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We are excited to share the latest edition of the Law Update, beautifully and appropriately titled “Sustainable Horizons: The Saudi Arabian Vision.” Giving special honor to the Kingdom’s 2030 vision, this update focuses on a collection of both informative and inspiring articles.
For those in construction, you can learn about how the tendering environment impacts risk-pricing for contractors, the updates on the legal framework of the construction industry and how contractors can protect themselves against financial difficulties.
There is good news too from the kingdom’s banking sector, from which the practice of “Open Banking” is being pushed for! But what is open banking? We’re answering that too.
Also . . . Are there any women trail blazers in Saudi Arabia you can name? We’ll help you with that. We cover how the Middle East has been making strides in empowering women in the entrepreneurial space,most notably in STEM fields.Read the full edition
Written by: Layla El-Wafi – Senior Legal Counsel – Governance and Middle East, at Standard Chartered
Contributions/support from: Francis Patalong, Zane Anani and Leen Masadeh
This article will:
An ESG led approach covers a multitude of actions and priorities. It reflects a holistic and systematic method for public institutions and private corporations to consider, plan for, and act sustainably and ethically in relation to people and the natural environment.
The ‘ESG buzz’ in recent years reflects the escalation of the global warming climate crises and inequities that international and regional commitments have tried to address – notably the Paris Agreement on Climate Action and UN Sustainable Development Goals (“SDGs”).
ESG related developments in the Middle East, North Africa (“MENA”) and Gulf Cooperation Council Countries (“GCC”) continued apace in 2021 in line with global developments and trends. Prepare to hear more about ESG in 2022 both in the region and internationally as commitments from regulators and the private sector ramp up to meet the SDGs 2030 deadline and mitigate climate change effects.
Over the last year several governments in the MENA / GCC region announced net zero carbon emissions targets, enacted personal data and privacy laws, and regulators issued guidance on sustainable finance, ethical use of enabling technology and outsourcing, required ESG reporting and female board representation for publicly listed companies. The United Arab Emirates (“UAE”) set up a Human Rights Institute with a wide mandate to draft a national human rights action plan and passed a law concerning enhanced accountability of government ministers and officials.
Looking ahead the region shows signs to take greater strides in stronger and deeper ESG led practices albeit not uniformly due to the variable socio-economic and security circumstances present in the region. The UAE and the Kingdom of Saudi Arabia (“KSA”) stand out, with Egypt, Bahrain and Omani authorities also issuing ESG related policies (although enforcement strategies remain absent or unclear).
Given the forthcoming UN Climate Summits (COP 27 and 28) will be hosted in the region, ESG related principles will likely gain more prominence, in keeping with international trends and pressures. This may spotlight regional solutions to bridge the challenge of protecting the environment and meeting economic development needs like KSA’s Green Initiative endorsing a circular carbon economy and commitment to plant 10 billion trees in KSA and a further 40 billion in the Middle East region. It may also pull forward those countries currently lagging. Given most governments in the region are not encumbered by complex political systems they can mobilize quickly and make up for lost time.
These shifting sands need to settle before the new legal and regulatory landscape can be assessed. It is however promising that the three strands of ESG appear to be moving at a broadly similar pace – which is cause for optimism. The legal community are well placed to solve for such challenges together with policy makers, scientists, innovators, investors and financial institutions.
There was a succession of regional developments in relation to climate change, sustainable finance, social considerations, and good governance – see table below for a country-by-country overview.
The UAE currently stands out positioning itself as the region’s sustainable finance hub with numerous regulatory actions especially by capital markets regulator (SCA) and financial free zone regulators in Abu Dhabi (ADGM) and Dubai (DIFC). UAE regulatory initiatives included mandatory ESG reporting, female board appointments, and public awareness and capacity building webinars and conferences. The UAE government also appointed a dedicated Climate Change Special Envoy; announced a detailed Sustainable Finance Strategy issued by its Ministry of Climate and Environment and announced a Net Zero 2050 Strategic Initiative with associated funding commitments valued at US$163 billion for investment in clean energy. The Zayed Sustainability Prize continued for its 14th year to promote grassroots solutions awarding US$ 3 million in prize money. The Dubai Expo 2020 promoted hundreds of Global Innovators social impact projects and hosted the first UN SDG Global Goals Week held outside of New York.
There was also a pronounced increase in regional government led and/or public-private partnerships for green financing, investment in renewable energy, sustainability linked sovereign issuances (such as KSA’s Red Sea tourism project’s green financing), Oman’s green power investment, Egypt’s green bond issuance and plans to invest in renewable energy plants and Abu Dhabi’s sovereign wealth fund Mubadala announcing the creation of a standalone ESG Unit.
Private sector sustainable finance commitments and transactions were also on the rise driven partly by international and regional banks in the region like Standard Chartered, HSBC and First Gulf Bank, also from MNCs and asset managers, Engie Consortium and EFG Hermes, and by local corporates in retail and the aviation sectors notably Majid Al Futtaim, Emirates and Etihad Airline.
Alongside these government and corporate initiatives, the advisory community (banks, lawyers, consultants) invested considerable efforts in raising awareness and engaging with clients on ESG in public and private webinars and conferences for capacity building, transactional and advisory mandates. The pandemic focused the attention of this sector on the fragility and risk embedded in the ‘business-as-usual’ model, with advisory firms actively educated themselves and their clients on the threats and opportunities presented by the global ESG mainstreaming challenge. This was also reflected in increased hiring for ESG related jobs across different sectors.
The table below sets out a non-exhaustive summary of notable ESG related laws, regulations, sovereign deals and policy announcements from the region during 2021:
|Country||Climate Change and Net Zero Commitments||Sustainable Finance||Social laws / policies||Governance|
|Bahrain||Net Zero 2060 Target
|Sustainable Energy Authority tender announcement for 2 solar plant projects pursuant to government pledge to cover 5% of electricity demand with renewables by 2025
Bahrain Bourse (BHB) 7 December 2021 webinar titled ‘’Evolving Bahrain’s ESG Landscape & Sustainable Financing’’
|Developments with regards children’s rights.
Amending labor law to close gender pay gap
|Bahrain Bourse (BHB) – publication on Sustainable Finance titled “Evolving ESG Landscape & Capital Markets”
BHB joined the UN Sustainable Stock Exchanges (SSE) initiative to promote sustainable and transparent capital
|Egypt||Hosting UN COP 27 on Climate Change in November 2022
Update to its sustainable development / climate change strategy
Government funding commitments for green energy including more solar plants and hydrogen projects (including transmission to African countries)
|Central Bank circular to FI’s relating to a consultation about sustainable finance guidelines / ESG guidelines in July 2021
Sovereign Green Bond issuance
Increase SME financing from 20% to 25%
Egypt Central Bank member of IFC/Word Bank’s Sustainable Banking Network
|Launching the “Closing the Gender Gap Accelerator” action plan in 2021.
|The development of new mechanisms for youth participation in decision-making and the formulation of public policies.
Establishing a National Anti-Corruption Academy to enhance the performance of the existing anti-corruption system
|Iraq||Accession to the Paris Agreement on Climate Change||Central Bank circular to FI’s on sustainability guidelines in November 2021
Central Bank of Iraq member of IFC/Word Bank’s Sustainable Banking Network
|The creation of The Supreme Committee overseeing the empowerment of women to participate in the political process and elections for the Iraqi Council of Representatives.
Iraq’s Vision 2030 is to establish effective administrative institutions to guarantee political, civil and human rights, justice and equality for all
|National Development Plan 2018-2022 aims to achieve sustainable, balanced growth, social justice and pollution free environment|
|Israel||Net Zero Target by 2050
|The Capital Markets, Insurance and Savings Authority, published a circular requiring FI’s to consider ESG factors and developing risks (such as cybersecurity and technology) insofar as they might affect the performance of an investment portfolio.
|Israeli Securities Authority released ESG reporting recommendations calling on public companies to publish an annual ESG report based on international standards
|Jordan||National Energy Strategy 2020-2030, aims to reduce the carbon emissions by 10 % by 2030 and expand renewable energy’s share from 11 % in 2020 to 14 % in 2030 which is supported by the Renewable Energy and Energy Efficiency Law 2012
Climate Change integrated into Jordan National Green Growth Plan 2017-2025
|Secured ranking of 5th MENA country on SDG Index Report 2021
|KSA||Net Zero 2060 Target
National Renewable Energy Program to meet 50% of its domestic energy needs from renewable sources by 2030
Circular Carbon Economy Framework and 4Rs
Green Initiative to plant 10 billion trees in KSA and more across ME region to mitigate emissions
Environmental Law regulations issued July 2021
Waste Management Law issued August 2021
|Red Sea tourism project secures $3.76bn in green financing
Government funding announcement for green hydrogen energy plants
Growing Sustainability – ESG, stock exchanges and Tadawul’s role
limit impact of external factors, adopt rules for fiscal sustainability 
Tadawul’s ESG disclosure guidelines
|Data Protection Law issued September 2021.
|Public Investment Fund (PIF) announcement of ESG Framework and Green Bond Issuance|
|Kuwait||New Kuwait 2035 Vision calls for the creation of sustainable living 
[No official pledge]
|One of the world’s biggest wealth funds targets sustainable finance- Kuwait Investment Authority has applied the ESG standard set by an independent globally-recognised ESG benchmark provider
|Boursa Kuwait launched its new ESG guide to raise awareness and drive the embrace of Corporate Sustainability in the Kuwaiti capital market. The guide aims to introduce the ESG universe to companies listed on the stock exchange and highlight the benefits of ESG disclosure and best practices 
|Morocco||Ministry of Energy Transition and Sustainable Development plans to use biomass to create renewable and sustainable energy, signaling a continuation of the country’s efforts to promote renewable energy and combat climate change.
|The EBRD and Green Climate Fund and the EU pledge EUR 25m to Moroccan Bank for Commerce and Industry (BMCI) to support green energy plan (sub-loans to local residents, SMEs, and corporations for investments in climate change mitigation and adaptation technology)
|The issuance of Morocco’s New Development Model with human capital and inclusion as part of its second and third priority||The issuance of Morocco’s New Development Model with sustainability as part of its fourth priority|
|Oman||Updates to its climate action plan in July to include a 7% reduction in emissions by 2030 – a cut far short of the 50% reduction scientists say is needed to stem runaway climate change.
|Green hydrogen plant project
Muscat Stock Exchange (MSX) announced the institution of a new section under the name of “ESG and D&I” 
Central Bank of Morocco member of IFC/Word Bank’s Sustainable Banking Network
|New Labour Law enhancing working conditions and annual leaves|
|Qatar||Qatar aims to reduce greenhouse gas emissions by 25% by 2030 and OPEC’s second-largest oil producer Iraq ratified the Paris agreement in January, committing to a 1-2% reduction in emissions.
|Qatar Stock Exchange Issued ESG index to identify the top 20 securities that demonstrate the best ESG profile.
|[Qatar Stock Exchange (QSE) ESG Guidance issued 2017]
QSE likely is to introduce mandatory ESG disclosure requirements 
|Tunisia||Central Bank of Tunisia member of IFC/Word Bank’s Sustainable Banking Network
|UAE||Net Zero 2050 Strategic Initiative
US$ 168bn funding commitment to renewable energy including Masdar City $15bn pledge
Hosting COP 28 in 2023
ADNOC Zero-Flaring objective
Al Reyadah Abu Dhabi Carbon Capture Company
|Abu Dhabi Sustainability Week and related sub events on Sustainable Finance and Energy
Including awarding of Zayed Sustainability Prizes worth $3m
Government Sustainable Finance Framework 2021-2031
Notable private sector transactions from Emirates, Etihad Airlines, Al Futtaim
DIFC Regulator DFSA ESG Hub announced in Q4 2021 TBD
Mubadala ESG Unit
The DFSA launched the Task Force on Sustainable Finance to support best regulatory practices in sustainable finance standards in the DIFC
|Human Rights Institute / Law
Federal Personal Data Privacy Law
ADGM Data Protection Regulations update
New Labour Law enhancing working conditions
|CB UAE ethical guidelines for FI’s use of enabling technology and updated outsourcing regulations
SCA requirement for ESG reporting for publicly listed companies
SCA requirement of min 1 woman board member for publicly listed companies
Public Officials Accountability Law
The Race Towards ESG Integration in the UAE public webinar targeted at private sector hosted by the DIFC Academy on 31 August 2021
|Regional||The Role of Governance and Sustainability in Attracting Long-Term Investments for Companies, online webinar 15 December 2021, organized by the Securities and Commodities Authority in the UAE in partnership with Hawkamah Governance Institute.
Arabic language regional webinar attended by over 100 participants about ESG with speakers from banking and capital market regulators of UAE, Oman, Kuwait and Egypt all emphasizing the importance for companies to integrate ESG policies and practices.
2022 is poised be the year in which players in the region take steps for broader integration of ESG principles – although not uniformly.
In 2022 it is anticipated that there will be:
International focus on climate change and environmental protection will soon spotlight the region with consecutive hosting of the UN Climate Summits and regional attendance at the UN Biodiversity Conference COP 15 hosted by China. This may elevate regional solutions to meet development needs during the transition period to clean energy including KSA’s Green Initiative and Circular Carbon Economy (CCE) proposals endorsed by G20 Leaders in 2020 relying on the “4 Rs” (carbon reduction, reusing, recycling and removal) and other offsetting through intensive tree planting allowing continued reliance on oil and gas prevalent in the region while mitigating emissions harm.
The momentum of these events can be harnessed to facilitate meaningful regional policy formation, cooperation and action on climate change mitigation and transitioning assuming there is political will, economic resource, technical support and overall stability. Net zero policy announcements alone will not be sufficient. The public and private sectors must work together to meet the funding and financing needs and put the regulatory frameworks to prompt action, build infrastructure and provide vulnerable segments of our societies including SME’s and family run businesses with meaningful support. Advances by certain countries in the region are commendable but struggling neighbors should not be left behind considering the pan-regional and global impacts.
The private sector – in particular financial institutions and MNCs – will continue to promote sustainable finance and ESG bench-marking especially in relation to climate change mitigation and funding other SDGs to meet self-imposed commitments, regulatory targets, institutional investor expectations and to avoid litigation and reputational risks. The role of FI’s has also gained more prominence post COP26 with commitments from the Glasgow Financial Alliance for Net Zero or GFANZ. This presents both an opportunity to offer new products and services but also challenges given the impediments faced by countries in the region.
Nevertheless ESG features in corporate lending will continue to accelerate in the region in 2022-2023 together with third-party assurance, sustainability compliance certification and auditing to comply with private financing requirements but increasingly for nascent local regulatory reporting and compliance (for example sustainable finance frameworks and personal data privacy laws). This will also coincide with more ESG related job recruitment as reflected on job posting cites such as LinkedIn indicating a ‘greening’ of business models in some pockets of the region (namely the GCC and Egypt).
This normalization is aligned with current international transactional, integration and reporting standards including the Taskforce on Climate Related Financial Disclosures (TCFD), the EU Sustainable Finance Taxonomy, EU SF Disclosure Regulation as well as sustainable finance frameworks, data privacy and ethical use of AI regulations issued by China, Singapore and Hong Kong governments. It is noteworthy that the International Financial Reporting Standards (IFRS)’s creation of the International Sustainability Standards Board (ISSB) announced at COP26 in November 2021 is expected to consolidate climate disclosure and sustainability accounting standards (SASB).
There are also emerging regional ESG regulatory reporting requirements especially within financial services and capital markets beyond environmental related factors in relation to diversity and inclusion (“D&I”). Global FI regulators in UK, US, Hong Kong and Australia taking steps to formalize reporting D&I for FI’s and publicly listed companies by imposing executive accountability for more diverse leadership in recognition of D&I being an enabler of stronger governance, better environmental and social outcomes and enhanced company performance. This has been echoed by some FI regulators in the GCC region and Egypt focusing on uplifting female participation by mandating publicly listed companies to appoint at least one female board member and public / private partnerships such as the UAE Gender Council.
Governments and corporations (especially FI’s) globally are under pressure to ‘know and show’ that they are implementing international commitments such as the UN SDGs, Paris Agreement on Climate Change, UN Guiding Principles on Human Rights, OECD Guidelines for Responsible Business (in addition to industry specific ones) to integrate ESG principles to mitigate climate change risks, biodiversity loss, and enhance social safeguards.
Further ESG led action is needed to achieve the UN SDGs but also imperative for the region to avert further adverse climate impact, which will not only radically change the ecology but also the economy, which risks overwhelming a region with a disproportionately young population. Given most governments in the region are not encumbered by complex political systems they can mobilize quickly given political stability, security and financial resources.
Further delays in implementing credible ESG led policies and investments in the region pose numerous risks including:
The challenges to ESG integration and impact in the region are many including:
Despite the risks and challenges, the region shows promise and opportunities for continuing to invest in its ESG journey to reach the UN SDGs and climate change commitments to avert further regional strife, including:
With eight years remaining in the ‘Decade of Action’ to achieve the UN SDGs and mitigate climate change temperature rises, there is a need for greater investment, pan-regional and international cooperation. The region is operating at variable speeds in addressing these challenges – projects such as NEOM in Saudi Arabia have the vision and ambition to become a new global paradigm for how we live, work and thrive in a sustainable, zero carbon way.
Any disparities will need to be worked through collaboratively and can present opportunities for investors in the region and beyond. There is genuine urgency but also complexity in this task.
The legal community are well placed to solve for such challenges together with policy makers, scientists, innovators, investors and financial institutions.
 Bahrain, Israel, UAE and KSA – https://www.wri.org/insights/how-countries-net-zero-targets-stack-up-cop26 ; https://www.arabnews.com/node/1889726/middle-east
 UAE, KSA
 Iraq, Egypt KSA, UAE
 UAE SCA mandating at least 1 female board member for publicly listed companies & ESG reporting; https://www.sca.gov.ae/en/media-center/news/14/3/2021/board-of-directors-of-sca-approves-the-obligation-of-listed-companies-to-represent-women-in-the.aspx; and https://www.tamimi.com/news/the-rise-of-esg-in-the-uae-mandatory-esg-reporting-for-uae-listed-companies/
 Saudi Arabia’s Red Sea tourism project secures $3.76bn in green financing
 Oman green hydrogen plant; others ?
 https://dailynewsegypt.com/2021/11/25/cib-ifc-move-forward-with-green-bond-programme/#:~:text=The%20Commercial%20International%20Bank%20%28CIB%29%2C%20Egypt%E2%80%99s%20leading%20private,of%20biodiversity%20and%20air%2C%20water%2C%20or%20soil%20pollution; AND https://enterprise.press/greeneconomys/egypt-poised-ride-2021s-green-bond-wave/
 https://www.etihad.com/en/news/etihad-raises-us12-billion-in-first-sustainabilitylinked-esg-loan-in-global-aviation; AND https://www.etihadaviationgroup.com/content/dam/eag/corporate/etihadaviation/en-ae/desktop2/sustainability/Etihad%20Transition%20Finance%20Framework%20211020%20Final.pdf
 Special thanks to Al Tamimi & Co for contributions to this table
 https://www.reuters.com/business/sustainable-business/saudi-sovereign-wealth-fund-scopes-banks-esg-framework-sources-2021-07-12/ and https://www.arabnews.com/node/1954391
 Dubai Future District Fund; DIFC FinTech Hive; AccelerateHer and Womentum programmes
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