Central Bank of Bahrain issues ESG reporting requirements

November 30, 2023|Written by Ingrid Walker

The Central Bank of Bahrain (CBB) has issued ESG reporting requirements that will be applied to a comprehensive range of listed companies and financial institutions from the end of 2024.

The standard’s stated aim is to establish a uniform framework to foster “consistency and reliability” in ESG reporting, and facilitate transparent and comparable disclosures in pursuit of social and climate-related objectives.

The requirements have been developed as part of Bahrain’s commitment to the UN’s Sustainable Development Goals. They are also a key pillar of the country’s economic vision for shaping the government, society and the economy around the principles of sustainability, fairness and competitiveness.

The reporting requirements will apply to all listed companies, banks, insurance firms, financing companies and most investment firms. It includes scope 1, 2 and 3 emissions, employs the principle of double materiality, and primarily draws on the Global Reporting Initiative (GRI) standards.

As an oil-rich developing state situated on a small archipelago, Bahrain faces material physical and transition risks. Despite the government’s efforts to diversify the economy, oil and natural gas play a dominant role in the economy, comprising 85% of revenues.

Due to environmental risks, such as water scarcity, sea level rise and desertification, Bahrain is exposed to substantial climate and environmental vulnerability and has significant adaptation finance needs.

According to the CBB’s standard, ESG reporting can bring several benefits to Bahrain, namely improved reputation, attracting diverse investment and better risk management.

Though the region has historically focussed on the governance aspect of ESG, Bahrain and other Gulf Coast countries are under increasing pressure to decarbonise their economies and invest in widening access to social benefits.

Bahrain has committed to net zero by 2060, although Natalie Stafford, director of ESG at intelligence consultancy S-RM, commented recently that these promises “gloss over the region’s continued economic reliance on fossil fuels”.

In line with the nation’s goals of diversifying its economy and increasing the share of renewables, the standard requires companies to provide a breakdown of energy consumption by source, including the percentage of renewable and non-renewable energy used.

The standard also addresses Bahrain’s enduring workers’ rights issues by including KPIs on labour and human rights. Despite improvements in labour issues in recent years, including the establishment of the Labour Market Regulatory Authority, according to the World Directory of Minorities and Indigenous Peoples’ findings, more work is needed.

The CBB standards emphasise that companies must avoid the greenwashing practice of “making misleading or exaggerated claims about the environmental or social benefits” and use clear reporting metrics not vague descriptions.

The CBB has produced a framework to support credible ESG reporting, although Bahrain’s dependency on fossil fuel revenues and history of workers’ rights issues present challenges. According to Stafford, alongside the rest of the Gulf Coast region, Bahrain must address pressing social issues as a “prerequisite to ESG being taken seriously”.

This page was last updated November 30, 2023

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