The adoption of sustainable finance in the Gulf Cooperation Council (GCC) region is on the rise, with total issuances of environmental sukuk and other sustainable debt instruments surpassing SR8 billion (two billion dollars), according to Abdullah Al-Moqbel, director of the Capital Market Authority’s sustainability department.

Al-Moqbel made these remarks during a panel discussion on ‘Climate Risk and Financial Disclosure: Harmonizing New Frameworks and Implementation’ at the Sustainability Forum Middle East in Manama, Bahrain, on January 30.

Al-Moqbel emphasized the growing role of sustainable finance in facilitating climate adaptation and sustainable development.

He highlighted that sustainable finance is key to driving sustainability practices across economies and will be especially important during the transition phase.

Al-Moqbel also underscored the need for collaboration with various stakeholders to advance corporate sustainability strategies, noting that market participants and listed companies are integral to this process.

In Bahrain, Alya Al-Omran, head of capital markets supervision at the Central Bank of Bahrain, outlined the country’s mandatory approach to sustainability.

Bahrain recently introduced an Environmental, Social, and Governance (ESG) module, which mandates that licensees and listed companies comply with sustainability standards.

Al-Omran explained that the mandatory nature of these regulations is designed to push companies to integrate sustainability into their operations.

Meanwhile, Mohammad Essa, head of corporate governance at the Securities and Commodities Authority in the UAE, discussed the country’s efforts to promote green finance.

He noted that the UAE issued regulations in 2023 regarding green and sustainability-linked bonds and sukuk.

To support these initiatives, the UAE has exempted companies from registration fees when listing such bonds and sukuk on the financial market.

According to Essa, by the end of 2023, the UAE had issued a total of $14 billion in green bonds and sukuk, a figure which has continued to rise.

While progress in the GCC is notable, Al-Moqbel pointed out the global disparity in the adoption of sustainable finance.

He stated that although green bond issuance has surpassed $850 billion worldwide, it still represents just 3 percent of total conventional bond issuances.

Nevertheless, Al-Moqbel noted that the compound annual growth rate of green financial products is twice that of conventional bonds, signaling a promising future for these instruments.

The Capital Market Authority in Saudi Arabia is currently drafting voluntary guidelines for issuing green, social, and sustainability-linked sukuk and other debt instruments.

These guidelines aim to help companies meet international disclosure standards and align with principles set by the International Capital Market Association.

The ultimate goal is to increase the issuance of these sustainable financial products in both local and regional markets.

Al-Moqbel also emphasized the importance of raising awareness among local and regional investors, as most demand for sustainable finance products currently comes from international investors.

Raising local awareness is seen as key to further expanding the market for green sukuk and other sustainable finance instruments.