Qatar Central Bank Issues Sustainable Finance Framework to Align Financial Sector with ESG Goals

With the launch of the Qatar Central Bank’s Sustainable Finance Framework, Qatar has formalized its commitment to ESG-aligned finance requiring banks to direct funding toward green and socially responsible projects.

As part of Qatar’s ongoing efforts to integrate environmental, social, and governance (ESG) priorities into its financial system, the Qatar Central Bank (QCB) has released its inaugural Sustainable Finance Framework (hereinafter referred to as the “Framework”). The move reinforces national sustainability objectives enshrined in the Qatar National Vision 2030 and reflects a broader strategy to align local banking practices with international ESG standards.

The Framework, introduced via QCB Circular No. 2025/0001546, is immediately applicable to all banks operating in the State of Qatar. Its primary goal is to formalize and promote responsible investment and lending, directing financial flows toward environmentally and socially beneficial projects.

Sustainable finance gains momentum in Qatar’s financial sector

Throughout last year, Qatar advanced its position as a regional leader in sustainable finance, driven by a combination of policy initiatives, regulatory reforms, and increased investor demand for ESG-aligned instruments. The issuance of US$2.5 billion in green bonds marked a regional first and reflected growing market confidence in Qatar’s efforts to integrate sustainability into its financial system.

A key catalyst for this progress was the QCB’s ESG and Sustainability Strategy for the Financial Sector, launched in 2024. The strategy outlined the regulatory foundation for embedding ESG considerations across banking operations, credit assessments, and investment activities. It set the stage for more structured sustainable finance practices and aimed to establish Qatar as a leading hub for responsible finance in the region.

The Qatar Financial Centre (QFC) also played a pivotal role, having introduced the GCC’s first dedicated sustainable Sukuk and bond framework in 2022. This initiative facilitated ESG-aligned capital raising and provided both issuers and investors with clearer guidelines on structuring and assessing sustainable instruments.

In parallel, the country saw growing interest in sustainable foreign direct investment (FDI). Capital flows into renewable energy, green infrastructure, and socially inclusive projects increased, supporting Qatar’s ambition to attract up to US$75 billion in sustainable investment by 2030, as projected by Invest Qatar.

These developments were underpinned by enhanced ESG disclosure requirements and a national push for greater transparency and accountability in financial markets. Together, they have positioned Qatar’s financial sector as a key enabler of the country’s transition toward a low-carbon, inclusive, and resilient economy.

Scope and objectives of the Qatar Sustainable Finance Framework

The Framework defines sustainable finance as any credit facility—whether conventional or Islamic-compliant—or financial instrument such as bonds, sukuk, guarantees, or letters of credit, that is used in full or in part to fund eligible green, social, or sustainable projects.

These include initiatives in renewable energy, clean transportation, sustainable water and waste management, and affordable housing.

In addition to setting out definitions, the Framework introduces principles intended to bring consistency to how banks structure, evaluate, and report on sustainable finance activities. Particular attention is given to sustainability-linked financing, where credit terms vary based on the borrower’s achievement of defined sustainability performance targets.

Islamic-compliant sustainability financing

Significantly, the Framework addresses the integration of Islamic finance with sustainability criteria, recognizing the growing role of Shariah-compliant instruments in the ESG space. This aligns Qatar with other Gulf states that are positioning Islamic finance as a key lever in sustainable development financing.

Implementation and compliance

Banks are expected to implement the Framework from the date of the Circular, marking a decisive regulatory shift. QCB also emphasizes the importance of transparency and accountability, requiring financial institutions to adopt clear procedures for impact evaluation, reporting, and third-party verification.

This regulatory development follows a regional trend, as Gulf financial regulators seek to enhance the role of banking systems in facilitating energy transition and climate resilience. The Framework also complements broader national reforms in public sector sustainability reporting, green bond frameworks, and infrastructure investment. 

Private sector engagement and industry readiness

Qatar’s banking sector has begun adapting to the regulatory shift ushered in by the Framework, though implementation remains uneven. As of Q1 2025, three of the country’s top five banks—QNB, Commercial Bank, and Masraf Al Rayan—have publicly disclosed ESG integration initiatives, including sustainability reporting and the adoption of climate risk metrics in lending portfolios.

QNB, which issued the region’s first green bond in 2020, reported that over 12 percent of its corporate loan book in 2024 was ESG-linked, up from 5 percent in 2022. Meanwhile, Masraf Al Rayan announced the establishment of a green finance unit with plans to deploy QAR 3 billion (approx. US$820 million) toward sustainable projects by 2026, as per the 2024 Masraf Al Rayan Annual Report.

Despite this progress, broader industry adoption remains limited. As of April 2025, fewer than 40 percent of licensed banks in Qatar had established internal ESG governance systems or embedded sustainability-linked lending practices, according to internal QCB monitoring data referenced in The Peninsula.

To address this, the Qatar Financial Centre Authority (QFCA) is preparing a technical assistance initiative set to launch in H2 2025, designed to support second-tier banks in aligning with the Framework’s compliance structure (QFC ESG Strategy Overview).

A 2024 report by Invest Qatar, Sustainable Growth in Qatar – Road to ESG Investing, revealed that just 31 percent of local financial institutions perform climate-related stress testing, and only 18 percent require ESG disclosures from borrowers.

In the absence of a unified ESG taxonomy, comparability and benchmarking remain a challenge. However, additional technical guidance from QCB and QFC is expected by the end of 2025, including sector-specific ESG risk factors and templates for sustainability-linked disclosures.

Outlook

The launch of the Framework sends a clear message that Qatar is committed to embedding sustainability into the DNA of its financial sector. While the guidance provides flexibility in implementation, it establishes a foundational structure that aligns Qatar’s banking industry with evolving global ESG frameworks, including those set out by the International Capital Market Association (ICMA) and OECD.

For financial institutions, the Framework represents both a compliance mandate and an opportunity—one that could redefine lending practices, risk assessment models, and investor engagement strategies over the coming years.

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