AS the global business landscape shifts towards more sustainable and responsible practices, Environmental, Social, and Governance (ESG) principles have emerged as a critical framework for companies and governments alike.
For Oman, embracing ESG is not just a strategic imperative but a pathway to align with international standards, attract investment, and drive sustainable development in line with Oman Vision 2040.
This was the most poignant message of the recent Climate Dialogue that was organised by the Environment Society of Oman (ESO), Sohar International Bank, and ASYAD and involved the Financial Services Authority (FSA) and the National Programme for Fiscal Sustainability and Capital Market Development (Estidamah).
ESG principles offer a holistic approach to evaluating the broader impact of business and government activities beyond financial performance. In Oman, the adoption of ESG can play a pivotal role in addressing key challenges such as economic diversification, environmental sustainability, and social development.
By integrating ESG principles, Oman can enhance its appeal as a destination for sustainable investment, foster resilience in its economy, and ensure the well-being of its people.
From an environmental stewardship perspective, Oman's unique natural landscapes, biodiversity, and coastal ecosystems are invaluable assets that require careful management.
Adopting ESG principles can help Oman address environmental challenges, including water scarcity, desertification, and the impacts of climate change. For example, investing in renewable energy, promoting energy efficiency, and adopting sustainable practices in industries such as oil and gas, fisheries, and tourism can reduce environmental footprints and preserve the country's natural heritage.
In addition, social factors within ESG encompass issues such as labour rights, community engagement, and equitable access to opportunities. In Oman, prioritizing social responsibility involves ensuring fair wages, safe working conditions, and inclusive practices that empower women, youth, and persons with disability. By enhancing education, healthcare, and workforce development, Oman can build a more inclusive society that harnesses the full potential of its human capital.
Strong governance consolidates the above two aspects of ESG. It is the backbone of any successful ESG strategy. For Oman, this means fostering transparency, accountability, and ethical practices across both the public and private sectors. Implementing robust corporate governance standards, combating corruption, and ensuring that business operations align with legal and ethical norms are essential steps towards building investor confidence and achieving sustainable growth.
To fully integrate ESG principles into Oman's economic and social fabric, a multi-faceted approach is needed. First and foremost, Oman should develop a comprehensive ESG framework that sets clear guidelines and standards for businesses and government entities. This framework should align with international best practices while being tailored to the unique context of Oman’s economic and social landscape.
The framework can provide a roadmap for companies to report on ESG metrics, encouraging transparency and accountability. Estidamah has been working closely with all stakeholders to ensure such a framework is developed and implemented.
The next step is raising awareness and building capacity around ESG is crucial. Oman can invest in education and training programs to enhance understanding of ESG principles among business leaders, policymakers, and the general public. Universities and professional institutions can play a key role in integrating ESG topics into curricula, ensuring that the next generation of leaders is well-versed in sustainable practices. To that effect, the FSA has earmarked certain areas and institutions and has already started its capacity-building and awareness initiatives to serve this purpose.
In order to attract investments that are aligned with ESG principles, Oman can introduce incentives such as tax breaks, subsidies, or preferential financing for companies that demonstrate strong ESG performance.
Establishing green financing mechanisms, such as green bonds or sukuk, would also channel capital towards projects that contribute to environmental and social goals. It would also tap into an enormous source of socially responsible capital. The FSA has been pivotal in supporting developments in this track.
The most recently published regulations governing bonds and sukuk paved the way to facilitate access to such resources ushering the possibility of issuing green, sustainable and other innovative bonds and sukuk. In addition, the Ministry of Finance issued the national framework for sustainable finance setting the country on the right foot.
Coupled with required regulatory frameworks, Oman should encourage companies to adopt standardised ESG reporting practices, providing stakeholders with clear and consistent information on their environmental and social impact. The FSA has been working closely with Muscat Stock Exchange (MSX), a key FSA’s partner and stakeholder in the financial sector, to mandate ESG disclosures for publicly listed companies, ensuring that businesses are held accountable for their commitments to sustainable practices. MSX’s commitment to ESG has been unwavering at all levels of strategic and executive management.
Meaningful stakeholder engagement is a cornerstone of effective ESG implementation. A key component of the FSA national roadmap to align the non-banking financial sector with the requirements and principles of green and sustainable finance is raising awareness and building capacity. Participating in the above-mentioned Climate Dialogue embodied real dialogue between regulators, communities, civil society, and other stakeholders to understand their needs and priorities. By incorporating diverse perspectives into decision-making, Oman can ensure that ESG initiatives are inclusive and responsive to the concerns of its people.
Civil society organisations play a critical role in advancing ESG principles by raising awareness, advocating for policy changes, and holding businesses and governments accountable. In Oman, organisations like the ESO are at the forefront of these efforts, contributing significantly to the country's sustainability journey.
Embracing ESG is not just an opportunity but a necessity for Oman as it seeks to build a resilient, diversified, and sustainable economy. By integrating environmental stewardship, social responsibility, and strong governance into its development agenda, Oman can position itself as a leader in sustainability in the region.
The path forward requires commitment, collaboration, and a long-term vision, but the rewards — enhanced investment, improved quality of life, and a more sustainable future — are well worth the effort. As Oman takes steps to embed ESG principles into its core, it will not only meet the aspirations of Vision 2040 but also contribute to a more sustainable and equitable world.
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