Saudi Press

Saudi Arabia and the world
Thursday, Jan 30, 2025

Sustainable Finance Growth in the GCC: Focus on Green Bonds and Sukuk

Issuances of green sukuk and other sustainable finance instruments rise across Saudi Arabia, Bahrain, and the UAE, with total issuances exceeding SR8 billion ($2 billion).
The use of environmental sukuk and other sustainable debt instruments has seen a significant rise in the Gulf Cooperation Council (GCC) region, with total issuances surpassing SR8 billion ($2 billion), according to Abdullah Al-Moqbel, director of the Capital Market Authority's (CMA) sustainability department.

Al-Moqbel made the 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 critical role of sustainable finance in enabling climate adaptation and supporting sustainable development across economies.

He noted that sustainable finance is crucial for the transition phase toward a more climate-conscious global economy.

Al-Moqbel also pointed out that corporate sustainability strategies will be primarily implemented by companies, not regulators, with the CMA fostering multi-sided communication with stakeholders in Saudi Arabia to advance such efforts.

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

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

Al-Omran acknowledged that the enforcement of this new rule is an unconventional approach, but stated that it is necessary to force companies to integrate sustainability into their operations.

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

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

To encourage the listing of such financial products, the UAE has exempted companies from registration fees for green bonds and sukuk.

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

While progress in the GCC is evident, Al-Moqbel also acknowledged the global disparity in sustainable finance adoption.

Despite over $850 billion in global green bond issuances, these represent only 3 percent of total conventional bond issuances worldwide.

However, he pointed out that the compound annual growth rate of green financial products is twice that of conventional bonds, underscoring the promising future of sustainable finance instruments.

As part of its regulatory push, the CMA in Saudi Arabia is drafting voluntary guidelines for the issuance of green, social, and sustainability-linked sukuk and other debt instruments.

These guidelines aim to assist companies in meeting international disclosure standards and align with global principles, such as those outlined by the International Capital Market Association (ICMA).

Al-Moqbel highlighted that the goal of these guidelines is to stimulate increased issuance of sustainable financial products in local and regional markets.

Despite the growing demand for these financial instruments from international investors, Al-Moqbel stressed the importance of raising awareness among local and regional investors.

Currently, the majority of the demand for green sukuk and other sustainable finance products comes from international markets.

Raising local and regional investor awareness is critical for further growth in the sector.
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