As Bahrain’s policymakers work to create an environment conducive to the realisation of Bahrain Economic Vision 2030, the UN Sustainable Development Goals and the kingdom’s net-zero target, businesses are aligning strategic priorities and operational practices with national environmental and socio-economic objectives. In particular, investment in clean energy and energy-efficiency solutions, as well as sustainable transport and infrastructure, has prompted businesses to re-evaluate how best to provide or obtain funding for projects that support the broader national agenda for sustainable development. For banks, this typically involves publishing green or sustainable finance frameworks that outline target areas, criteria and intended outcomes for funding sustainable projects, and developing specialised loans and financing mechanisms. However, companies seeking funding for such projects may develop their own transition-financing frameworks to emphasise their sustainability targets, planned investment and intended outcomes ahead of issuing debt finance instruments or applying for loans.
Regulatory Environment
The Central Bank of Bahrain (CBB) and Bahrain Bourse have been active on the regulatory side in promoting environmental, social and governance (ESG) reporting among listed firms. While annual ESG reports are important for companies to explain their strategies for – and progress made towards – reducing their carbon footprints and risk exposure, they serve a different purpose to corporate and national sustainable finance frameworks. While the Bahrain Association of Banks has been advocating for the creation of a green finance policy framework, the CBB is still working towards finalising a comprehensive policy to guide lenders in supporting sustainable projects. Although the CBB’s Rulebook does not yet include specific guidelines for green products and services, this presents an opportunity for the kingdom to develop a tailored approach that meets its unique needs. In the meantime, some Bahraini banks and companies have embraced sustainability by developing their own innovative finance frameworks, drawing on international standards and best practices. This proactive approach demonstrates the commitment and forward-thinking mindset of the kingdom’s financial sector.
Corporate Developments
As the national energy company, Bapco Energies has the potential to significantly impact the kingdom’s sustainable development trajectory. In recent years the company has undergone a rebranding and restructuring exercise as it pivots away from the hydrocarbons sector and looks to invest in a wide variety of clean and sustainable energy projects. As part of these efforts, in January 2024 Bapco Energies launched its Transition Finance Framework on the sidelines of the World Economic Forum as the basis for issuing transition bonds, sukuk (Islamic bonds), loans and other debt instruments in order to help fund eligible transition projects as defined in the framework. The document outlined the organisation’s commitments to reducing greenhouse gas emissions in both net intensity and absolute terms, as well as the initiatives it intends to undertake to achieve these reductions. By defining clear criteria for raising funds for specific types of projects tied to the company’s long-term sustainability and diversification strategy, Bapco Energies has helped build trust among local and international investors and creditors.
On the creditors’ side, individual banks in Bahrain have been taking their own actions to develop sustainable finance frameworks, products and services. For example, the Arab Banking Corporation published its sustainable finance framework in 2023, helping mobilise $2.3bn in sustainable finance that year, with green finance and social finance comprising 63% and 37% of the total, respectively. In addition, the National Bank of Bahrain said in its 2023 annual report that it is at an advanced stage of implementing a sustainable finance framework, in line with the International Capital Market Association and Loan Market Association.
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