UAE, Saudi Arabia to lead in green bonds issuance

Ok Raveendran

The inexperienced, social, sustainable, and sustainable-linked bonds (GSSSB) market–together with sustainable sukuk–within the Center East (GSSSB) is ready to broaden additional, with the UAE and Saudi Arabia prone to stay the leaders, Normal & Poor’s mentioned in a report.

The report is timing with the high-profile COP28 assembly in Dubai, which has seen various pathbreaking selections by nations.

GSSSB issuance within the Center East ought to proceed to extend within the coming years, supported by authorities initiatives and the relative nascency of sure markets, S&P factors out.

The UAE and Saudi Arabia will probably stay the leaders of the area’s GSSSB market, significantly by means of inexperienced bonds, which we count on will proceed driving regional issuance over the subsequent three to 5 years.

Gulf Cooperation Council (GCC) government-related entities (GREs) in fossil gasoline dependent sectors are aligning methods with nationwide sustainability targets, however implementation could also be delayed, the report, nevertheless, notes.

GSSSB bond issuance, together with sustainable sukuk, greater than quadrupled within the first 9 months of 2023 from the identical interval final 12 months, to achieve $19.4 billion. Nevertheless, it expanded from a comparatively low base. GSSSB issuance is lower than 1% of the GDPs of the Center East international locations studied. That is comparatively consistent with sure different rising economies. For instance, GSSSB issuance within the first 9 months of 2023 was comparable relative to nominal anticipated 2023 GDP in international locations corresponding to Indonesia (0.1%) and South Africa (0.1%). The Center East accounts for lower than 3% of worldwide GSSSB issuance.

S&P estimates that GSSSB issuance comprised about 30% of whole U.S.-dollar denominated worldwide bond issuance within the Center East throughout the first 9 months of 2023. Globally, it expects GSSSB issuance to make up about 15% of whole issuance in 2023. Saudi Arabia and the UAE will probably proceed to seize the biggest share of issuance. That is largely fuelled by authorities or GRE issuance to satisfy nationwide sustainability targets. Whereas we word the ramp up in GSSSB issuance within the Center East, its contribution remains to be comparatively marginal globally and domestically.

Issuance might be associated to funding local weather transition and adaptation and water initiatives, corresponding to desalination. That is attributed to the excessive reliance of regional economies on the hydrocarbon sector, through which emissions are tough to cut back, and publicity to water shortage.

The vast majority of the governments within the GCC area, aside from Qatar, have introduced net-zero targets. Türkiye has made an analogous announcement. Deploying renewable power will assist meet the local weather commitments of their nationally decided contributions (NDCs). The UAE and Saudi Arabia–which produce the very best greenhouse gasoline emissions within the GCC in absolute phrases–have made the biggest investments in renewables.

Additionally revealed on Medium.