H1-2022 Sees A Considerable Drop In Value Terms, A Concern For ME Businesses

In 2021 green finance in the Middle East and North Africa (MENA) region grew faster than the rest of the world. In the first six months, issuances of green and sustainability-linked debt amounted to $6.4 billion, outstripping the global growth rate, and more than a third higher than total 2020 volumes.  2022 however, is entirely different. The market is down.

The total value of green bonds in the MENA region in the first-half of 2022 was approximately $2.05 billion, and sustainability-linked loans $1.25 billion, according to Bloomberg’s Capital Markets League Tables, significantly down on the same period of last year but not without notable transactions.

Aluminium Bahrain’s $1.247 billion sustainability-linked loan has leveraged its participation in the green finance market, while UAE companies were once again the region’s most active, with First Abu Dhabi Bank (FAB) making three green bond issuances totalling $788 million and Sweihan PV Power issuing one of $700.8 million.

The trend overall for the start of 2022, however, has been downwards. The reasons for the MENA dip lie outside of the region in geopolitical tensions, economic uncertainty, rising interest rates and increasing oil prices. The downward trend in the MENA region also reflects the global picture for green and sustainability-linked debt in the first-half of the year. Globally, the most affected form of green finance in the first-half has been sustainability-linked loans, which are down approximately 12.5 percent. Green bonds have been less affected, slipping only 3.2 per cent while continuing to attract significant interest, including two more issuances by the European Union following its 2021 debut.

Looking forward, the global market for green and sustainability-linked debt could reach $15 trillion by 2025 as the world keeps pushing towards net-zero.

The MENA region has the potential to make an important contribution, particularly with COP27 and COP28 taking place in Egypt and the UAE. The government is preparing to issue its first green bond in Saudi Arabia in 2022.

In this region, the spotlight will focus on how companies and governments are helping to build a more sustainable future, with both consumers and investors likely to advocate more loudly for them to meet their existing commitments and accelerate the pace of change.