As Saudi ramps up non-oil sector development and giga-projects, what role is environmental consultancy playing in enabling compliant, finance-ready projects?
With the announcement of new environmental regulations in 2021, the Kingdom of Saudi Arabia (KSA) has introduced an environmental permitting system similar to that found in most Middle Eastern countries. Projects are categorised and require environmental and social impact assessments (ESIA) based on their scale. Small-scale projects (Category 1) require an environmental and social management plan (ESMP), and medium-scale projects (Category 2) require an ESIA and ESMP. Large-scale projects (Category 3) require an environmental and social impact identification scoping phase, ESIA and ESMP, similar to ESIAs typically required by international finance institutions (IFI). Only with the ESIA or ESMP does a project developer obtain its environmental permit to construct (EPC) and environmental permit to operate (EPO) from the KSA National Center for Environmental Compliance (NCEC).
Therefore, environmental consultancy ensures legally compliant projects by conducting ESIAs according to these new regulations. RSK is registered with the NCEC and has conducted ESIAs for multiple categories of project in non-oil sectors since 2021, including infrastructure (giga-projects), utilities and transport (e.g., airports) and renewable energy (e.g., solar PV).
For international finance readiness, environmental consultants provide ESIAs, which also demonstrate alignment with the international environmental and social performance standards used by most IFIs and international lending banks, such as those of the International Finance Corporation (IFC) and Equator Principle 4 (EP4). IFC/EP4 requirements call for various additional assessments beyond NCEC requirements, such as a climate change impact assessment and a human rights impact assessment. Therefore, IFC/EP4 ESIAs are more complex because KSA and IFC/EP4 standards need to be taken into consideration in parallel. It is the job of companies such as RSK to help clients navigate these multiple standards to satisfy both the regulator and lenders.
What impacts have Saudi’s recent reforms had on investor sentiment toward sustainability and environmental risk management?
There is no doubt that KSA’s Vision 2030 reforms in the last decade have put the country firmly on the radar of international investors, as most recently demonstrated by President Trump’s visit to Riyadh in May 2025. KSA’s 2021 environmental law comes from the sustainability vision contained in Vision 2030, and the introduction of environmental safeguards has given many investors confidence in KSA.
However, with international attention comes inevitable enquiries about sustainability and environmental risk management aspects. For example, high-profile coastal developments lead to questions about damage to coral; the promotion of tourism is met with queries about sustainable and eco-tourism approaches; and applications to host major sporting events prompt concern over sustainability considerations (as they did around the Qatar World Cup).
As a result, some investors do still shy away from KSA despite other Middle Eastern countries in receipt of international lender financing arguably being less stable jurisdictions with fewer developed environmental controls. However, other investors do not shy away but are increasingly requiring IFC/EP4 standard ESIAs to be conducted by environmental consultants such as RSK. By blending international and Saudi national understanding, we understand the ground-level realities and practical methods of implementing international standards in KSA and can bring this benefit to our clients.
Therefore, KSA’s ongoing reforms are generating a healthy debate about environmental and social risks and how to address them. As with all aspects of KSA’s regulatory environment, environmental and social standards are likely to continue to evolve in the run-up to 2030 and beyond, driven by both government objectives and investor experience.
What steps should the kingdom take to meet global ESG standards and enhance investor trust in environmental compliance?
The 2021 environmental law is already a major step towards ESG alignment with KSA’s regional neighbours. An investor used to the United Arab Emirates ESIA requirements is now going to find KSA’s system familiar. KSA has also learned lessons from its neighbours in developing its new regulations and is leading in innovation in aspects such as the use of AI, drones and digital portals.
KSA is strictly regulated, and there is no reason to assume that the NCEC processes will not be as rigorous as other types of regulation, which should enhance investor confidence. In that sense, the NCEC processes (as well as the additional environmental requirements of jurisdictions such as the Royal Commissions and Royal Reserves) are part of meeting global ESG standards. Investors should gain confidence from these processes and not see them as additional barriers.
That said, aspects of the KSA requirements can and may well evolve further. At present, the requirements are predominantly environmental, whereas the IFC Performance Standards include detailed social aspects such as the requirements for a human rights risk assessment, resettlement action plan (RAP) and livelihood restoration plan (LRP). At present, KSA government bodies other than NCEC regulate social aspects such as land acquisition, and while landowners are typically well compensated for acquired land, it is often difficult for consultants to capture this in ESIAs owing to the regulatory structure. KSA could look to evolve such aspects in order to streamline project ‘bankability’.
The IFC Performance Standards are themselves being updated in the coming years, and investors in all countries need to be ready for that. Climate change, social and human rights aspects will all feature more prominently. Therefore, KSA has an opportunity to align its environmental and social safeguard requirements to the revised IFC requirements in order to attract increased international financing into the funding mix for Vision 2030.
What environmental or regulatory risks are most pressing for companies today as they pursue investor or development opportunities in Saudi’s dynamic landscape?
I would give companies exploring the KSA market three key bits of advice.
- Understand the context: Get out of the office and go and see the site. Talk to Saudis. Understand the environmental and social context. KSA is different and unique!
- Engage with the NCEC process as early as possible: Talk to NCEC; understand project categorisation and what you will have to budget for to obtain the correct category of ESIA; and ensure that all planned activities are included in your ESIA so that you obtain an environmental permit that covers all your activities – by missing things out of the scope of the ESIA, you can limit yourself to what you are then permitted to do going forward. For example, if you do the ESIA at concept masterplan (CMP) stage, if things change at design masterplan (DMP) stage, you will need to update the ESIA to obtain an updated permit.
- If you have any interest in seeking international lender financing for your project, consider the IFC Performance Standards early: Just because NCEC does not require something does not mean that international lenders will not ask for it later. The earlier you cover the international requirement, the better!
Written by: Nicholas Ramsden, Country manager for Saudi Arabia