As part of the Central Bank of Bahrain’s (“CBB”) objective to maintain disclosure transparency and high corporate governance standards, in addition to its commitment to social and climate related goals, the CBB is currently developing Environmental, Social, and Governance (“ESG”) disclosure guidelines to assist companies with ESG integration and reporting against a broad range of environmental, social, and corporate governance factors.
The CBB views ESG reports as effective tools for all stakeholders to better examine a company’s efficiency, sustainability, and risk exposure. Given the impact of ESG factors on a company’s capacity to execute its business plan and produce value in the long run, the CBB is placing great emphasis on integrating disclosure guidelines within the CBB’s regulatory framework. The guidelines are aimed at ensuring progressive adoption of ESG disclosures that are relevant, specific, comprehensive, clear, verifiable, balanced, and consistent.
The guidelines will be based on international best practices, frameworks and initiatives, and taking into consideration the responses to the ESG Reporting Survey released earlier this year by the CBB to all listed companies, insurance firms, banks and category 1 investment firms.
The survey was designed to examine market attitudes towards ESG. Key results for listed companies included: 70% of respondents declaring ESG issues as ‘relevant’ to their Business Model and Strategy, 85% of respondents who are not reporting any ESG factors are currently evaluating and/or planning on ESG adoption in the near future and 54% of respondents declared ESG disclosures as significant means of communication with stakeholders.
As for Banks, majority of the respondents declared ESG issues as ‘relevant’ to their Business Model and Strategy, have a management level committee to oversee sustainability related goals and objectives and declared ESG disclosures as significant means of communication with stakeholders. Further, insurance and investment firms displayed a similar acknowledgment for the relevancy of ESG disclosure to their Business Model and Strategy, with 63% and 56% respectively stating that ESGs are considered relevant to their strategy.
The CBB issued a circular to all licensees in November 2021 to raise awareness on climate-related risks which was followed by a detailed Guidance Note in March 2022 aimed at ensuring licensees regulated by the CBB are kept abreast of the developments and practices in the area of climate-related risk management as it will shape business models and business operations across different geographies in years to come. The CBB seeks periodic feedback from the licensees on their preparedness to potentially implement a framework to identify and manage climate-related risks and also capitalise on climate-related opportunities. The ESG disclosure guideline underway is envisaged to align the objectives of climate-related risks circular besides being an exhaustive reference of ESG factors.
Additionally, Bahrain Bourse, the exchange licensed by the CBB as a Self-Regulatory Organisation, issued its ESG Reporting Guidelines on the 11th June 2020 as an effort to support sustainable capital markets through enhanced disclosure standards. It aims to provide a tool to encourage issuers in providing ESG information to investors.
The CBB continues its efforts to highlight the need to mitigate risks related to ESG matters and encourage relevant disclosures aligned with Bahrain Economic Vision 2030 and the UN Sustainable Development Goals (SDGs) in accordance with the commitment of the Government of Bahrain to achieve the global climate goals.
The CBB anticipates the issuance of the ESG disclosure guidelines in the first half of 2023 that will be addressed to listed companies and relevant CBB licensees.
