The Kuwaiti Government has been actively promoting sustainable development, in alignment with global initiatives such as the United Nations Sustainable Development Goals, and with regional trends across the GCC. GCC countries have been increasingly focusing on sustainable development as part of their long-term visions and strategies to respond to pressing environmental challenges, and to promote long-term sustainable growth.

The Kuwait Government’s interest in sustainability has manifested in a number of initiatives. These include the New Kuwait Vision 2035, which is a long-term development plan that focuses on economic diversification, investment in human capital, infrastructure development, and environmental sustainability. A sustainable diversified economy and sustainable living environment are both among the pillars of the New Kuwait Vision 2035. Other initiatives of relevance to sustainability include the launching of renewable energy projects, the issuance of policies, establishment of programs, and the development of projects in the areas of waste management and treatment, water management and energy efficiency.

As part of this wider governmental interest in sustainable development, the Capital Markets Authority of Kuwait (the “CMA”) and the Central Bank of Kuwait (the “CBK”) have issued decisions in 2022 with the aim of encouraging sustainability in the context of conventional and Islamic debt instruments and banking activities, respectively.

This article sets out a high-level outline of the abovementioned regulatory developments sponsored by the CMA and the CBK in relation to sustainability.  

Introduction of ESG Bonds/Sukuk

The CMA has, in February 2022, amended Book 11 of the Executive Bylaws No. 72 of 2015 of the Capital Markets Law No. 7 of 2010 (the “Bylaws”) through its Resolution No. 28 of 2022 (“Resolution No. 28”) to introduce and regulate new types of bonds and sukuk, including green, sustainability and social bonds and sukuk (the “ESG Bonds/Sukuk”). These ESG Bonds/Sukuk grant investors and issuers a variety of options for the funding of, inter-alia, environmental and social initiatives which were traditionally limited in terms of financing to charity and crowdfunding.

The Resolution No. 28 contains a number of noteworthy provisions and provides for requirements specific to ESG Bonds/Sukuk; these include:

  • Their identification by reference to the use of their proceeds i.e., ESG Bonds/Sukuk are those whose proceeds are allocated towards the financing or re-financing of green, eco-friendly or social projects.
  • The application for the CMA’s approval on the issuance of the ESG Bonds/Sukuk should include additional documents not required for ordinary bonds and sukuk. These consist of: (a) a framework document prepared pursuant to the guidelines of the International Capital Markets Association (ICMA), the standards of the Climate Bond Initiative, or any other international frameworks; and (b) report by an independent expert or agency specializing in environmental or social matters (as applicable) setting-out said expert’s review of, and comments on, the ESG Bonds/Sukuk framework, the use of the ESG Bonds/Sukuk proceeds, and the standards according to which the green or social projects are selected. All such reports should be disclosed to the public on the issuer/obligor’s website.
  • The issuer/obligor of ESG Bonds/Sukuk is required to submit to the ESG Bond/Sukuk holders during the annual meetings of their respective associations: (a) an annual report assessing the issuer/obligor’s compliance with the ESG framework and commitment to environmental or social matters; (b) annual report by the issuer/obligor’s auditors on the use of the ESG Bonds/Sukuk in compliance with the terms of the offering documents; (c) a report by an independent expert or agency specializing in environmental or social matters (as applicable) setting-out said expert’s review of, and comments on, the ESG Bonds/Sukuk framework, the use of the ESG Bonds/Sukuk proceeds, and the standards according to which the green or social projects are selected.

It should be pointed out that the Resolution No. 28 was complemented by subsequent regulations issued by the CMA in August 2022, which aimed at further integrating the objectives of sustainability into the securities market. These sustainability-focused reforms include the introduction of “sustainable funds” into the Bylaws, the identification of the sustainability-related compliance and reporting obligations in the corporate governance policies followed by listed joint stock companies, and the regulation of the substance and disclosure of the annual sustainability report that should be prepared by joint stock companies listed on the Kuwait Boursa.

Sustainable Financing Guidelines and Standards

As for the CBK, the latter has issued a Circular No. (2/BS, IBS/500/2022) (the “Circular No. 2/BS”) addressed to local banks in November 2022, which contained guidelines on sustainable finance. This circular specifically refers to the New Kuwait Vision 2035 as the underlying basis for its guidelines. These guidelines set out the standards that local banks should take into account when considering sustainable financing opportunities, with the aim of promoting responsible and sustainable practices in the financial sector, which in turn contributes to long-term economic growth.

Among the key features of the Circular No. 2/BS are the following:

  • The definition of the “Three Pillars of Sustainability Governance” (also known as the Triple Bottom Line, which is a widely accepted model for assessing and promoting sustainable development), being the environmental, social, and corporate governance pillars. The environment pillar, as described in the Circular No. 2/BS covers factors and risks arising from certain environmental events, such as climate change, hazardous waste and resource depletion. The social pillar relates to various matters of social nature, such as the creation of job opportunities, well-being of employees, consumer protection and data privacy. The governance pillar covers the corporate responsibilities and policies in areas such as remuneration control, anti-corruption and organizational stability, the achievement of which is dependent upon experienced management, professional practices and related controls.
  • The issuance of the key directives governing sustainable finance. We particularly note, among such directives, the following: embedding ESG values within financial institutions’ corporate governance and risk management so as to take account of sustainable finance elements, the structuring and launching of sustainable financial products and instruments, raising awareness of sustainable finance among the financial institutions’ staff, studying ESG factors where the financial institutions contemplate the grant of loans and in decision-making in relation to investment matters, and emphasizing the importance of transparency in ESG matters by issuing and disclosing annual reports on sustainability.


In conclusion, the Kuwaiti Government has demonstrated a strong commitment to promoting sustainability and embedding it within the national economy. The regulatory reforms initiated by the CMA and the CBK further illustrate the government's efforts to encourage sustainable practices within the financial sector, which will contribute to a more sustainable future for Kuwait by facilitating access to green financing, promoting responsible banking practices, and increasing transparency in environmental, social, and governance matters. Further sustainability-focused reforms in the financial sector are likely to take place over the coming years.


Sam Habbas is a Senior Partner at ASAR – Al Ruwayeh & Partners, with decades of experience in the Kuwait law practice. He is consistently recognized as one of Kuwait’s pre-eminent corporate and finance lawyers. Sam has extensive corporate and commercial law experience and both advises, and acts as lead counsel to, a host of local and foreign multinational clients across a vast array of industry sectors and businesses.

Ibrahim Sattout is a Partner at ASAR – Al Ruwayeh & Partners. He has over 30 years of legal experience, 23 years of which have been spent in Kuwait. His extensive experience includes banking, finance, commercial, corporate and business acquisition transactions, litigation and arbitration. He has been extensively involved as lead and co-counsel in several financing, capital markets and mergers & acquisitions transactions ranging from typical transactions to highly complex ones. He has worked on such transactions from inception to completion.

Hussein Azmy is a Senior Associate at ASAR – Al Ruwayeh & Partners and joined the firm in 2021. Hussein has substantial experience in the areas of corporate and project Islamic financing, refinancing, and financial restructuring. He is also well versed in the capital markets, commercial and corporate practice areas. Prior to joining ASAR, Hussein practiced at international and top-tier law firms in Egypt and Oman.