Saudi Arabia and the UAE are expected to continue leading the way with sustainable bond issuances in the Middle East in 2025, with total sustainable issuance in the region projected to range between USD 18-23 bn, according to an S&P Global report (pdf). The two countries accounted for more than half of last year’s issuances, which totaled USD 22.6 bn.

Renewable energy projects, especially solar, will dominate demand as GCC countries continue to prioritize energy efficiency and diversification from oil. Projects like sustainable water management, clean transport, and pollution control have also been popular in both Saudi Arabia and the UAE.

New types of bonds will also increase in popularity: Blue and transition bonds issuances are predicted to increase due to exposure to water scarcity and hydrocarbons. Sustainable sukuk will also continue to grow, S&P Global expects.

ICYMI- Last month, The Finance Ministry tapped HSBC, JPMorgan, and Societe Generale as global coordinators for its EUR-denominated first green bond issuance. The offerings may include a seven-year green sukuk and a 12-year conventional sukuk. Additional details on yields and offering size were not disclosed. Proceeds will go toward financing the Kingdom’s green financing framework, unveiled in March last year.

IN CONTEXT- The government is looking to tap green bond sales for the first time, unveiling a green financing framework that identifies eight types of green projects to be funded through the sale of the bonds. The Kingdom’s first push into green bonds comes as part of efforts to boost its clean energy transition away from fossil fuels, which remains the cornerstone of the economy.

SAUDI ARABIA’S 2024 ISSUANCES AT A GLANCE-

The Kingdom’s sustainable bond issuances in 2024 hit USD 5.6 bn, coming in second place in MENA despite a 27% y-o-y decline in issuance value. Financial institutions and adaptation-focused projects played a bigger role in local issuances compared to other countries in the region, the report noted. Sustainable sukuk accounted for the bulk of Saudi Arabia’s 2024 sustainable bond issuance, coming in at 78% of the total, with the remaining 12% coming from other sustainable bonds, according to the report.

Who were the top issuers last year? Al Rajhi Bank issued two USD 1 bn sustainability sukuks, while other major issuers included Saudi National Bank (USD 850 mn), Arab Petroleum Investments Corp. (USD 750 mn), Riyad Bank (USD 750 mn), Saudi Investment Bank (USD 750 mn), and the Public Investment Fund (PIF)’s USD 500 mn green bond.

THE REGIONAL PICTURE-

Despite dominating the regional market, UAE issuances declined amid post-COP normalization, S&P says: The UAE’s sustainable bond issuances declined by 28% y-o-y to reach USD 7.4 bn in 2024, as peak demand after COP28 in Dubai eased, along with a higher interest rate environment. Green bonds were the most popular, with around 60% of issuances focused on energy. Other prevalent sectors included logistics, real estate, and tourism and hospitality. Meanwhile, sustainable sukuk represented 30% of the UAE’s total sustainable issuances last year.

Financial institutions dominated issuances in the UAE, led by Dubai Islamic Bank’s USD 1bn sustainable sukuk, followed by Taqa’s USD 850 mn green bond issuance, and First Abu Dhabi Bank’s USD 800 mn bonds. The Emirate of Sharjah issued the largest sustainable sovereign bonds in the UAE at USD 750 mn and USD 545 mn. The region’s only social bond was issued by the National Bank of Ras Al Khaimah, amounting to USD 600 mn. Beyond sovereign and banking issuances, the biggest sustainable issuances were Masdar’s USD 1 bn green bonds and Aldar’s USD 500 mn green sukuk.

MEANWHILE- Qatar had the region’s largest issuance with a USD 1.5 bn sovereign green bond issuance. The second-largest issuances were Dubai Islamic Bank’s USD 1 bn sustainability sukuk, Al Rajhi Bank’s two USD 1 bn sustainability sukuks, and Qatar’s second sovereign green bond worth USD 1 bn. Saudi National Bank’s USD 850 mn sustainability sukuk and Abu Dhabi National Energy Company’s USD 850 mn green bond ranked third.

OTHER REGIONAL TRENDS WORTH NOTING-

  • Sustainable bonds represented 25% of total issuances done by regional corporate and financial institutions, compared with a 9% global average;
  • Financial institutions achieved a new sustainable issuance record of USD 12.6 bn in 2024, while sovereign sustainable issuances declined by 56% y-o-y to USD 1.7 bn;
  • The share of sustainable sukuk amounted to more than 35% of regional sustainable bond issuance in 2024, compared to 26% in 2023.
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