Muscat – The Central Bank of Oman (CBO) on Monday issued a new circular aimed at strengthening the Omani banking sector’s resilience to climate-related risks. The circular emphasises the importance of integrating climate risk management into banks’ overall operations, including governance, strategy, risk assessment, and disclosure.

The circular encourages banks to actively participate in sustainable finance initiatives by issuing sustainable or green finance instruments, investing in sustainable assets, and offering green loans or financing products that support environmentally beneficial projects.

Through this circular, the CBO also highlighted the need for staff training to equip them with the knowledge and skills to integrate Environmental, Social, and Governance (ESG) considerations into their work. Additionally, banks can play a crucial role in educating customers and the public about the benefits of sustainable financial practices, the central bank mentioned.

The new requirements apply to all locally incorporated conventional, Islamic, and specialised banks in Oman, as well as branches of foreign banks operating in the country. Banks are required 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 the respective boards of directors, should be submitted to the Central Bank of Oman by June 30, 2025.

The CBO also emphasised a holistic approach to sustainability, encouraging banks to voluntarily adopt broader ESG factors. This, as the central bank said, can help banks contribute to a more resilient and sustainable economy, enhance their reputation, attract sustainability-focused investors, and mitigate potential risks.

“Climate change may pose significant risks to the financial sector, but it also offers opportunities to drive innovation and growth through sustainability,” said H E Tahir al Amri, Executive President of the Central Bank of Oman, in a statement.

“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 actively support the nation’s sustainability efforts and long-term vision for a resilient, low-carbon economy,” H E Amri added.

The CBO noted that 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.

Requirements related to governance, strategy, risk management, and additional ESG recommendations 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.

The CBO stated it is committed to driving Oman’s transition towards a low-carbon economy and has initiated several actions, including integrating sustainability objectives into regulatory frameworks, reducing its own carbon footprint, investing in green assets, and strengthening collaboration for capacity and awareness building.

The central bank said it will continue to work closely with financial institutions and stakeholders to refine this framework and ensure that banking and financial institutions lead the transition to a sustainable and green financial system in Oman.

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