The Momentum and Mandate of Sustainable Finance in MENA: A Clymflex Perspective

Dubai, Riyadh, and Doha are converging on a powerful trajectory: sustainable finance is no longer a fringe concern but an operational imperative for banks. Clymflex has closely monitored this transformation across the Middle East and North Africa, and what emerges is a shared narrative among regulators in Qatar, the UAE, and Saudi Arabia that is both rigorous and forward leaning. Climate and ESG considerations are now enshrined in supervisory frameworks, risk oversight, product design, and disclosure expectations—marking a decisive shift from aspirational statements to enforceable practice.

In Qatar, the Qatar Central Bank (QCB) has taken a system-wide leadership position. Its 2024 ESG and Sustainability Strategy for the Financial Sector articulates not only a vision but foundational strategic pillars, and demands the same clarity from banks. Through its Supervisory Principles for Banks and complementary Sustainable Finance Framework Circular, QCB has made it clear that board level ownership, integration of climate risk into ICAAP and governance, transparent product frameworks, and credible disclosure are not merely good practice but they are mandatory. Banks that fail to align with these expectations expose themselves to enforcement under QCB's governing laws.

The institutional evolution is equally advanced in the UAE, where the Central Bank of the UAE (CBUAE) and its peers are integrating climate risk into macroprudential oversight and stress testing. The 2024 Financial Stability Report explicitly acknowledges climate risks—including both transition and physical dimensions—as material, and embeds scenario analysis (notably NGFS-based scenarios) in systemic resilience assessments. Simultaneously, the UAE Sustainable Finance Working Group, comprising multiple regulators, has issued foundational Principles for Effective Management of Climate-related Financial Risks and, more recently, Principles for Sustainability-Related Disclosures. These mandates are mirrored in the free zones: the DFSA in DIFC and the FSRA in Abu Dhabi Global Market (ADGM) have set stringent requirements around sustainable financial instruments, product governance, and anti-greenwashing controls, particularly for labeled offerings such as green and transition funds.

Saudi Arabia's approach, while grounded in prudential tradition, is advancing rapidly. The Saudi Arabian Monetary Authority (SAMA) has incorporated climate considerations into its Financial Stability Reports and supervisory toolkit, signaling that transition risk and physical exposures must be embedded within existing risk categories and ICAAP frameworks. At the same time, Tadawul (the Saudi Exchange) is raising the bar for ESG disclosures by listed firms, improving data quality for banks' underwriting and investment decision-making. Together, these forces are aligning climate and sustainability as financial realities, not academic abstractions.

Local Banks and the Sustainability Reporting Imperative

Across MENA, the regulator's message is clear: sustainability reports are no longer marketing collateral but they are strategic disclosures subject to supervisory review. Local banks in Qatar, the UAE, and Saudi Arabia are now expected to publish annual sustainability or ESG reports that align with internationally recognized frameworks such as the ISSB's IFRS S1 and S2, the GRI Standards, or SASB metrics, while also integrating region-specific guidance from central banks and securities regulators.

In Qatar, QCB's Sustainable Finance Framework explicitly ties reporting to the classification and monitoring of green and sustainable assets. Leading Qatari banks have begun integrating climate risk narratives into their annual reports, outlining financed emissions baselines, sectoral exposure analyses, and net-zero roadmaps. In the UAE, the influence of the SFWG's disclosure principles is evident in the increasingly data-rich sustainability reports of domestic banks—reports now contain scenario-based risk disclosures, Scope 1-3 emissions inventories, and detailed impact tracking for green lending portfolios. Free-zone institutions, particularly in ADGM and DIFC, face the additional expectation of product-level transparency, meaning sustainability reports must reconcile institutional climate strategies with fund- or bond-specific reporting.

Saudi banks, historically conservative in ESG communication, are accelerating disclosure maturity under dual pressure from SAMA's prudential oversight and Tadawul's ESG Disclosure Guidelines. The largest lenders are moving toward integrated reporting, linking financial and non-financial performance, disclosing financed emissions methodologies, and articulating climate-risk management within ICAAP documentation.

From a Clymflex perspective, the strategic value of these sustainability reports lies in their dual function: satisfying regulatory compliance while positioning banks as credible counterparties in the rapidly expanding sustainable finance market. A well-crafted sustainability report, grounded in robust data and forward-looking metrics, strengthens market trust, supports green capital raising, and aligns with the due-diligence demands of international investors.

The Strategic Imperative

What should banks operating across MENA take away from this regulatory evolution? The answer is clear: sustainability must be woven into the very fabric of strategy, risk, capital, and operations. Governance must be unequivocal in tone and accountability. Risk processes, from market and credit to capital planning, must reflect both transition and physical climate dimensions, grounded in robust scenario analysis. Sustainable finance products must be built on rigorous frameworks with clear eligibility criteria, tracked post-issuance, and communicated transparently to avoid greenwashing. Disclosure through sustainability reports and regulatory filings must ascend to global benchmarks, while meeting local supervisory nuances.

At Clymflex, we believe that banks who anticipate and embed these regulatory expectations will not only pass supervisory scrutiny but unlock broader opportunity. Sustainable finance is becoming foundational, not optional, and first movers will achieve dual dividends: regulatory alignment and enhanced reputation, funding access, and client strategy alignment. As MENA's sustainable finance landscape matures rapidly, the imperative is clear: act with rigor, ambition, and foresight or risk being left behind.