BAKU, Azerbaijan, May 23. Green, social, sustainability, and sustainability-linked (GSSS) bonds are emerging as critical tools for addressing financing gaps in the Middle East as economies in the region transition away from fossil fuels and bolster resilience against climate-related shocks, Trend reports with reference to the latest International Finance Corporation (IFC)-Amundi Green Bond report.
In 2023, the Middle East experienced a significant surge in GSSS bond issuance, led by the United Arab Emirates (UAE) and Saudi Arabia. This growth underscores a strong commitment to a sustainable development agenda aimed at tackling pressing environmental and social challenges.
The region boasts a substantial pool of institutional investors, sovereign wealth funds, and Islamic finance institutions. The IFC-Amundi report anticipates that GSSS bond issuance from the Middle East will continue to grow in the coming years, driven by the ongoing economic reliance on the hydrocarbon sector and vulnerabilities to water scarcity. The future trajectory of GSSS bond issuance will largely depend on the ambition and pace of implementing decarbonization strategies.
Investor appetite for products aligned with environmental, social, and governance (ESG) criteria is another factor expected to boost future issuance volumes. While climate mitigation, renewables, and hydrogen projects currently dominate the use of proceeds, future GSSS bond deals in the Middle East may increasingly focus on financing adaptation measures for water stress and heat waves.
The COP28 UN climate summit, held in Dubai in December 2023, provided a significant impetus for green and sustainable bond deals in the region. Spearheaded by Saudi Arabia and the UAE, Middle Eastern GSSS bond issuance reached a record $20.4 billion in 2023, more than doubling from the previous year. This surge reflects the region's accelerating efforts to integrate sustainable finance into its broader economic and environmental strategies.
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