The Capital Market Authority (CMA) is out with a new regulatory guide for issuing green, social, sustainability, and sustainability-linked (GSS) debt instruments. The new framework (pdf) seeks to attract investors to sustainable development and align the Saudi market with the International Capital Market Association’s (ICMA) standards.

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The guideline outlines the following types of debt instruments funding environmental or social projects:

  • A green debt instrument uses proceeds to finance new or existing eligible green projects with a positive environmental impact, such as renewable energy, energy efficiency, and pollution prevention;
  • A social debt instrument finances eligible social projects aimed at achieving positive social outcomes, including affordable basic infrastructure, access to essential services, and affordable housing;
  • A sustainability debt instrument financing eligible projects aimed at achieving both positive environmental and social impacts;
  • A sustainability-linked debt instrument has its classification tied to the issuer’s achievement of sustainability targets, allowing its proceeds to be used for general corporate purposes rather than being restricted to specific projects.

The requirements: Green, social, and sustainability bonds require clear use-of-proceeds disclosure, quantifiable environmental or social benefits, a public framework, external review, and annual impact reports. Sustainability-linked bonds, however, need identified, measurable KPIs and ambitious Sustainability Performance Targets (SPTs) disclosed in prospectuses, supported by a framework, external review, and annual reports detailing KPI progress.

A budding sector: Some 94 Saudi listed firms disclosed sustainability practices in 2024 (up from 81 in 2023), and sustainability disclosure among the top 100 listed companies rose to 65% in 2024 (from 58% in 2023), according to Argaam.

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