GCC green bond and sukuk issuances hit a record in 2022

Globally, sales of new green and sustainable bonds and sukuk fell about 14 per cent from a year earlier

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The market for green and sustainable bonds and sukuk in GCC economies set a new record in 2022 amid increased participation from banks and government-related entities, according to Bloomberg data.

Total GCC green and sustainable bond and sukuk issuances last year reached $8.5 billion from 15 deals, compared with $605 million from six deals in 2021, data from Bloomberg’s Capital Markets League Tables showed.

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. In 2021, all GCC issuances were generated by the UAE.

“Following Cop27 in Egypt and ahead of Cop28 in the UAE, the trajectory of the wider region’s green finance market has taken on new significance,” said Venty Mulani, data specialist — sustainable fixed income, at Bloomberg LP.

“2022 proved to be a record year for green and sustainable bonds and sukuk in the Gulf, whereby the debut of several notable government-related entities and banks suggests sustainable finance is continuing to enter the mainstream in the region.”

In October, Saudi Arabia’s sovereign wealth fund, the Public Investment Fund, listed its debut $3 billion green bond on the London Stock Exchange.

The transaction was more than eight times oversubscribed, with orders exceeding $24 billion, the state-run Saudi Press Agency reported at the time.

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

Last January, Abu Dhabi National Energy Company, better known as Taqa, together with Emirates Water and Electricity Company, raised $700.8 million through its first green bond as it diversifies funding sources to include sustainable financing for projects.

Globally, sales of new green and sustainable bonds and sukuk decreased by about 14 per cent to $635 billion in 2022 from a year earlier, in part due to growing economic uncertainty and rising interest rates.

For the first time, more money was raised in the debt markets for climate-friendly projects than for fossil-fuel companies last year.

Roughly $580 billion was arranged in 2022 for renewable energy and other environmentally responsible ventures, while the oil, gas and coal industries raised about $530 billion, according to Bloomberg data.

GCC economies are projected to grow 3.7 per cent and 2.4 per cent in 2023 and 2024, respectively, driven by stronger hydrocarbon and non-hydrocarbon industries, the World Bank said in October.

Oil producing countries have benefitted from a surge in global crude prices following Russia’s invasion of Ukraine in February.

Brent, the benchmark for two thirds of the world’s oil, is currently trading at about $80 a barrel after falling to less than $30 in 2020.

The International Monetary Fund cut its global growth forecast for 2023 in October and warned of a cost-of-living crisis as the global economy continues to be affected by the Ukraine war, broadening inflation pressures and a slowdown in China.

The fund maintained its global economic estimate for 2022 at 3.2 per cent but downgraded this year’s forecast to 2.7 per cent — 0.2 percentage point lower than its July forecast.

Updated: January 04, 2023, 4:00 PM