Adopting ESG criteria undoubtedly enhances a company's reputation, since it will tend to strengthen the confidence of consumers, who are increasingly attentive to companies' extra-financial performance. This strategy therefore has a direct impact on a company's long-term performance and access to capital, as ignoring these criteria can harm its profitability and supply chain. It can also prevent a company from obtaining more advantageous financing conditions, such as lower interest rates and green bonds, which brings us to investors' views on the adoption of these criteria.
Indeed, a company's adoption of ESG criteria can make a difference to investors' decisions, as they may favour ethical and responsible investments in order to reconcile their personal values with their financial choices. One study (NYU Stern) shows that 58% of research has found a positive link between ESG criteria and the financial performance of companies that adopt them, since their risks are reduced, notably by being less exposed to sanctions, scandals and financial losses.
The aim of the following section is to understand the different approaches of Quebec and the United Arab Emirates in relation to their laws, conservation initiatives, climate objectives and the challenges they face.
The main law in Quebec protecting the environment and prohibiting its degradation is the Environment Quality Act (EQA). Its aim is to safeguard living species, as well as providing for a system of authorization that may have an impact on the environment. The United Arab Emirates also has its own laws on environmental protection and development, notably Federal Laws Nos. 23 and 24 of 1999. Federal Law No. 23 specifically concerns the exploitation, protection and development of whitewater resources in the UAE, while Law No. 24 aims to prohibit the hunting, transfer, killing or elimination of terrestrial or marine organisms.
The Municipal Funds for Biodiversity enable Quebec municipalities to contribute to the protection and enhancement of natural environments on their territory. The Quebec government has also set up the Plan Nature 2030 with a view to restoring ecosystems and protecting endangered species. In the United Arab Emirates, ambitious biodiversity conservation initiatives have been launched, including the planting of 100 million mangrove trees by 2030, a target that has now been increased by a further 30 million.
By 2030, Quebec is committed to reducing its greenhouse gas emissions by 37.5%, as well as achieving carbon neutrality by 2050, just like the United Arab Emirates, which aims to eliminate net CO₂ emissions. Indeed, this flagship commitment is supported by projects such as the Barakah nuclear power plant, which will supply up to 25% of the country's electricity and reduce emissions by 22.4 million tonnes a year.
As demonstrated above, several initiatives have been put in place by Quebec and the United Arab Emirates, whether in terms of legislation, the conservation of their respective biodiversity or their climate objectives, but many challenges remain.
The objectives of the Strategic Plan for Biodiversity, established between 2011 and 2020, have not been fully achieved in Quebec, and the current plan for a green economy in 2030 will only enable a reduction of 15% on 1990 levels, well below the target. And, despite regulatory advances, the UAE still faces considerable environmental challenges, not least with the fossil fuel industry contributing significantly to air pollution, thereby creating major health risks. It is also important to note that current air quality standards in the UAE remain lower than those recommended by the WHO.
To attract international capital, many organizations have set up support programs and tax incentives, such as the Dubai Chamber of Commerce's ESG label, which encourages the integration of sustainability into decision-making processes and aims to assess companies' ESG maturity and provide reports to help them improve and enhance their attractiveness to investors.
On the regulatory front, the Sustainable Finance Working Group (SFWG) has published guidelines aligned with international standards (BCBS) to require financial companies to integrate climate risks into their strategies. Transparent reporting obligations are imposed by the Abu Dhabi Global Market (ADGM) on entities operating under its jurisdiction to enhance transparency and accountability. The DIFC (Dubai International Financial Center) also has its own legal, tax and regulatory system, designed to promote the growth of financial services and attract international capital.
In order to share best ESG practices within the UAE, several international and local institutions work closely together, notably the CCI France UAE, whose mission is to share key resources to align companies with international standards in connection with COP28, for example. The aforementioned ADGM and SFWG, for their part, work with institutions such as the Basel Committee to harmonize regulations and avoid greenwashing.
Many banks have introduced sustainable financing initiatives, facilitating the UAE's transition to carbon neutrality, with Emirates NBD and FAB launching green financing programs, including sustainable bonds.
Firms specializing in ESG criteria, such as ESG Integrate and the Emirates Environmental Group, help companies to develop ESG strategies. The ADGM has also simplified the administrative obligations for companies, with regulatory frameworks tailored to start-ups and SMEs.
Despite their inadequate standards and dependence on fossil fuels, which is slowing down their transition to clean energy, the United Arab Emirates are nevertheless taking initiatives, notably with partnerships that are setting international standards vis-à-vis ESG criteria, major banks that are encouraging sustainable financing, as well as their carbon neutrality targets by 2050 and federal laws to protect biodiversity.
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Dubai Chamber of Commerce (August 27, 2024). Chamber of Commerce launches ESG label to encourage sustainable practices. Emirates News Agency. https://www.wam.ae/article/1436xfg-lancement-dun-label-esg-par-chambre-commerce-pour
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