how those preferences are reflected in recommended strategies over time.

Cross-border firms and international groups managing portfolios from Abu Dhabi face additional complexity. Compliance teams must map ADGM requirements against those of the SCA, ADX and - where relevant - the Dubai International Financial Centre (DIFC) or overseas regulatory regimes. For groups operating across multiple jurisdictions simultaneously, this reconciliation exercise represents a significant compliance project. Holtara and Breathe ESG both note that firms should treat this as an ongoing governance process rather than a one-time documentation task.

What Clients are Asking their Advisors

What is an ESG impact statement and why is ADGM requiring one from financial advisors?

An ESG impact statement formally documents a portfolio's environmental, social and governance characteristics - covering factors such as carbon footprint, labour practices and board governance quality. ADGM now requires these statements to accompany portfolio recommendations so that professional and institutional investors can assess sustainability alignment before committing capital, rather than relying on general product labels.

Which ADGM-licensed firms are affected by the new ESG advisory disclosure rules?

The requirements apply to FSRA-licensed financial advisory firms and portfolio managers dealing with institutional, professional and high-net-worth clients. The broader ADGM ESG Disclosures Framework additionally covers ADGM-registered companies with annual turnover above approximately USD 68 million and asset managers with AUM above approximately USD 6 billion.

How do ADGM's ESG disclosure rules differ from those of the SCA or ADX?

The SCA and ADX frameworks primarily target listed onshore companies at the issuer level. ADGM goes further by embedding ESG disclosure obligations into financial intermediation activities - meaning the advisory and portfolio management process itself must reflect ESG integration, not only the underlying companies being reported on.

What compliance risks do advisory firms face if they cannot meet ADGM's ESG standards?

Firms unable to evidence clear ESG integration in their advisory processes face regulatory scrutiny from the FSRA, including potential licensing consequences. Beyond that, firms that fall short risk reputational damage with institutional investors that carry their own sustainability mandates - and cross-border firms face additional exposure from the need to reconcile ADGM obligations with SCA, ADX and overseas requirements at the same time.