This report does not constitute a rating action.
Issuance To Remain In Line With 2024 Levels
Total regional issuance could reach $18 billion - $23 billion.
- United Arab Emirates (UAE) and Saudi Arabia issuers will continue leading sustainable bond markets, though we expect greater participation in other Middle Eastern countries.
- Green projects will remain substantial, aligning with national net-zero targets, particularly related to clean power.
- Sustainability bond issuance will also be considerable, given the increased prevalence in the region.
- Banks will retain a key role, in addition to corporations and government-related entities.
- Sustainable sukuks, blue bonds, and transition bonds are likely growth areas.
Chart 1
Corporates And Financial Institutions Lead Issuance
- Sustainable bonds account for more than 25% of regional corporate and FI issuance, compared with 9% globally.
- This is despite the Middle East's share of global sustainable bonds being less than 3%.
Chart 2
Chart 3
Regional Interest To Persist In 2025
- Issuance slowed in 2024, largely due to normalization following COP28 in November 2023, as well as higher interest rates.
- UAE and Saudi Arabia account for more than half of regional issuance, with Qatar and Kuwait increasing volumes in 2024. We expect this trend to continue.
Chart 4
Chart 5
Sustainability Bonds Lead 2024 Middle East Issuance
- While climate transition and adaptation is a priority given regional exposure to hydrocarbons, sustainability bonds (including social categories) have risen in 2024.
- This contrasts with global trends, where green bonds remain prevalent (about 60% of sustainable bonds).
- Sustainability bonds dominate as most issuers are financial institutions, and adding a social element to the framework aligns with sector exposure.
- Common social categories include access to essential services, affordable housing, and employment.
Chart 6
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Sukuk Issuance Persists Despite Sustainable Slowdown
- Total sustainable sukuk volume in the Middle East reached $7.9 billion, with the majority in Saudi Arabia.
- Most sukuk issuance comes from the Gulf Cooperation Council (GCC), where we expect interest to continue.
- The share of sustainable sukuk is increasing, constituting more than 35% of regional sustainable bond issuance in 2024, compared with 26% at the end of 2023.
- Guidance on green, social, and sustainability sukuk published by the International Capital Market Assn. (ICMA) in April 2024 should provide additional transparency, which could renew interest and clarify labelled Islamic finance issuances.
- Some government-led or regulatory initiatives could also help sustain growth.
Chart 8
UAE and Saudi Arabia: Differences In Market Dynamics
Chart 9
UAE Sustainable Bond Market
- Issuance reached $7.4 billion in 2024, marking a 28% decline from 2023.
- Financial institutions are prevalent, mainly driven by a UAE Banks Federation pledge to mobilize over UAE dirham (AED) 1 trillion ($272 billion) in sustainable finance by 2030.
- About 60% of green bond issuances are focused on energy (including solar), with interest in other sectors including logistics, real estate, and tourism and hospitality.
Chart 10
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Table 1
| UAE 2024 sustainable bonds | ||||||||
|---|---|---|---|---|---|---|---|---|
| Issuer | Issuance type | Mil $. | Issuer type | |||||
| Dubai Islamic Bank | Sustainability bond | 1,000 | Financial services | |||||
| Abu Dhabi National Energy Company | Green bond | 850 | Nonfinancials | |||||
| First Abu Dhabi Bank | Green bond | 800 | Financial services | |||||
| Emirates Islamic Bank | Sustainability bond | 750 | Financial services | |||||
| Emirate of Sharjah | Sustainability bond | 750 | Sovereign | |||||
| Rakbank | Social bond | 600 | Financial services | |||||
| Emirate of Sharjah | Sustainability bond | 545 | Sovereign | |||||
| Emirates NBD | Sustainability bond | 500 | Financial services | |||||
| Aldar Properties PJSC | Green bond | 500 | Nonfinancials | |||||
| Masdar | Green bond | 500 | Nonfinancials | |||||
| Masdar | Green bond | 500 | Nonfinancials | |||||
| DP World | Green bond | 100 | Nonfinancials | |||||
| Sources: Environmental Finance Bond Database, S&P Global Ratings. | ||||||||
Saudi Arabia Sustainable Bond Market
- Issuance reached $5.6 billion in 2024, marking a 27% decline from 2023.
- High concentration of issuers in financial services largely explains the rise of sustainability bond issuances.
- Adaptation projects are more dominant in Saudi project categories compared with UAE.
Chart 13
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Table 2
| Saudi Arabia 2024 sustainable bonds | ||||||||
|---|---|---|---|---|---|---|---|---|
| Issuer | Issuance type | Mil. $ | Issuer type | |||||
| Al Rajhi Bank | Sustainability | 1,000 | Financial services | |||||
| Al Rajhi Bank | Sustainability | 1,000 | Financial services | |||||
| Saudi National Bank | Sustainability | 850 | Financial services | |||||
| Arab Petroleum Investments Corporation | Green | 750 | Nonfinancials | |||||
| Riyad Bank | Sustainability | 750 | Financial services | |||||
| Saudi Investment Bank | Sustainability | 750 | Financial services | |||||
| Public Investment Fund | Green | 500 | Sovereign | |||||
| Sources: Environmental Finance Bond Database, S&P Global Ratings. | ||||||||
Key Drivers for 2025 Regional Issuance
Renewable energy
- Renewable energy projects, especially solar, are especially popular in GCC countries given the high levels of solar irradiance.
- Energy companies such as Masdar in the UAE will likely continue issuing green bonds to help expand renewable portfolios and transition from fossil fuels.
- In 2026, Saudi Arabia plans to commission the world's largest utility-scale green hydrogen project in Neom, using solar PV, wind, and energy storage.
Social projects
- While sustainability bonds have been popular, social bond issuance has been muted, with only five total issuances since 2018.
- UAE-based Rakbank issued the region's sole social bond in 2024, a $600 million bond supporting MSME financing and expanding access to health care.
- Financial inclusion, access to essential services, and affordable housing are potential uses of proceeds for social bonds.
New bond types
- Global guidance tailored to local specifics will lay the groundwork for new bond types in the Middle East.
- We expect increased issuance of blue and transition bonds due to exposure to water scarcity and hydrocarbons.
- UAE-based logistics company DP World issued the region's second-ever blue bond, which will support a range of eligible projects including marine transportation and port infrastructure.
Table 3
| Largest 2024 Middle East sustainable bond issuances | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Issuer name | Country | Issuer type | Amount (mil $) | Issuer type | Asset class | |||||||
| State of Qatar | Qatar | Green bond | 1,500 | Sovereign | ||||||||
| Dubai Islamic Bank | United Arab Emirates | Sustainability bond | 1,000 | Financial services | Sukuk | |||||||
| Al Rajhi Bank | Saudi Arabia | Sustainability bond | 1,000 | Financial services | Sukuk | |||||||
| Al Rajhi Bank | Saudi Arabia | Sustainability bond | 1,000 | Financial services | Sukuk | |||||||
| State of Qatar | Qatar | Green bond | 1,000 | Sovereign | ||||||||
| Saudi National Bank | Saudi Arabia | Sustainability bond | 850 | Financial services | Sukuk | |||||||
| Abu Dhabi National Energy Company | United Arab Emirates | Green bond | 850 | Nonfinancials | ||||||||
| First Abu Dhabi Bank | United Arab Emirates | Green bond | 800 | Financial services | ||||||||
| Emirates Islamic Bank | United Arab Emirates | Sustainability bond | 750 | Financial services | Sukuk | |||||||
| Saudi Investment Bank | Saudi Arabia | Sustainability bond | 750 | Financial services | Sukuk | |||||||
| Riyad Bank | Saudi Arabia | Sustainability bond | 750 | Financial services | Sukuk | |||||||
| Arab Petroleum Investments Corporation | Saudi Arabia | Green bond | 750 | Nonfinancials | ||||||||
| Emirate of Sharjah | United Arab Emirates | Sustainability bond | 750 | Sovereign | ||||||||
| Rakbank | United Arab Emirates | Social bond | 600 | Financial services | ||||||||
| Ulker Biskuvi Sanayi | Turkiye | Sustainability-Linked bond | 550 | Nonfinancials | ||||||||
| Source: Environmental Finance Bond Database, S&P Global Ratings. | ||||||||||||
Sustainable Bonds Defined
Sustainable bonds fall into two main categories:
Sustainability-linked bonds (SLBs): Any instrument for which the financial or structural characteristics can vary depending on whether the issuer achieves predefined sustainability objectives.
Use-of-proceeds bonds: Any instrument where net proceeds (or equivalent amount) are exclusively used to finance or refinance, in part or in full, new and/or existing eligible green and/or social projects. The three main subcategories are:
- Green bonds: Instruments that raise funds for projects with environmental benefits including renewable energy, green buildings, and sustainable agriculture. This includes blue bonds, which raise funds to support the sustainable use of maritime resources and promote related sustainable economic activities.
- Social bonds: Instruments that raise funds for projects addressing or mitigating a specific social issue and/or seeking to achieve positive social outcomes, such as improving food security and access to education, health care, and financing, especially but not exclusively for target populations.
- Sustainability bonds: Instruments that raise funds for projects with both environmental and social benefits.
Transition bonds can be either sustainability-linked or use-of-proceeds bonds issued specifically to support climate transition goals, geared toward issuers in hard-to-abate sectors. Projects these bonds support may not always be "green" but still aim to support climate transition.
Related Research
- Sustainable Bond Outlook 2025: Asia-Pacific Issuance Could Hit Record High, Feb. 23, 2025
- Sustainable Bond Outlook 2025: Global Issuance To Reach $1 Trillion, Feb. 26, 2025
- U.S. Municipal Sustainable Bond Outlook 2025: Sustainable Bonds Expected To Trail Conventional Market, Feb. 26, 2025
- Sustainable Bond Outlook 2025: Latin America Leading The Way For Nature Financing, March 10, 2025
- Sustainability Insights: Global Sustainable Bond Issuance To Hold Steady At $1 Trillion In 2025, Feb. 5, 2025
- Sustainability Insights: Middle East Sustainable Bond Issuance Trends, Oct. 15, 2024
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