Saudi Press

Saudi Arabia and the world
Thursday, Dec 04, 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
As Trump Deepens Ties with Saudi Arabia, Push for Israel Normalization Takes a Back Seat
Thai Food Village Debuts at Saudi Feast Food Festival 2025 Under Thai Commerce Minister Suphajee’s Lead
Saudi Arabia Sharpens Its Strategic Vision as Economic Transformation Enters New Phase
Saudi Arabia Projects $44 Billion Budget Shortfall in 2026 as Economy Rebalances
OPEC+ Unveils New Capacity-Based System to Anchor Future Oil Output Levels
Will Saudi Arabia End Up Bankrolling Israel’s Post-Ceasefire Order in Lebanon?
Saudi Arabia’s SAMAI Initiative Surpasses One-Million-Citizen Milestone in National AI Upskilling Drive
Saudi Arabia’s Specialty Coffee Market Set to Surge as Demand Soars and New Exhibition Drops in December
Saudi Arabia Moves to Open Two New Alcohol Stores for Foreigners Under Vision 2030 Reform
Saudi Arabia’s AI Ambitions Gain Momentum — but Water, Talent and Infrastructure Pose Major Hurdles
Tensions Surface in Trump-MBS Talks as Saudi Pushes Back on Israel Normalisation
Saudi Arabia Signals Major Maritime Crack-Down on Houthi Routes in Red Sea
Italy and Saudi Arabia Seal Over 20 Strategic Deals at Business Forum in Riyadh
COP30 Ends Without Fossil Fuel Phase-Out as US, Saudi Arabia and Russia Align in Obstruction Role
Saudi-Portuguese Economic Horizons Expand Through Strategic Business Council
DHL Commits $150 Million for Landmark Logistics Hub in Saudi Arabia
Saudi Aramco Weighs Disposals Amid $10 Billion-Plus Asset Sales Discussion
Trump Hosts Saudi Crown Prince for Major Defence and Investment Agreements
Families Accuse OpenAI of Enabling ‘AI-Driven Delusions’ After Multiple Suicides
Riyadh Metro Records Over One Hundred Million Journeys as Saudi Capital Accelerates Transit Era
Trump’s Grand Saudi Welcome Highlights U.S.–Riyadh Pivot as Israel Watches Warily
U.S. Set to Sell F-35 Jets to Saudi Arabia in Major Strategic Shift
Saudi Arabia Doubles Down on U.S. Partnership in Strategic Move
Saudi Arabia Charts Tech and Nuclear Leap Under Crown Prince’s U.S. Visit
Trump Elevates Saudi Arabia to Major Non-NATO Ally Amid Defense Deal
Trump Elevates Saudi Arabia to Major Non-NATO Ally as MBS Visit Yields Deepened Ties
Iran Appeals to Saudi Arabia to Mediate Restart of U.S. Nuclear Talks
Musk, Barra and Ford Join Trump in Lavish White House Dinner for Saudi Crown Prince
Lawmaker Seeks Declassification of ‘Shocking’ 2019 Call Between Trump and Saudi Crown Prince
US and Saudi Arabia Forge Strategic Defence Pact Featuring F-35 Sale and $1 Trillion Investment Pledge
Saudi Sovereign Wealth Fund Emerges as Key Contender in Warner Bros. Discovery Sale
Trump Secures Sweeping U.S.–Saudi Agreements on Jets, Technology and Massive Investment
Detroit CEOs Join White House Dinner as U.S.–Saudi Auto Deal Accelerates
Netanyahu Secures U.S. Assurance That Israel’s Qualitative Military Edge Will Remain Despite Saudi F-35 Deal
Ronaldo Joins Trump and Saudi Crown Prince’s Gala Amid U.S.–Gulf Tech and Investment Surge
U.S.–Saudi Investment Forum Sees U.S. Corporate Titans and Saudi Royalty Forge Billion-Dollar Ties
Elon Musk’s xAI to Deploy 500-Megawatt Saudi Data Centre with State-backed Partner HUMAIN
U.S. Clears Export of Advanced AI Chips to Saudi Arabia and UAE Amid Strategic Tech Partnership
xAI Selects Saudi Data-Centre as First Customer of Nvidia-Backed Humain Project
A Decade of Innovation Stagnation at Apple: The Cook Era Critique
President Trump Hosts Saudi Crown Prince Mohammed bin Salman in Washington Amid Strategic Deal Talks
Saudi Crown Prince to Press Trump for Direct U.S. Role in Ending Sudan War
Trump Hosts Saudi Crown Prince: Five Key Takeaways from the White House Meeting
Trump Firmly Defends Saudi Crown Prince Over Khashoggi Murder Amid Washington Visit
Trump Backs Saudi Crown Prince Over Khashoggi Killing Amid White House Visit
Trump Publicly Defends Saudi Crown Prince Over Khashoggi Killing During Washington Visit
President Donald Trump Hosts Saudi Crown Prince Mohammed bin Salman at White House to Seal Major Defence and Investment Deals
Saudi Arabia’s Solar Surge Signals Unlikely Shift in Global Oil Powerhouse
Saudi Crown Prince Receives Letter from Iranian President Ahead of U.S. Visit
Saudi Arabia’s Crown Prince Begins Washington Visit to Cement Long-Term U.S. Alliance
×