MUSCAT - Commercial banks in the Sultanate of Oman will be required to begin disclosing climate-related risks and practices starting from the 2026 financial year, according to the Central Bank of Oman (CBO).

The move is part of a broader effort by the country’s apex bank to integrate climate risk into financial stability oversight, the CBO said in its newly published 2025 Financial Stability Report.

While affirming that Oman has not yet experienced significant climate-induced financial disruptions, the Central Bank cautioned that the Sultanate of Oman remains vulnerable to physical risks arising from rising temperatures and extreme weather events such as cyclones and flash floods.

“These events pose potential threats to critical infrastructure, economic productivity and the insurance sector. The increasing severity and frequency of such events may impact asset valuations, damage collateral and elevate underwriting and operational risks for financial institutions”, the report noted.

In addition to physical risks, the Central Bank highlighted transition risks associated with the global shift towards decarbonisation.

“Oman’s hydrocarbon-reliant sectors may face tightening international environmental regulations, carbon pricing adjustments and shifting investor sentiment. These pressures could lead to a revaluation of carbon-intensive assets and weaken the credit profiles of affected corporates — particularly if banks lack granular data to assess their exposures”, it warned.

Compounding these concerns, the report noted, is the absence of climate scenario analysis across the banking sector, which could heighten vulnerability to abrupt changes in policy or market expectations.

In response, the CBO in 2023 directed all banks to submit implementation plans by June 2025 and to begin disclosing climate-related risks and practices from Fiscal 2026. At the same time, the Bank began coordinating with national environmental bodies to “support the classification of banks and borrowers by energy intensity”.

The Central Bank reiterated that climate change is emerging as a significant structural threat to global financial stability. It observed that delays in mitigation and adaptation measures are amplifying the exposure of financial systems worldwide, while limited fiscal capacity and restricted access to international finance are constraining investments in resilient infrastructure, clean energy transition and disaster preparedness.

The CBO further noted that as physical risks intensify and transition-related policies and technologies evolve, financial markets could face abrupt asset repricing, rising insurance costs and credit deterioration in vulnerable sectors.

It warned that climate-induced supply chain disruptions may also magnify global contagion effects, triggering spillovers into capital flows, commodity markets and debt sustainability. The growing frequency and severity of these risks, it said, could compound systemic vulnerabilities and undermine global financial stability.

This growing threat, the Central Bank emphasised, underscores the urgent need to integrate climate-related risks into financial policy, regulation and supervision frameworks worldwide.

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