‘Strong Pipeline’ Of Sustainable Bonds Likely From Middle East

Green bonds in the use-of-proceeds category will continue to lead issuance.

“Green bonds in the use-of-proceeds category will continue to lead issuance in EMEA region in 2023, in our view,” the report said.

“This should be driven by the focus on credible net zero plans by issuers, the European Central Bank’s intent to green its bond-buying programme, and the implementation of the EU Taxonomy and EU green bond standards.”

Issuers are also increasingly looking to finance biodiversity enhancement and preservation projects, it added.

Report further stated, the market for green and sustainable bonds and sukuk in GCC economies set a record in 2022 amid increased participation from banks and government-related entities, according to data from Bloomberg’s Capital Markets League Tables.

Total GCC green and sustainable bond and sukuk issuances last year reached US$8.5 billion from 15 deals, compared with US$605 million from six deals in 2021.

Saudi Arabia was the leading issuer within the region, accounting for more than half of the total volume, with the UAE accounting for the remaining issue volume.

According to Saudi Press Agency, in October, Saudi Arabia’s sovereign wealth fund, the Public Investment Fund, listed its debut US$3 billion green bond on the London Stock Exchange. The transaction was more than eight times oversubscribed, with orders exceeding US$24 billion, the report mentioned.

In November, Dubai Islamic Bank, the UAE’s biggest Sharia-compliant lender by assets, raised US$750 million through the sale of its debut sustainable sukuk.

In January last year, Abu Dhabi National Energy Company, better known as TAQA, together with Emirates Water and Electricity Company, also raised US$700.8 million through its first green bond.

Masdar’s CEO revealed they are planning to raise money through the issuance of a green bond this year.

The size of the planned bond was not disclosed.

The Arab Petroleum Investments Corporation (Apicorp), a Saudi Arabia-based multilateral lender owned by the 10 members of the Organisation of Arab Petroleum Exporting Countries, has allocated US$335 million to fund green projects after it raised US$750 million through a green bond in 2021, the report added.

“We believe GSSSB issuance from non-financial corporates, financial services, and the US and international public finance sectors is likely to comprise 14 per cent to 16 per cent of all bond issuance in 2023,” S&P said.

Three factors could drive growth or drag it down, including policy initiatives, levels of investment in climate adaptation and resilience, and the ability of issuers to address concerns about the credibility of certain types of GSSSB debt, the report said.

“Over the next five years, regulatory initiatives could be a key driver of whether the GSSSB market grows,” it added.

According to the report, Cop27 in November emphasised the need for more investment in adaptation and resilience to the physical risks of climate change, which could boost the issuance of green and sustainability use-of-proceeds bonds.

“Meanwhile, sustainability-linked bonds are at an inflection point.