Saudi Arabia strengthens its leadership in the sustainable bond market with $ 5.6 billion

A report revealed that the issues of sustainable bonds in Saudi Arabia recorded $ 5.6 billion in 2024, a decrease of 27% from 2023, in light of the concentration of publications in the financial services sector.
Saudi Arabia continues to strengthen its position as a major player in a market, with a focus on climate adaptation projects more than converting to clean energy.

Sustainable bond market

The leaders in Saudi Arabia and the UAE continue to issue sustainable bond markets, in light of the expectations of the expansion of the base of others from other countries in the region.
According to the report, especially those related to clean energy, at the forefront of publications, remains in line with the national goals of climate neutrality.
Sustainability bonds are increasing, in light of the growing awareness of their importance, while banks maintain their pivotal role in issuance, as well as government companies and entities.
The report expected that the market will witness remarkable growth in sustainable bonds, blue bonds and transitions, which reflects the diversity of the available financing tools in the region.

The superiority of companies and financial institutions

Companies and financial institutions in the Middle East account for more than 25% of the total issues of sustainable bonds, compared to about 9% at the global level.
The report said: Although the region’s share in the global market for sustainable bonds is still low, as it does not exceed 3%, Saudi Arabia and the UAE lead this trend, followed by Qatar and Kuwait.
The publications witnessed a decline in 2024 as a result of several factors, most notably the return of the market to normal after the momentum of the COP28 conference, and the high interest rates, but expectations indicate the continuation of the momentum in the coming years.

Sustainability bonds lead the scene

The report stated that while climate transition and adaptation to it are a priority in light of the region’s dependence on the oil and gas sector, sustainability bonds, including social bonds, have recorded remarkable growth in 2024, bypassing global trends that still prefer green bonds by 60%.
This is due to the fact that most of the leaders in the region are financial institutions, which tend to integrate social elements within their financing frameworks, especially in the areas of access to basic services, housing, and employment.

Sustainable sukuk

The issues of sustainable sukuk in the Middle East amounted to $ 7.9 billion, and the largest share of it was for the Kingdom of Saudi Arabia.
With the interest of sukuk in the Gulf countries, its share increased from the total regional sustainable bond versions to exceed 35% in 2024, compared to 26% in 2023.
The new guidelines issued by the International Capital Markets Association (ICMA) on green, social and sustainable instruments will lead to enhancing transparency and increasing the demand for these financial tools.

2025 forecasts

Renewable energy projects, especially solar energy, have great appeal in the Gulf countries due to the high levels of solar radiation.
Saudi Arabia is preparing to launch the largest green hydrogen project in the world of NEOM by 2026, which enhances its position in the field of clean energy.
It is expected that the energy companies, such as the UAE “Masdar”, will continue to issue green bonds to finance renewable energy projects.
Despite the growth of sustainability bonds, the issuance of social bonds is still limited, as the number of regional publications has not exceeded five since 2018.
In 2024, Ras Al Khaimah National Bank in the Emirates issued the first social bond worth $ 600 million to finance small and medium enterprises and expand health care services.
The possible uses of social bonds include support for financial inclusion, providing well -to -housing, and improving access to basic services.
Global guidelines will contribute to enhancing the growth of blue and transitional bonds, especially with the increasing need for sustainable financing in light of the scarcity of water resources and the region’s dependence on the oil and gas sector.
According to the report issued by “Standard & Poor’s Global”, “Dubai World Ports” released the second blue bond in the region, to finance sustainable projects in marine infrastructure and maritime transport.

Definition of sustainable bonds

Sustainable bonds are divided into two main categories:
Sustainable bondsIts financial or structural conditions change based on the achievement of the source of specific sustainability goals.
Revenue use bondsUsers are used to finance green or social projects, and are divided into:
Green bondsMonitoring environmental projects such as renewable energy, sustainable buildings and clean agriculture.
Social bondsIt targets social issues such as education, health care, and affordable housing.
Sustainability bonds: Following projects that combine environmental and social goals.
Transitional bonds: Dependable to support the transformation of sectors that are difficult to reduce their emissions directly, but they contribute to climate transformation.