ESG disclosure evolution in Kuwait: From Voluntary to Mandatory
The global financial landscape is undergoing a profound transformation, with Environmental, Social, and Governance (ESG) considerations increasingly shaping investment decisions and regulatory frameworks. In alignment with this paradigm shift, Kuwait is taking decisive steps to integrate sustainability reporting into its capital markets showing an evolution from voluntary to mandatory ESG disclosure. Building on the foundation laid by Boursa Kuwait’s 2021 voluntary ESG reporting guide, which aimed to encourage early adoption of sustainable practices, the Capital Markets Authority (CMA) is now spearheading a move towards mandatory reporting. This initiative reflects a strategic drive to enhance transparency, attract responsible investment, and ultimately contribute to the realization of Kuwait’s “New Kuwait 2035” vision. On February 12, 2025, the CMA issued Circular No. (04) of 2025, mandating sustainability reporting for companies listed on the Boursa Kuwait – Premier Market, underscoring the nation’s commitment to aligning with international best practices and fostering a sustainable financial ecosystem.
Why is ESG reporting critical for Kuwait?
ESG reporting has emerged as a critical imperative for Kuwait, particularly as it seeks to enhance its attractiveness to international investors who are increasingly prioritizing sustainability and socially responsible investment.
- This move aligns with a broader regional trend, as nations across the Middle East are progressively implementing mandatory ESG reporting frameworks, positioning the region as a significant player in the global sustainable finance arena.
- For Kuwait, this shift is essential for fostering improved corporate governance, robust risk management, and heightened accountability.
- By promoting transparency, Kuwait can cultivate trust with key stakeholders, including investors, customers, and the public, ultimately strengthening its reputation as a responsible and forward-thinking investment destination.
Furthermore, mandatory ESG reporting empowers companies to identify and capitalize on emerging opportunities within the burgeoning green economy, thereby contributing to a more sustainable and prosperous future for Kuwait and fostering innovation in sustainable technologies and practices.
To ensure the integrity and effectiveness of sustainability reporting, companies in Kuwait must adhere to rigorous standards when preparing their disclosures. Specifically, reports must provide clear and accurate information, focusing on material environmental, social, and economic impacts.
To achieve this, the following key elements are mandatory:
- Reports must be prepared in accordance with one or more recognized international sustainability reporting standards. Such as GRI, SASB, TCFD, UNGC, CDP, International Integrated Reporting
- Scope of the report and the rationale behind its determination must be clearly articulated, including the identification of relevant stakeholders and the boundaries of the reporting entity.
- A company’s environmental, social, and economic impact must be determined, and stakeholders must be engaged in the materiality assessment process of those topics. Further, they are expected to describe their approach used to analyse this ESG impact in the assessment process.
- Describe the method and procedures followed in dealing with each of the Sustainability topics that were determined in the materiality assessment process.
- The company may seek external assurance to enhance the report’s credibility, provided that the assurance report shall be included in the Sustainability report.
Kuwait’s Circular No. (04) of 2025: What are the key highlights of this mandate?
Boursa Kuwait has established an ESG disclosure guide that recommends an initial set of 30 sustainability indicators, those indicators are based on KPIs from the World Federation of Exchanges (WFE) and the Sustainable Stock Exchanges Initiative (SSE), which are commonly applicable for all sectors. This guide will support listed companies to report corporate sustainability practices and ESG issues in line with the expectations of stakeholders such as investors, suppliers, and customers.
Mandatory Reporting:
- Premier Market-listed companies are required to produce sustainability reports, starting with 2025 data for 2026 reporting and it should be published by June 2026.
- This is a primary regulatory requirement, indicating a firm commitment to integrating ESG considerations into the core business practices of leading Kuwait firms.
Alignment with International Standards:
- The mandate encourages the use of globally recognized frameworks, including GRI, SASB, and ISSB to ensure comparability and credibility.
- By adopting these standards, Kuwaiti companies can demonstrate their commitment to transparency and accountability, aligning their reporting practices with international best practices and enhancing their attractiveness to global investors. The use of these standards ensures that reported data is consistent and verifiable.
Regulatory Framework:
- The CMA’s regulations form the legal basis of the mandate, providing a clear and consistent framework for ESG reporting. These regulations ensure that all listed companies adhere to the same reporting standards and that ESG information is disclosed in a transparent and reliable manner.
What Impact does ESG Reporting create for Companies in Kuwait?
Anticipating and mitigating potential ESG risks through mandatory reporting: Beyond mere compliance, this drives companies to strategically integrate ESG considerations into their operational workflows. It necessitates the establishment of dedicated teams and the allocation of financial resources, fostering a culture of sustainability from within. Additionally, it compels companies to engage in long-term planning, anticipating and mitigating potential ESG risks.
Alignment with international ESG/sustainability reporting standards: This not only ensures comparability but also provides a roadmap for companies navigating the complex landscape of ESG reporting. By adhering to established frameworks, companies can streamline their data collection and analysis processes, reducing the burden of reporting and enhancing the reliability of their disclosures. Moreover, it allows for benchmarking against global peers, identifying areas for improvement and fostering continuous enhancement of ESG performance.
Materiality Focus: This ensures that reports are not just a collection of data but a strategic communication tool. By focusing on material issues, companies can demonstrate their understanding of stakeholder concerns and their commitment to addressing the most pressing ESG challenges. This approach enhances the relevance of reports, making them valuable resources for investors and other stakeholders.
Regulatory Framework: This provides a stable and predictable environment for companies to plan and implement their ESG strategies. It also ensures that all companies are held to the same standards, promoting fairness and transparency across the market.
Summary
Circular No. (04) of 2025 marks a pivotal moment in Kuwait’s journey towards sustainable finance. By transitioning from voluntary to mandatory ESG reporting for Premier Market-listed companies, the CMA is solidifying its commitment to transparency, accountability, and responsible investment. The mandate’s emphasis on aligning with international standards, conducting thorough materiality assessments, and adhering to a robust regulatory framework ensures that Kuwaiti companies are not only compliant but also positioned to enhance their global competitiveness. As Kuwait continues to navigate the evolving global financial landscape, this initiative will undoubtedly play a crucial role in attracting responsible investment, strengthening market integrity, and contributing to the nation’s “New Kuwait 2035” vision, ultimately fostering a more sustainable and prosperous future.
How NeoImpact ESG reporting solutions can help
- Peer Benchmarking: With NeoImpact’s dedicated peer benchmarking services, gain valuable insights by comparing your ESG performance against industry peers and best-in-class companies. Our benchmarking analysis pinpoints areas of strength and identifies opportunities for improvement, guiding strategic decision-making.
- Gap Analysis: We conduct thorough assessments to identify discrepancies between your current ESG practices and leading standards or regulatory requirements. Our detailed gap analysis provides a clear roadmap for addressing deficiencies and enhancing your sustainability performance.
- Strategy Development & Implementation: NeoImpact develops and guide businesses in implementing robust ESG strategies aligned with your business goals and stakeholder expectations. Our expertise ensures seamless integration of sustainability into your core operations, driving long-term value.
- ESG Reporting: We streamline reporting process, helping you produce accurate and transparent ESG reports that meet regulatory standards and investor expectations. Our support ensures your disclosures effectively communicate your sustainability performance and progress.
