Total sustainable bond issuance reached $16.7 billion in the first nine months of 2024 in the Middle East, according to S&P Global Ratings.
This is down 18 per cent from the same period a year earlier, which is attributed to higher interest rates and some normalising from the “halo effect” of COP28 in November 2023.
The US credit rating agency’s report, published this week, outlined that in the first two quarters of 2024, sustainable finance activity in the region improved better sequentially compared with global trends. However, in the third quarter, activity was muted despite continued bond issuances in the region.
While UAE and Saudi Arabia are forecast to continue leading the region’s sustainable bond issuances, issuances from Qatar also increased this year.
Total sustainable sukuk volume reached $6.1 billion in the Middle East in the first nine months of 2024, relatively unchanged from a year earlier. However, the share of sustainable sukuk in the region continues to increase, it said, constituting close to 35 per cent – 40 per cent of sustainable bond issuance in the region so far in 2024, compared with 25 per cent – 30 per cent at year-end 2023.
The report noted that demand for sustainable bond issuance in the region is sensitive to economic growth, inflation, and interest rates, adding that while transparency and disclosure within ESG reporting are in the early stages of development, these factors could affect funding and regulations.
“To take off, sustainable bond issuance in the Middle East could require acceleration in implementing net zero policies, despite government initiatives and increasing alignment with sustainability strategies, or even regulatory requirement,” the report reads.