UAE Leads Middle East in Lasting Bond Issuance with $7.4 Billion in 2024
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The United Arab Emirates (UAE) has solidified its position as the frontrunner in the Middle East’s sustainable bond market, achieving a remarkable $7.4 billion in issuances in 2024. This figure, reported by Standard & Poor’s global, underscores the UAE’s strong dedication to sustainable financing and its proactive efforts to foster environmentally and socially responsible investments across the region. Financial institutions within the Emirates have been instrumental in this achievement, spurred by the UAE Banking Union’s aspiring objective to secure over one trillion dirhams, equivalent to $272 billion, in sustainable financing by 2030. This commitment was prominently announced during the Conference of the Parties COP 28.
The surge in sustainable bond issuances highlights a notable shift in the region’s financial landscape, with the UAE leading the charge. This move towards sustainable financing is not just a trend but a strategic decision to align economic growth with environmental and social duty.
Focus on Green Energy and Diversification
According to the Standard & Poor’s Global report, approximately 60% of green bond issuances are channeled into the energy sector, with a strong emphasis on solar energy projects. However, there is a growing interest in expanding sustainable practices to other sectors, including logistics, real estate, and tourism and hospitality services. This diversification reflects a broader commitment to integrating sustainability across various industries, ensuring a more comprehensive and resilient approach to economic growth.
The focus on green energy is crucial for the UAE’s commitment to reducing its carbon footprint and transitioning to a more sustainable energy mix. The diversification into other sectors demonstrates a holistic understanding of sustainability, recognizing that environmental and social responsibility extends beyond the energy sector.
Key Issuers and Their Contributions
In 2024, twelve financial institutions in the UAE actively participated in issuing sustainable bonds. Sustainable sukuk, which are Islamic bonds that comply with Sharia law, accounted for 30% of the total issuances.Dubai Islamic Bank spearheaded the effort with a $1 billion issuance, followed by the National Energy National Company (Energy), which issued $850 million. Abu Dhabi Bank issued $800 million, Emirates Islamic Bank issued $750 million, and the Emirate of Sharjah issued $750 million. Ras Al Khaimah Bank issued a social bond worth $600 million, the Emirate of Sharjah issued a sustainable bond of $545 million, Emirates NBD issued $500 million, and Aldar Real Estate Company issued a green bond of $500 million. Additionally, two issuances for a source company were valued at $500 million each, and dubai World Ports issued $100 million.
The diverse range of issuers and the variety of sustainable bonds and sukuk demonstrate the breadth and depth of the UAE’s commitment to sustainable finance. The participation of both public and private sector entities underscores the widespread adoption of sustainable practices across the economy.
Sustainability Bonds Gain Traction
The Standard & Poor’s Global report highlighted the increasing prevalence of sustainability bonds in the Middle East region during 2024. While climate transition and adaptation are key priorities due to the region’s significant oil and gas sector, sustainability bonds, including social components, have gained prominence. The report suggests that the dominance of financial institutions in the market contributes to this trend,as incorporating a social element aligns with the sector’s broader objectives.
The rise of sustainability bonds reflects a growing awareness of the interconnectedness of environmental and social issues. By incorporating social components into their bond issuances, financial institutions are addressing a wider range of sustainable development goals, contributing to a more equitable and inclusive society.
Future Trends and Projections
Looking ahead, Standard & Poor’s Global anticipates continued growth in the Middle East’s sustainable bond market throughout 2025, projecting total issuances to range from $18 billion to $23 billion. The agency expects the UAE and the Kingdom of Saudi Arabia to maintain their leading positions, although increased participation from other countries is also anticipated.
Green projects are expected to remain a primary focus, aligning with national climate neutrality goals, notably in clean energy. The market is also likely to see more sustainability bond issuances due to their increasing popularity in the region. Banks are expected to continue playing a central role in these issuances, along with government-related companies and entities. The agency also predicts growth in sustainable sukuk,blue bonds,and transition bonds.
The projected growth in the sustainable bond market signals a long-term commitment to sustainable finance in the Middle East. The increasing participation of other countries in the region will further accelerate the adoption of sustainable practices and contribute to a more sustainable and resilient economy.
Sustainable Sukuk: A Growing segment
Standard & Poor’s Global highlighted the ongoing regional interest in sustainable sukuk for 2025. The agency attributed the decline in issuances during 2024 to the normalization of market conditions following the Conference of the Parties to the United Nations Framework Convention on Climate change (COP28) in November 2023, and also high interest rates.
The UAE and the Kingdom of Saudi Arabia account for over half of the regional sukuk issuances, followed by Qatar and Kuwait. Despite a recent slowdown, the agency expects continued issuance of sukuk.In 2024, the total volume of sustainable sukuk issuances in the Middle East reached $7.9 billion, with the majority originating from the Kingdom of Saudi Arabia. Sustainable sukuk represented over 35% of regional sustainable bond issuances in 2024, compared to approximately 26% at the end of 2023.
The agency anticipates that the guidelines for green, social, and sustainable bonds published by the International Capital Markets Association (ICMA) in April 2024 will enhance clarity, possibly renewing interest and clarifying the ratings of Islamic financing versions.Governmental and organizational initiatives could also contribute to sustained growth in this area.
The increasing adoption of sustainable sukuk reflects the growing demand for ethical and Sharia-compliant investment options. The guidelines published by the ICMA will further enhance the transparency and credibility of sustainable sukuk, attracting more investors and driving further growth in this segment.
Conclusion
the UAE’s leading position in the Middle East’s sustainable bond market in 2024, with $7.4 billion in issuances, reflects its strong commitment to sustainable finance. Driven by financial institutions and supported by initiatives like the UAE Banking Union’s pledge at COP 28, the market is poised for continued growth. With a focus on green energy and diversification, along with the increasing prominence of sustainable sukuk, the UAE is setting a precedent for environmentally and socially responsible investments in the region.
UAE’s Green Bond Revolution: A Sustainable Finance Transformation in the Middle East?
Is the United Arab Emirates quietly pioneering a global shift towards ethical and sustainable investing? The answer, according to our expert, is a resounding yes.
Interviewer: Dr.Nadia Al-Zoubi, a leading expert in sustainable finance and islamic finance, welcome to World Today News. The UAE’s remarkable surge in sustainable bond issuance has captured global attention. Can you unpack the significance of this burgeoning market for both the region and the international financial landscape?
Dr. Al-Zoubi: the UAE’s commitment to sustainable finance, evidenced by its significant investments in green and social bonds, signals a pivotal moment in the Middle East’s economic trajectory. This isn’t merely an increase in bond sales; it represents a fundamental restructuring of the financial landscape, prioritizing long-term environmental stewardship and social duty alongside economic growth. The sheer volume of investment – billions channeled into environmentally conscious projects – highlights a strategic shift away from traditional finance models. This proactive approach is attracting significant international attention and investment, positioning the UAE as a global leader in ethical finance. The impact extends beyond the UAE, inspiring neighboring countries to explore similar initiatives and fostering a ripple effect of environmentally conscious financial practices across the region. The UAE’s success serves as a powerful example of how economic prosperity and environmental responsibility can coexist—and even reinforce each other.
Interviewer: The article emphasizes the critical role of UAE financial institutions, particularly in promoting sustainable sukuk. Can you explain the significance of sukuk in this context—and what factors are driving their growing popularity among both local and international investors?
Dr. Al-zoubi: Sustainable sukuk, compliant with Islamic finance principles, are playing a crucial role in the growth of the UAE’s sustainable bond market. They offer a unique and ethical investment vehicle for those who adhere to Sharia law,allowing for profit-sharing arrangements without charging interest (riba).This aligns perfectly with the principles of sustainable growth, promoting responsible and impactful investments. The increased popularity of sustainable sukuk stems from several factors:
Growing demand: A significant global pool of investors seeks ethical and responsible investment options.
Alignment with values: Sustainable sukuk’s inherent focus on social good aligns with the growing ethical awareness among investors.
Product sophistication: The market is witnessing improved product sophistication and increased liquidity,making them more attractive to a broader range of investors.
Regional leadership: The UAE and Saudi Arabia’s active promotion of sustainable sukuk is driving market growth across the Middle East.
Interviewer: The energy sector naturally benefits from this green bond boom. Though, the report highlights diversification into other sectors like real estate, logistics, and tourism. What is the underlying rationale behind this broadened approach to sustainable investments?
Dr. Al-Zoubi: While green energy projects are undeniably vital, the UAE’s strategic diversification into real estate, logistics, and tourism demonstrates a holistic understanding of sustainable development. this approach recognizes that environmental responsibility spans far beyond energy production. The reasons for this diversification include:
Building resilient infrastructure: Sustainable practices in these sectors create robust and future-proof infrastructure.
Wider economic impact: Diversification ensures sustainability benefits permeate various aspects of the economy.
Holistic approach: A comprehensive approach addresses the interconnectedness of environmental and social challenges.
Long-term sustainability: This ensures economic development does not come at the cost of environmental integrity.
Interviewer: The report forecasts sustained growth in the Middle East’s sustainable bond market. What are some key drivers expected to fuel this continued growth?
Dr. Al-Zoubi: several factors point to a strong future for this market:
Global awareness: Increasing awareness of environmental risks and the long-term consequences of unsustainable practices encourages responsible investment.
Governmental support: Government policies and incentives play a vital role in supporting the development of the sustainable bond market.
International guidelines: The clarity and standardization provided by regulatory bodies enhance the trust and credibility of the market, attracting more investors.
Innovative financial instruments: Green bonds, social bonds, blue bonds, and sustainable sukuk provide diversified investment options catering to a wider range of projects and investor preferences.
Interviewer: What advice would you offer businesses looking to participate in this rapidly expanding landscape of sustainable finance?
Dr. Al-Zoubi: Businesses interested in entering the sustainable bond market should take these steps:
- Conduct a thorough ESG assessment: Identify areas of your operations were you can align with environmental, social, and governance (ESG) criteria.
- Develop a robust sustainability strategy: Outline your goals,metrics,and targets for sustainability initiatives,demonstrating a genuine commitment.
- Seek self-reliant third-party verification: Credible verification of sustainability claims adds legitimacy and increases investor confidence.
- Select the appropriate bond type: Choose green bonds, social bonds, or sustainability bonds depending on your project’s objectives.
- Collaborate with experienced financial advisors: Expert advisors guide you through the complex process of bond issuance and market navigation.
Interviewer: Dr. Al-zoubi, thank you for sharing your invaluable insight. This has been incredibly enlightening.
Dr. Al-Zoubi: My pleasure. The transition to sustainable finance is not merely a trend, but a critical shift toward a more equitable and resilient global economy.The UAE’s leadership in this field is inspiring, demonstrating how economic growth and environmental responsibility can and must work in harmony.
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