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Sustainable bond issuance in ME down 18% in first nine months of 2024
Total sustainable bond (green, social, sustainability, and sustainability – linked bonds) issuance in the Middle East reached $16.7 billion in the first nine months of 2024, down 18% from the same period a year earlier, although this followed a relatively high COP28 halo effect, according to S&P Global Rating.
To take off, sustainable bond issuance in the Middle East could require acceleration in implementing net zero polices, despite government initiatives and increasing alignment with sustainability strategies, or even regulatory requirement.
The demand for sustainable bond issuance in the region is sensitive to economic growth, inflation, and interest rates, while transparency and disclosure within ESG reporting are in the early stages of development; these factors could affect funding and regulations.
The United Arab Emirates (UAE) and Saudi Arabia will likely continue leading the region’s Sustainable Bonds issuances, despite increased activity elsewhere. Sustainability bonds lead the share of issuance, as more banks fuel issuances, with corporate activity meaningfully lower (45% year over year).
The UAE and Saudi Arabia make up most sustainable bonds issuance in the Middle East, but issuances from Qatar have risen this year.
Issuances in the UAE are more diversified by issuer type than those in the rest of the region, but financial institutions are prevalent across the board this year.
In the UAE, the financial sector has pledged to mobilize AED1 trillion ($272 billion) in sustainable finance by 2030 as a key factor for issuances in the sector.
Renewable energy remains a key priority in the region, with most issuances including it as part of use of proceeds.
“We calculate sustainable bonds contribute to 15%-20% of total bond issuances (excluding sovereigns and private placements) in the region, higher than global levels of 12%-14%,” according to S&P.
Given that 35%-40% of the issuances in the region this year were propelled by private placements and domestic issuances, including these amounts, the share of sustainable bond issuance in the region drops to 10%-15%.
In the first two quarters of 2024, sustainable finance activity in the region improved better sequentially compared with global trends. However, this changed in the third quarter, where activity was muted despite continued bond issuances in the region.
The total volume of sustainable sukuk globally reached $7.1 billion in the first nine months of 2024, down 11% compared with the same period a year earlier.
In the Middle East, the total sustainable sukuk volume reached $6.1 billion in the same period, relatively unchanged from a year earlier.
The share of sustainable sukuk in the region continues to increase, constituting close to 35%-40% of sustainable bonds issuance in the region so far in 2024, compared with 25%-30% at year-end 2023.
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