Developing an eco-friendly classification system for the Gulf region
The Gulf region is witnessing discussions about a unified taxonomy to harmonise sustainability standards across the countries. As of now, no structured framework exists for the region as a whole, with several Gulf nations yet to introduce their own Sustainable Taxonomy frameworks.
However, there is an ongoing plan to establish a regional Sustainable Taxonomy for the Gulf states. This regional taxonomy, inspired by the Association of South East Nations (Asean) model, could accommodate the diversity in market maturity, energy dependence, economic composition, and national climate targets of Gulf states.
The proposed taxonomy would follow a phased approach, starting with a high-level, principles-based framework and evolving into more technical criteria. This structure would provide a solid foundation while allowing for policy learning and capacity-building across jurisdictions.
Taxonomies play a crucial role in directing financial resources toward sustainable activities. By increasing market transparency, they help governments integrate climate targets into financial regulation. Establishing a regional taxonomy could be instrumental in attracting green investment and supporting the transition to sustainable economic models in the Gulf.
The taxonomy must be rooted in national transition plans and capable of evolving over time, offering a flexible but robust classification system. For instance, a traffic light classification system could acknowledge existing energy sources while planning for decarbonisation, paired with specific sectoral guidance and sunset clauses.
A unified Gulf taxonomy, designed well, could attract both regional and international investors, support national transition plans, and enhance the Gulf's position in the climate finance arena. It could also enhance credibility, reduce greenwashing concerns, and provide a reliable foundation for scaling up sustainable and sharia-compliant bond issuance across the region.
One relevant example for a Gulf taxonomy is Malaysia's SRI Sukuk Framework, which enables issuers to reference a national taxonomy and international standards like the International Capital Market Association's Green Bond Principles.
The multi-jurisdiction common ground taxonomy, involving China, Singapore, and the EU, aligns definitions and identifies shared criteria to address investor concerns over greenwashing and support greater consistency across jurisdictions. This coordinated approach could serve as a guiding principle for the Gulf taxonomy.
As of July 9, 2025, more than 60 taxonomies are now in place around the world, but none of the Gulf states have introduced one. With the United Arab Emirates (UAE) setting an ambitious emissions target of a 47% reduction by 2035, the time for a regional taxonomy may be ripe.
A well-designed Gulf taxonomy could be a critical part of the financial architecture for global climate action, providing a standardised language for investors, issuers, and policymakers alike. It could help the Gulf region navigate the tension between harmonization and flexibility in taxonomy design, much like Asean's framework demonstrates.
In conclusion, the establishment of a regional taxonomy for the Gulf region could pave the way for a more sustainable and green economy, attracting investment and supporting the transition to a low-carbon future.
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