Green Finance Gathers Pace in Middle East

Green financing has been gaining traction in the Middle East region, home to major oil producers, with Qatar’s Ministry of Finance announcing issuance of green bonds totalling $2.5 billion last week, marking the first issuance of its kind in the region, aimed at funding environmentally friendly projects.

According to the Finance Ministry, the were divided into two tranches: a $1 billion tranche with a five-year maturity priced at a 30 basis point spread over US Treasuries and a $1.5 billion tranche with a 10-year maturity priced at a 40 basis point spread over US Treasuries.

Qatar achieved the lowest spread ever recorded by any bond-issuing country in the Middle East, Central and Eastern Europe, and Africa, the Ministry said.

It also revealed that the coverage ratio exceeded 5.6 times the total issuance size, with peak subscription demand reaching over $14 billion. This confirms that the issuance enjoyed broad and diversified geographic and institutional investor interest from around the world.

The remarkable success of the subscription process reflects investors’ high confidence in the sovereign green financing framework established by the Ministry of Finance according to the highest global standards in sustainable finance.

It also provides investors with an opportunity to participate in the country’s journey to combat the negative effects of climate change and protect the environment through sustainable development, alongside the development of the sustainable finance sector in the country.

Key Economic Theme

According to PricewaterhouseCoopers, professional services brand of firms, it has identified green financing as one of the key economic themes in the Middle East region in 2023 and the trend was continuing in 2024, with Sharjah issuing its second sustainable bond in February this year.

The sector did indeed build momentum, including a more than doubling in the issuance of green bonds and sukuk in the region to $24 billion, the majority coming from the UAE and Saudi Arabia, PwC said.

The issuance spanned a wide range of entities including banks (Dubai Islamic Bank, Abu Dhabi Commercial Bank, Al Rajhi), corporates (Saudi Electricity Company, DP World, Masdar, RAQA, Aldar), sovereign wealth funds (Mubadala and PIF) and the GCC’s first sovereign sustainable bond from Sharjah.

It may be recalled that Oman published a Sustainable Finance Framework, and Qatar’s Finance Minister Ali bin Ahmed Al Kuwari said at Davos summit early this year its debut green bond would be coming soon.

“Saudi Arabia is also thought to be contemplating a sovereign green issuance, on top of the large sums raised by PIF, and it has just launched its Green Financing Framework, which sets out its approach to financing climate commitments,” PwC said.

The massive investment underway across the GCC in renewable energy, green hydrogen and other sustainable projects require substantial amounts of financing, both debt and equity, which suggests that the sector will continue to grow in the coming years, PwC added.