Oman’s New Banking Directive on Climate Risk Disclosures: Key Implications for Investors and Business Owners
MUSCAT, SEPTEMBER 27 — The Central Bank of Oman (CBO) has announced that commercial banks in the Sultanate will be mandated to disclose climate-related risks and practices starting from the 2026 financial year. This directive is part of a wider initiative by the CBO to incorporate climate risk considerations into its financial stability oversight, as detailed in the newly released 2025 Financial Stability Report.
While Oman has not yet faced major climate-induced financial disruptions, the Central Bank highlighted the country’s vulnerability to physical risks such as rising temperatures, cyclones, and flash floods. These climate events threaten critical infrastructure, economic productivity, and the insurance sector. The report noted that increasing frequency and severity of such events could negatively impact asset valuations, collateral, and elevate underwriting and operational risks for financial institutions.
Beyond physical risks, the CBO also drew attention to transition risks linked to the global move toward decarbonisation. Sectors in Oman dependent on hydrocarbons may encounter stricter international environmental regulations, carbon pricing changes, and shifting investor sentiment. These factors may lead to the revaluation of carbon-intensive assets and weaken the creditworthiness of affected companies, particularly if banks lack detailed data to assess exposure levels.
The report further identified a significant gap in climate scenario analysis within the banking sector, which could increase vulnerability to sudden policy or market shifts.
In response, the CBO instructed all banks in 2023 to submit climate risk implementation plans by June 2025 and to commence disclosure of climate-related risks from the fiscal year 2026. The Central Bank is also collaborating with national environmental authorities to assist in classifying banks and borrowers by their energy intensity.
The report underscores climate change as a profound structural threat to global financial stability. It warned that delays in mitigation and adaptation efforts amplify financial system exposures worldwide, compounded by limited fiscal capacity and restricted access to international funding for resilient infrastructure, clean energy, and disaster preparedness.
The CBO cautioned that escalating physical risks and evolving transition policies and technologies could trigger abrupt asset repricing, increased insurance costs, and credit deterioration in vulnerable sectors. Additionally, climate-related supply chain disruptions may intensify global contagion effects, impacting capital flows, commodity markets, and debt sustainability. These developments pose a growing systemic risk that could undermine both national and international financial stability.
The Central Bank concluded by emphasizing the urgent need to embed climate-related risk considerations into financial policy, regulation, and supervision frameworks globally.
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The Central Bank of Oman’s mandate for banks to disclose climate-related risks from 2026 signals a critical shift toward climate-conscious finance, highlighting emerging vulnerabilities in Oman’s hydrocarbon-reliant economy. Businesses and investors should proactively assess and mitigate exposure to physical and transition risks, leveraging climate scenario analysis to stay ahead of regulatory changes and avoid sudden asset revaluations. This transition presents opportunities for innovative firms and green investments aligned with the global decarbonization agenda, while underscoring the urgency for resilient infrastructure development in Oman’s financial ecosystem.
