| Central Bank of Oman Introduces New Requirements on Sustainable and Green Financial Practices for Banking Sector | | | 10/14/2024 7:15:00 AM | Central Bank of Oman Introduces New Requirements on Sustainable and Green Financial Practices for Banking Sector | The Central Bank of Oman today issued a new circular aimed at strengthening the banking sector's resilience to climate-related risks. | <p style="text-align:justify;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3">The Central Bank of Oman today issued a new circular aimed at strengthening the banking sector's resilience to climate-related risks. The circular emphasizes the importance of integrating climate risk management into banks' overall operations, from governance and strategy to risk assessment and disclosure.</span></p><p style="text-align:justify;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3">The circular also emphasized the importance of a holistic approach to sustainability, encouraging banks to voluntarily adopt broader environmental, social, and governance (ESG) factors, which can help them not only contribute to a more resilient and sustainable economy but also enhance their reputation, attract sustainability focused investors and mitigate potential risks.</span></p><p style="text-align:justify;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3">"Climate change may pose significant risks to the financial sector, but it also offers opportunities to drive innovation and growth through sustainability," <strong>said H.E. Tahir al Amri, Executive President of the Central Bank of Oman</strong>. "This circular is an important step in aligning our banking sector with Oman's National Strategy for an Orderly Transition to Net Zero. By equipping our banks to manage climate risks, we are ensuring that they play an active role in supporting the nation's sustainability efforts and long-term vision for a resilient, low-carbon economy."</span></p><p style="text-align:justify;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3">The circular also suggests banks to actively participate in sustainable finance initiatives by issuing sustainable/green finance instruments, investing in sustainable assets, and offering green loan/financing products that support environmentally beneficial projects. Through this circular, the Central Bank also emphasizes the importance of capacity building of their staff to equip them with the necessary knowledge and skills to integrate ESG considerations into their work. Additionally, banks can play a crucial role in educating customers and the general public about the benefits of sustainable financial practices.</span></p><p style="text-align:justify;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3">The circular applies to all locally incorporated conventional, Islamic, and specialized banks in Oman, as well as branches of foreign banks operating in the country. </span>Banks have been asked to assess their current practices against the circular's requirements and develop an implementation plan with a clear timeline, interim targets and milestones. This plan, approved by respective board of directors, should be submitted to the Central Bank of Oman by June 30, 2025.</span></p><p style="text-align:justify;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3">The effective date and transitional arrangements outlined in the circular are designed for smooth implementation. Provisions related to the “integrity of sustainability claims and communications" will take immediate effect, ensuring transparency in environmental claims. Similarly, requirements related to governance, strategy, risk management, and additional recommendations related to ESG factors will be effective from July 1, 2026, allowing banks time to adjust their practices. Disclosure requirements will take effect on December 31, 2026, for financial statements prepared for 2026, ensuring consistency and accountability in climate-related reporting.</span></p><p style="text-align:justify;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3">The CBO is committed to driving Oman's transition towards a low-carbon economy and has taken several initiatives, including integrating sustainability objectives into regulatory frameworks, reducing its own carbon footprint, investing in green assets and strengthening collaboration for capacity and awareness building.</span></p><p style="text-align:justify;"><span class="ms-rteThemeFontFace-1 ms-rteFontSize-3">The Central Bank will continue working closely with financial institutions and stakeholders to refine this framework and ensure that the banking and financial institutions lead the transition to a sustainable and green financial system in Oman.<br></span></p> | 0x010100C568DB52D9D0A14D9B2FDCC96666E9F2007948130EC3DB064584E219954237AF3900075E4FF44B3F64489802BE694C5C6FB70300A9BCF8A0432A87429120A5B0A0EDBFF9 | | |