The ADGM Fund rulebook provides for detailed guidelines on the formation and constitution of a fund in the financial centre. The ADGM Fund rulebook has provisions for specialist classes of Funds, which include funds such as Umbrella Funds, Real Estate Investment Trusts (REITs), Venture Capital Funds, Private Credit Funds, ADGM Green Funds, ADGM Climate Transition Funds, and several others. This article will study the requirements for a fund to be eligible as a Green Fund or Climate Transition Fund.
A Fund that merely has green or climate transition objectives is not required to become an ADGM Green Fund or an ADGM Climate Transition Fund. The specific terminology can only be used by funds that have obtained the relevant designation in their documentation and promotional materials from the regulator.
Both the ADGM Green Fund and ADGM Climate Transition Fund must be domestic funds that meet their specific investment and attestation requirements.
Investment Requirements
The Fund Rulebook states that the Green Fund, in its prospectus, must mention that the Fund Property must comprise predominantly Eligible Green Fund Property. The Rulebook imposes a restriction on investment in fund property that is inconsistent with the overall green objectives of the Fund. An asset is considered an Eligible Green Fund Property if it is either considered environmentally sustainable or equivalent under an Acceptable Green Taxonomy or included in or otherwise tracks an EU Paris Aligned Benchmark.
As for the ADGM Climate Transition Fund, the Fund Property must comprise predominantly of the Eligible Climate Transition Fund Property. The Rulebook imposes a restriction on investment in fund property that is inconsistent with the climate transition objectives of the Fund. An asset is considered eligible climate transition fund property if it is
-Aligned with an Acceptable Climate Transition Taxonomy,
-A Security issued in accordance with ICMA Green Bond Principles and other similar standards,
– A Security included in or that otherwise tracks an EU Climate Transition Benchmark.
Attestation Requirements
The Fund managers of Green and Climate Transition Funds must appoint a third party to attest to their compliance with the fund requirements on an ongoing basis or at least annually. The attesting third party shall be independent, must have the required skills, resources, and experience to provide the attestation, and must have been provided with all documents, records, and information necessary to give the attestation.
Cancellation
The designation of Green or Climate Transition Fund can be cancelled upon application by the fund manager themselves. The regulator may cancel the designation if the Fund is not in compliance with the fund rules or if there is a contravention of the Financial Services and Markets Regulations.
Conclusion
The ADGM Funds Rulebook provides a clear roadmap for the funds interested in exploring these funds aligning the financial sector with global sustainability and climate objectives. The rules ensure that the designations are not merely symbolic but are genuinely committed to climate-conscious investments.
For more information, you may contact:
Thomas Paoletti
Francesca Romana Valeri
Fauzia Khan
