SCA Continues To Support Sustainable Investment With Extended Fee Exemption For Green Bonds And Sukuk

The Securities and Commodities Authority (SCA) has recently announced an extension of the exemption from registration fees for green or sustainability-linked bonds or sukuk. This decision, made by Mohamed Ali Al Shorafa, Chairman of the SCA Board of Directors, is aimed at encouraging companies to finance sustainable projects through these financial instruments. The exemption applies to registration applications submitted within the current year, aligning with Decision No. 5 of 2023 regarding the registration of securities for listing purposes.

Last June, the SCA's Board of Directors approved a proposal to exempt companies looking to list their green bonds or sustainability-linked sukuk in local markets from registration fees for the year 2023. This move is part of the UAE's broader agenda to achieve sustainable development goals, particularly in fostering sustainable economic growth.

The waived registration fee, initially set by Decision No. (32 / R.M) of 2018, is calculated at a rate of 0.01 percent of the issue's value, capped at AED 30,000. This exemption underscores the SCA's commitment to promoting environmentally friendly investment opportunities and supporting projects that contribute to environmental sustainability.

Furthermore, the SCA's Decision No. (21 / R.M) for the year 2023 AD has paved the way for public shareholding companies to issue green bonds and sukuk dedicated to financing or refinancing projects with positive environmental impacts. These projects include renewable energy, energy efficiency improvements, pollution prevention and control, sustainable natural resource management, biodiversity conservation, clean transportation, and sustainable water and wastewater management.

This regulatory framework also allows for the issuance of sustainability-linked bonds and sukuk. These financial instruments are designed to achieve specific sustainability objectives within a set timeframe, contributing to key performance indicators. The structural and/or financial characteristics of these bonds and sukuk may vary depending on whether the issuing company meets its predetermined sustainability goals.

The SCA's decision reflects a growing recognition of the importance of sustainable finance in addressing climate change and environmental degradation. By facilitating easier access to green finance, the UAE is positioning itself as a leader in sustainable development and investment in the Middle East.

With inputs from WAM