Dubai Financial Market to launch carbon credits trading pilot during Cop28

“The launch of carbon credit trading represents a logical progression for DFM as a platform for ESG-focused themes and building on our existing track record.”

The Dubai Financial Market (DFM), operator of the Dubai stock exchange, has announced the launch of a pilot program for trading carbon credits during Cop28.

This initiative, running from December 4 to 8, 2023, will conclude with an offsetting period ending on January 10, 2024. The pilot involves over 17 UAE companies, including prominent organizations like Dubai Electricity and Water Authority (DEWA), DP World, and Emaar.

The transactions will be facilitated through five DFM brokers: Al Ramz Capital, Arqaam Securities, BHM Capital, EFG Hermes, and Emirates NBD Securities. Clearing and settlement processes will be managed by Dubai Clear and the Dubai Central Securities Depository, using US dollars. Daily global price references will be provided by agencies such as Opis, a Dow Jones company.

Carbon credits at DFM supplied by DEWA and MyCarbon

Carbon credits for trading on the DFM will be supplied by DEWA and MyCarbon, sourced from internationally certified carbon projects. These projects have been verified by standard setters like Verra or the UN’s Clean Development Mechanism, ensuring the quality of the credits. Local DEWA projects will also offer quality carbon credits during the pilot.

Hamed Ali, CEO of DFM and Nasdaq Dubai, noted the growing global demand for carbon project financing and trade credits in the context of accelerating decarbonization efforts. “The launch of carbon credit trading represents a logical progression for DFM as a platform for ESG-focused themes and building on our existing track record.”

Dawood Abdulrahman AlHajri, director general of Dubai Municipality, highlighted the platform’s crucial role in achieving climate neutrality by 2050 and noted Dubai’s transformation into a hub for green economy innovations.

The UAE will host Cop28 at Expo City Dubai from November 30 to December 12, 2023, marking a significant event in global climate discussions. This pilot program in carbon credits trading is a key step in aligning the region’s financial practices with global sustainability goals.

ESG strategy is part of DFSA’s Business Plan for 2023-24

Earlier this year, the Dubai Financial Services Authority (DFSA) released its Business Plan for 2023-24, designed to foster an enabling environment for firms as Dubai and the UAE continue to grow their reputation as well-regulated and forward-thinking financial services hub.

Encapsulated within four strategic themes, the plan calls to focus on several key projects that cut across multiple strategic themes as the regulator further enhances its policy framework through the implementation of international standards, ongoing development of its support for trading venues and markets, and strengthening its regime for the protection of client assets to maintain the integrity of the DIFC financial services industry.

Fighting financial crime remains a key priority for the DFSA as it continues to support the federal authorities in implementing the recommendations arising from the Financial Action Task Force (FATF) Mutual Evaluation of the UAE in 2020.

The DFSA will also work at a national level to deliver approaches on corporate governance, disclosure, and taxonomy and continue to work with DIFC firms to improve engagement and understanding of ESG issues, as part of its efforts to meet the goals of the Paris Climate Agreement.

The regulator intends to leverage technology to address regulatory obligations and challenges and continue to update the broader regulatory regime within the DIFC so that it addresses market developments – both risks and innovations.