As sustainability becomes a global priority, countries are implementing Environmental, Social, and Governance (ESG) frameworks to promote corporate responsibility, transparency, and long-term value creation. Once slow to adopt sustainability-focused policies, the Middle East rapidly integrates ESG regulations into its financial and corporate sectors. Let us uncover this through our Middle East ESG guide.
With national visions like Saudi Vision 2030, UAE Net Zero 2050, and Bahrain Economic Vision 2030, governments are setting ambitious targets for sustainability, carbon reduction, and responsible governance. However, ESG regulations vary across the region, with some countries mandating disclosures while others encourage voluntary reporting.
This Middle East ESG guide provides an in-depth analysis of ESG reporting frameworks in the Middle East, highlighting key regulations, industry impact, challenges, and opportunities for businesses operating in the region.
Understanding Middle East ESG Guide
What is ESG Reporting?
ESG reporting is the process by which companies disclose their environmental, social, and governance performance, risks, and strategies. It serves multiple purposes:
Enhancing corporate transparency and accountability
Attracting sustainable investments from global funds
Ensuring compliance with local and international regulations
Strengthening corporate reputation and stakeholder trust
Supporting climate action and social impact initiatives
Country-by-Country Breakdown of ESG Regulationsthrough Middle East ESG guide
1. United Arab Emirates (UAE)
The UAE has been a regional leader in sustainable finance and ESG adoption, with mandatory reporting requirements for some industries and voluntary guidelines for others.
Key Regulations:
The Abu Dhabi Global Market (ADGM) Sustainable Finance Regulatory Framework (2023) outlines ESG disclosure requirements for financial institutions.
The Dubai Financial Market (DFM) ESG Reporting Guidelines encourage listed companies to disclose sustainability-related information.
Mandatory/Voluntary:
Mandatory for ADGM-listed financial institutions.
Voluntary for other businesses listed on DFM and Abu Dhabi Securities Exchange (ADX).
Industries Affected:
Financial institutions
Publicly listed companies
Renewable energy and sustainability-focused businesses
Penalties: Non-compliance may lead to regulatory scrutiny, loss of investor confidence, and potential sanctions for financial institutions.
2. Saudi Arabia
Saudi Arabia is driving ESG adoption through its Saudi Vision 2030 strategy, emphasizing sustainable finance, responsible investing, and green energy.
Key Regulations:
The Saudi Capital Market Authority (CMA) ESG Disclosure Guidelines (2019) encourage ESG reporting among publicly listed companies.
The Public Investment Fund (PIF) Sustainability Guidelines require portfolio companies to align with ESG best practices.
Mandatory/Voluntary:
It is voluntary for most companies but is expected to become mandatory shortly.
Industries Affected:
Energy (including Saudi Aramco and renewable projects)
Financial institutions
Real estate and construction (aligned with Saudi Green Initiative)
Penalties: Currently, there are no direct penalties, but non-compliant companies may face difficulty in securing investments from Saudi’s sovereign wealth funds.
3. Qatar
Qatar prioritizes ESG reporting to attract foreign investments and align with international sustainability goals.
Key Regulations:
The Qatar Stock Exchange (QSE) ESG Reporting Guidelines encourage listed companies to disclose ESG data.
Mandatory/Voluntary:
Voluntary for QSE-listed companies.
Industries Affected:
Energy and natural resources
Banking and financial institutions
Penalties: No penalties for non-compliance, but ESG reporting enhances investor attractiveness.
4. Kuwait
Kuwait has recently made ESG reporting mandatory for a segment of its capital markets.
Key Regulations:
Circular No. (04) of 2025 mandates sustainability reporting for all companies listed on the First Market of the Kuwait Stock Exchange starting in 2026.
Mandatory/Voluntary:
Mandatory for First Market-listed companies from 2026.
Voluntary for other businesses.
Industries Affected:
All publicly listed companies on the First Market.
Penalties: The Capital Markets Authority (CMA) may impose regulatory sanctions if the company does not submit ESG reports by Q2 2026.
5. Oman
Oman is advancing its sustainability agenda through regulatory incentives and ESG frameworks.
Key Regulations:
The Muscat Stock Exchange (MSX) ESG Guidelines outline reporting best practices.
Expected mandatory ESG disclosure from 2025.
Mandatory/Voluntary:
Voluntary until 2025.
Mandatory for publicly listed companies from 2025.
Industries Affected:
Oil & gas, utilities, and industrial companies.
Penalties: To be determined upon full implementation in 2025.
6. Bahrain
Bahrain’s ESG framework supports corporate sustainability, with a growing emphasis on green finance and responsible business practices.
Key Regulations:
The Bahrain Bourse ESG Reporting Guidelines (2020) outline disclosure expectations.
Mandatory/Voluntary:
Voluntary at present.
Industries Affected:
Financial services
Manufacturing
Telecommunications
Penalties: No penalties, but sustainability-linked financing is being promoted.
7. Jordan
Jordan is in the early stages of ESG regulation but is moving towards alignment with global sustainability standards.
Key Regulations:
No formal ESG mandates yet.
The government is expected to introduce voluntary guidelines shortly.
Mandatory/Voluntary:
Currently not applicable.
Industries Affected:
The banking and renewable energy sectors are expected to be the first to adopt these technologies.
Penalties: None, but future regulations may include enforcement mechanisms.
Global ESG Trends Influencing the Middle East
The Role of International ESG Standards through Middle East ESG guide
The Middle East is rapidly aligning its sustainability policies with global ESG standards to remain competitive in international markets, attract foreign investment, and comply with trade regulations. Several key global sustainability trends are shaping regional ESG frameworks:
1. The Paris Agreement and Net Zero Commitments
The Paris Agreement sets a global framework to limit global warming to below 2°C and urges countries to work towards net-zero emissions by 2050. Middle Eastern nations—including the UAE, Saudi Arabia, Oman, and Bahrain—have set long-term net-zero goals, influencing ESG regulations and mandating industry carbon tracking and reduction measures.
2. The EU’s Carbon Border Adjustment Mechanism (CBAM)
The CBAM, enforced by the European Union, will impose a carbon tariff on imports from countries that lack stringent carbon pricing policies. This policy directly impacts Middle Eastern businesses exporting to the EU—especially those in steel, aluminum, cement, fertilizers, and energy-intensive sectors. Regional companies must measure, report, and reduce their carbon footprint to remain competitive and meet EU trade requirements.
3. Rise of Green Finance and ESG-Linked Investments
Financial institutions worldwide are incorporating ESG risks into their investment decisions. The Middle East’s banking sector is adapting, with sustainability-linked loans and green bonds becoming increasingly common. Central banks and stock exchanges in Saudi Arabia, UAE, and Bahrain require banks and listed companies to disclose ESG-related financial risks.
4. Shift Towards Renewable Energy and Clean Technology
Governments across the region are heavily investing in renewable energy projects as part of their sustainability goals. Initiatives such as Saudi Arabia’s Vision 2030, UAE’s Net Zero by 2050, and Oman’s Green Hydrogen Strategy create opportunities for businesses to integrate clean energy solutions and energy-efficient technologies into their operations.
3. Industry-Specific ESG Strategies in the Middle East
Why ESG Strategies Differ by Industry
Each industry has unique environmental, social, and governance challenges, requiring tailored ESG strategies. Here’s how different sectors in the Middle East are approaching sustainability:
1. Construction & Real Estate
Adoption of green building certifications like LEED, Estidama, and Al Safat
Mandatory energy efficiency measures in new developments
Sustainable material sourcing and waste management strategies
2. Manufacturing & Heavy Industry
Emission monitoring & reporting in compliance with UAE and Saudi carbon neutrality targets
Adoption of clean energy sources such as hydrogen and solar power
Implementation of circular economy models to minimize industrial waste
3. Transportation & Logistics
Transition to electric and hydrogen-powered fleets
Development of carbon offset programs to neutralize emissions
Innovative logistics solutions to optimize routes and reduce fuel consumption
4. Financial Services
Implementation of ESG-based investment strategies
ESG disclosure requirements for listed companies
Growth of green finance options, including ESG-linked loans
4. ESG Reporting Frameworks: What Companies Should Follow
Understanding and selecting the proper ESG reporting framework is essential for companies looking to comply with Middle Eastern regulations and global investor expectations.
1. Global Reporting Frameworks Used in the Middle East
GRI (Global Reporting Initiative)
Best for: General ESG disclosures
Commonly used in UAE, Saudi Arabia, Kuwait, and Qatar
Key Benefit: Provides a structured framework for businesses to disclose ESG-related financial and non-financial data
SASB (Sustainability Accounting Standards Board)
Best for: Industry-specific sustainability reporting
Commonly used in: Saudi Arabia, Bahrain, UAE
Key Benefit: Focuses on financially material ESG factors relevant to specific industries
TCFD (Task Force on Climate-related Financial Disclosures)
Best for: Climate risk reporting
Commonly used in: UAE, Saudi Arabia, and financial institutions across the region
Key Benefit: Helps businesses assess climate-related risks and opportunities affecting their operations
IFRS Sustainability Standards (ISSB)
Best for: Integrated ESG & financial reporting
Commonly used in: Financial institutions, publicly listed companies, and investment firms
Key Benefit: Aligns ESG performance with corporate financial reporting requirements
5. Challenges Companies Face in ESG Compliance
While ESG adoption is growing in the Middle East, companies face several obstacles in integrating sustainability into their business strategies:
1. Lack of ESG Data and Standardized Reporting
Many businesses struggle with inconsistent ESG data collection due to a lack of clear reporting frameworks and limited access to digital tools for monitoring sustainability metrics.
2. High Costs of ESG Compliance and Sustainable Investments
For SMEs and emerging companies, the financial burden of implementing ESG initiatives—such as carbon tracking, sustainability reporting, and green technology adoption—can be a challenge.
3. Evolving Regulatory Landscape
With ESG regulations still developing, companies often find it difficult to stay updated with changing compliance requirements. Failure to comply can result in legal penalties, reputational damage, or loss of investor confidence.
4. Talent & Workforce Training Gaps
Companies need skilled professionals who understand ESG strategy, carbon accounting, and sustainability reporting. Investing in ESG training programs is becoming essential for organizations looking to meet compliance requirements.
6. The Future of ESG in the Middle Eastthrough Middle East ESG guide
Looking ahead, ESG adoption in the Middle East will accelerate, with several key trends shaping the region’s sustainability landscape:
1. Stricter ESG Compliance & Expansion of Mandatory Reporting
The UAE, Saudi Arabia, and Kuwait are expected to expand ESG disclosure requirements beyond publicly listed companies to include private sector firms and SMEs.
Government-backed ESG frameworks will become more structured and aligned with international reporting standards like IFRS & GRI.
2. Integration of AI & Digital Tools in ESG Reporting
Businesses will leverage AI-powered ESG analytics platforms for real-time carbon tracking and sustainability performance monitoring.
IoT and blockchain will play a role in verifying supply chain sustainability and ensuring regulatory transparency.
3. Growth in ESG-Linked Financing and Green Bonds
Financial institutions in the Middle East will expand ESG investment options to support sustainable projects, clean energy initiatives, and green infrastructure.
More companies will issue ESG-linked bonds and sustainability-linked loans to fund their transition towards carbon neutrality.
4. ESG Integration into Government Procurement & Trade Agreements
Countries like UAE, Saudi Arabia, and Qatar are expected to introduce ESG criteria in government tenders and public-private partnerships.
ESG compliance may become a key factor for international trade agreements, particularly with regions implementing CBAM-like regulations.
Opportunities for Businesses
Early Adoption Advantage: Companies that adopt ESG practices now will gain a competitive edge in securing international funding.
Access to Green Finance: Governments and investors offer green bonds and sustainability-linked loans.
Operational Efficiency: ESG practices help companies optimize energy use, reduce costs, and improve resource efficiency.
Enhanced Brand Reputation: Companies with strong ESG strategies are more attractive to customers and partners.
Conclusion
The Middle East is rapidly evolving its ESG landscape. Some countries mandate reporting, while others encourage voluntary compliance. Businesses that embrace ESG now will be better positioned to attract investments, mitigate risks, and drive long-term success. Hope you got your answer through our Middle East ESG reporting guide.
As ESG becomes the norm, companies must stay ahead of regulatory changes. Partnering with Clenergize Consultants ensures you remain compliant, competitive, and committed to sustainability.
Need expert ESG guidance? Contact Clenergize today.
