Following the COP28 UN Conference on Climate Change, hosted by the UAE in late 2023, GCC member countries have seen intensified regional efforts to expedite the energy transition, implement environmental strategies and establish new financial frameworks emphasising climate action. This shift has catalysed the emergence of new investment products and strategies that incorporate environmental, social and governance (ESG) factors. Consequently, there has been a surge in ESG reporting initiatives, a key element in promoting transparency and attracting responsible investment.
Reporting Framework
In November 2023 the Central Bank of Bahrain (CBB) issued ESG reporting requirements, in alignment with the kingdom’s broader economic development and sustainability strategies. These requirements are designed to elevate transparency and consistency by employing 32 metrics and indicators to establish a standardised framework for comparable disclosures concerning social and climate objectives. The new framework requires companies to provide detailed reports on ESG factors, including direct and indirect emissions, and adhere to Global Reporting Initiative standards. Applicable to listed companies, banks, financing companies, insurance firms and investment firms, these guidelines respond to the mounting demand from investors for increased transparency regarding ESG practices. Reporting requirements for listed companies and financial institutions are scheduled to come into effect at the end of 2024.
Drawing upon global standards and frameworks, the requirements promote effective ESG integration, incorporating insights gleaned from the CBB’s 2022 ESG Reporting Survey. This survey engaged all listed companies, insurance firms and banks, as well as a number of investment firms – revealing market attitudes towards ESG. Key findings indicated that 70% of respondents deemed ESG issues to be relevant to their business model and strategy, with 85% of non-reporting entities evaluating or planning ESG adoption in the near future. Moreover, 54% of respondents acknowledged the significance of ESG disclosures as a means of stakeholder communication.
Sustainable Development
Since 2018 the Bahrain Association of Banks has spearheaded sustainability efforts by establishing a permanent sustainable development committee aimed at amplifying the banking sector’s contribution to the UN’s 2030 Agenda for Sustainable Development. Similarly, Bahrain Bourse (BHB) has been aligned with the Sustainable Stock Exchanges Initiative since 2019, promoting sustainable practices in capital markets. In June 2020 it bolstered this commitment by issuing voluntary reporting guidelines for listed companies, showcasing proactive engagement in sustainable finance. Furthermore, in January 2023 BHB collaborated with the GCC Exchanges Committee and GCC General Secretariat to publish unified ESG disclosure metrics, enhancing transparency across GCC exchanges. Additionally, BHB’s dedication to sustainability was solidified when it joined the Net Zero Financial Service Providers Alliance in May 2024, emphasising its commitment to achieving net-zero greenhouse gas emissions by 2050.
Addressing ESG-related priorities aligns directly with Bahrain Economic Vision 2030, which includes sustainability as one of its three guiding elements, as well as the UN Sustainable Development Goals. To support this vision, Bahrain has developed a comprehensive National Energy Strategy, aiming for a 30% reduction in carbon emissions by 2035 and achieving net-zero emissions by 2060. This strategy supports overall economic diversification by reducing dependence on fossil fuels and minimising climate risks. Compliance and governance are also central to the strategy, with companies required to adhere to CBB’s ESG reporting standards to avoid greenwashing and facilitate clear reporting metrics. Ultimately, the ESG reporting framework encourages companies to integrate ESG factors into their operations, enhancing performance and competitiveness.
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