ESG study reveals: Gulf region struggles with sustainability challenges!

ESG study reveals: Gulf region struggles with sustainability challenges!

On October 2, 2025, the renowned ESMT Berlin a comprehensive study of ESG (environmental, social, governance) performance of companies in the Gulf Cooperation Council (GCC). The authors, Catalina Stefanescu-Cuntze from ESMT Berlin, Rodrigo Tavares and Catarina Sá from the Nova School of Business and Economics, examined the relationship between ESG performance and financial results of 54 listed companies in seven GCC countries.

The results of the study are revealing: companies with better financial results invest significantly more in ESG initiatives. However, the results indicate that higher ESG scores do not lead to substantial improvements in stock market performance. What is surprising is that the relationship is often the other way around: financial strength enables companies to improve their ESG position. In addition, the predominance of large, financially strong companies in the financial and energy sectors is a source of distortion for the results.

Special features of ESG performance in the golf area

ESMT's study shows that the financial impact of ESG is not uniform. While ESG performance in the Gulf region remains evolving, its financial implications are very different from those in many developed markets. A key factor is the influence of state policies and institutional commitments, which are often more important than market forces. Companies in the GCC are pursuing ESG goals in particular to align with government vision and long-term transition goals.

In addition to these findings, another study published in the journal sheds light on them Green finance, the ESG performance of companies in the Gulf States. Together with the countries of Saudi Arabia, UAE and Qatar, 117 companies were analyzed in the period from 2021 to 2022. The UAE has been identified as a leader in ESG performance, particularly in environmental metrics, thanks to its strong institutional framework and alignment with global sustainability standards.

Saudi Arabia shows moderate progress in ESG performance, driven by the Vision 2030 reform agenda. However, it is also clear that progress varies widely within the UAE and Saudi Arabia. Qatar lags behind its neighbors, particularly in the areas of governance and social performance, reflecting weaker regulatory frameworks and slower adoption of sustainability standards.

Institutional pressures and challenges

The analysis highlights the role of institutional pressures influencing corporate sustainability practices in the GCC region. Coercive, normative and mimetic pressures are crucial in shaping ESG reporting. Companies that are strongly committed to sustainability and align themselves with global standards are better positioned in the long term.

However, the challenges should not be underestimated: a clear strategic framework for ESG, relevant indicators and high-quality data are difficult to achieve for many companies. The Meaning of ESG However, it is becoming increasingly clear as an evaluation criterion, not only for investors, but also for the corporate strategy as a whole. The ability to effectively collect ESG data and communicate it transparently is increasingly determining the economic success and trust of stakeholders.

Sustainability performance in the Gulf region is of international importance. The region is not only under pressure to generate financial returns, but also to assume ecological and social responsibility. The developments in the ESG performance of individual countries are significantly influenced by global standards and international competition.