S&P: Sustainability bond issuances in the Middle East decline 18% in 9 months

Total issuance of sustainability bonds (green, social, sustainability and sustainability-linked bonds) during the first 9 months of this year in the Middle East region amounted to $16.7 billion, down 18% compared to the same period last year, according to data issued by S&P.

The credit rating agency said that this decline came despite the great momentum of the 28th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP).

According to the agency’s calculations, sustainability bonds contribute about 15% to 20% of total bond issuance (excluding sovereign bonds and private issuances), explaining that this exceeds global levels of between 12% and 14%.

According to the data, between 35% and 40% of the region’s issuances during the current year were through private issuances and local issuances, including these amounts, and the agency added that the share of sustainability bond issuances in the region decreases to between 10% and 15%.

The agency stated that the first and second quarters of 2024 witnessed an improvement in sustainable finance activity in the region compared to global trends, adding that activity during the third quarter was muted despite the continued issuance of bonds in the region.

The data showed that although financing the climate transition and adaptation is a priority in the region due to exposure to the oil and gas sector, the volume of sustainable bond issuances, including financing social projects, increased in 2024 compared to the growth of green projects only in the past. It explained that this contradicts global trends, as green bond issuances remain at the forefront, accounting for about 60% of sustainability bonds.

According to the data, the UAE and Saudi Arabia accounted for most of the sustainability bond issuances in the Middle East, but with Qatari issuances increasing during the current year, the total sustainability sukuk issuances worldwide amounted to $7.1 billion during the first 9 months of 2024, down 11% compared to the same period in 2023.

The total volume of sustainability sukuk in the Middle East amounted to $6.1 billion during the same period, which is a stable level compared to 2023, and the agency explained that the share of sustainability sukuk in the region will continue to rise to represent between 35% and 40% of sustainability bond issuances in the region so far this year, compared to 25% and 30% by the end of 2023. Most of the issuances come from the Gulf countries, and the agency expects them to continue in this manner.