Saudi Press

Saudi Arabia and the world
Thursday, Oct 02, 2025

Are green bonds the future for the Gulf or just a gimmick?

Are green bonds the future for the Gulf or just a gimmick?

Analysts ponder the rise of green bonds in a region known for oil wells, tankers and sprawling natural-gas plants
In a region known for oil wells, tankers and sprawling natural-gas plants, green bonds might raise some eyebrows.

But when Saudi Electricity Co and Qatar National Bank sold notes this month designed to fund projects including environmentally friendly buildings, smart meters and infrastructure for distributing renewable power, investors piled in.

“If you have an ESG mandate and are looking for a yield pickup in a name with a phenomenally strong balance sheet, then you would be willing to buy,” said Patrick Esteruelas, head of research at Emso Asset Management in New York. “The combination of public-relations benefits and the opportunity to tap a growing pool of capital means there will be a significant increase in green-bond issuance.”

In the Gulf, the decline in oil prices that was fueled by the coronavirus pandemic served as a reminder of why nations need to diversify their economies away from energy exports. While not everyone is convinced that the environmental, social and governance, or ESG, bonds go much beyond good PR, the global rush for placements means more issuance from the region is a given.

Saudi Electricity’s $1.3 billion of green sukuk was the first such deal in the world’s largest oil-exporting nation, where per-capita energy use is triple the average for Europe.

It helped drive placements in the Middle East to almost $2.5 billion this year, a nearly five-fold increase from 2017, when the region issued its first green debt. Egypt is also in an advanced stage of issuing $500 million of green securities.

“Given their high carbon-dioxide emissions per capita, Gulf economies are good targets for such schemes,” said Thomas Le Guay, a Dubai-based analyst for Moody’s Investors Service. “Green initiatives are also a good way for Gulf countries to balance their generous welfare systems with declining revenues from oil exports.”

Fitch Ratings estimates the Saudi budget deficit will rise to 15 percent of gross domestic product in 2020, one of the highest levels in the Middle East. The government’s revenue fell almost 50% year-on-year in the second quarter.

Not everyone is embracing the deals.

“It’s just a label,” said Paul McNamara, a money manager at GAM Investments in London, who didn’t buy green bonds from the Saudi or Qatari companies. “There are lots of countries doing things that aren’t good for the environment, but Saudi Arabia is probably the worst of all. There is nothing about Saudi Arabia selling a bond with a green label that makes any difference from Saudi Arabia selling any other sort of bond.”

HSBC Global Asset Management this week said it’s challenging companies and governments to ensure they have proper environmental policies with carbon-reduction targets, and aren’t simply issuing green bonds opportunistically.

Still, seven in 10 money managers said environmental, social and governance factors will influence their decisions over the next decade, according to a survey by Vontobel Asset Management.

“It is very important for issuers out of the Gulf Cooperation Council, both sovereigns and corporates, to get broader avenues for funding for the near future,” said Sergey Dergachev, a money manager in Frankfurt at Union Investment Privatfonds GmbH who bought bonds of both Saudi Electricity and QNB.

“The ESG theme is globally on the rise, and Covid-19 in many ways accelerated the importance of the ESG theme. Issuing green debt signals to investors that sovereigns and corporates do take ESG related issues seriously, and that is a positive.”
Newsletter

Related Articles

Saudi Press
0:00
0:00
Close
Altman Says GPT-5 Already Outpaces Him, Warns AI Could Automate 40% of Work
Trump Organization Teams with Saudi Developer on $1 Billion Trump Plaza in Jeddah
Electronic Arts to Be Taken Private in Historic $55 Billion Buyout
Colombian President Petro Vows to Mobilize Volunteers for Gaza and Joins List of Fighters
Nvidia and Abu Dhabi’s TII Launch First AI-&-Robotics Lab in the Middle East
UK, Canada, and Australia Officially Recognise Palestine in Historic Shift
New Eye Drops Show Promise in Replacing Reading Glasses for Presbyopia
Dubai Property Boom Shows Strain as Flippers Get Buyer’s Remorse
Top AI Researchers Are Heading Back to China as U.S. Struggles to Keep Pace
JWST Data Brings TRAPPIST-1e Closer to Earth-Like Habitability
UAE-US Stargate Project Poised to Make Abu Dhabi a Global AI Powerhouse
Trump and Starmer Clash Over UK Recognition of Palestinian State Amid State Visit
Saudi Arabia cracks down on music ‘lounges’ after conservative backlash
Saudi Arabia Signs ‘Strategic Mutual Defence’ Pact with Pakistan, Marking First Arab State to Gain Indirect Access to Nuclear Strike Capabilities in the Region
Sam Altman sells the 'Wedding Estate' in Hawaii for 49 million dollars
Turkish car manufacturer Togg Enters German Market with 5-Star Electric Sedan and SUV to Challenge European EV Brands
World’s Longest Direct Flight China Eastern to Launch 29-Hour Shanghai–Buenos Aires Direct Flight via Auckland in December
New OpenAI Study Finds Majority of ChatGPT Use Is Personal, Not Professional
Kuwait opens bidding for construction of three cities to ease housing crunch.
This Week in AI: Meta’s Superintelligence Push, xAI’s Ten Billion-Dollar Raise, Genesis AI’s Robotics Ambitions, Microsoft Restructuring, Amazon’s Million-Robot Milestone, and Google’s AlphaGenome Update
Indian Student Engineers Propose “Project REBIRTH” to Protect Aircraft from Crashes Using AI, Airbags and Smart Materials
Could AI Nursing Robots Help Healthcare Staffing Shortages?
Turkish authorities seize leading broadcaster amid fraud and tax investigation
Qatari prime minister says Netanyahu ‘killed any hope’ for Israeli hostages
Apple Introduces Ultra-Thin iPhone Air, Enhanced 17 Series and New Health-Focused Wearables
Big Oil Slashes Jobs and Investments Amid Prolonged Low Crude Prices
Social Media Access Curtailed in Turkey After CHP Calls for Rallies Following Police Blockade of Istanbul Headquarters
Did the Houthis disrupt the internet in the Middle East? Submarine cables cut in the Red Sea
Gold Could Reach Nearly $5,000 if Fed Independence Is Undermined, Goldman Sachs Warns
Uruguay, Colombia and Paraguay Secure Places at 2026 World Cup
Trump Administration Advances Plans to Rebrand Pentagon as Department of War Instead of the Fake Term Department of Defense
Tether Expands into Gold Sector with Profit-Driven Diversification
Trump’s New War – and the ‘Drug Tyrant’ Fearing Invasion: ‘1,200 Missiles Aimed at Us’
At the Parade in China: Laser Weapons, 'Eagle Strike,' and a Missile Capable of 'Striking Anywhere in the World'
Information Warfare in the Age of AI: How Language Models Become Targets and Tools
Israeli Airstrike in Yemen Kills Houthi Prime Minister
After the Shock of Defeat, Iranians Yearn for Change
YouTube Altered Content by Artificial Intelligence – Without Permission
Iran Faces Escalating Water Crisis as Protests Spread
More Than Half a Million Evacuated as Typhoon Kajiki Heads for Vietnam
HSBC Switzerland Ends Relationships with Over 1,000 Clients from Saudi Arabia, Lebanon, Qatar, and Egypt
Sharia Law Made Legally Binding in Austria Despite Warnings Over 'Incompatible' Values
Dogfights in the Skies: Airbus on Track to Overtake Boeing and Claim Aviation Supremacy
Tim Cook Promises an AI Revolution at Apple: "One of the Most Significant Technologies of Our Generation"
Are AI Data Centres the Infrastructure of the Future or the Next Crisis?
Miles Worth Billions: How Airlines Generate Huge Profits
Zelenskyy Returns to White House Flanked by European Allies as Trump Pressures Land-Swap Deal with Putin
Beijing is moving into gold and other assets, diversifying away from the dollar
Cristiano Ronaldo Makes Surprise Stop at New Hong Kong Museum
Zelenskyy to Visit Washington after Trump–Putin Summit Yields No Agreement
×