CEBC launches a new report on “Green Debt Market in the MENA region: A Guide to Green Bonds and Sukuk”
13 December 2020 - Dubai, UAE
13 December 2020 - Dubai, UAE
The global green bond market over the past five years has quintupled in size to USD 754bn in 2019 and transformed into a broad sustainability-linked fixed income asset class, paying financial dividends while tackling some of the world’s most pressing climate and sustainability-related challenges.
“Combating climate change necessitates the implementation of decarbonisation strategies. This requires systematically accounting for and pricing climate risk in all activities. In turn, this means developing and using two instruments: introducing carbon pricing and taxation, while climate finance -including Green Bonds and Sukuk, Green Finance- is deployed for financing climate resilient infrastructure, clean energy and technology and climate risk mitigation tech. Our CEBC report provides a snapshot on the state of Green Bonds and Sukuk in the MENA region.” says Dr. Nasser SAIDI, CEBC Chairman
More than EUR 200 billion of green debt have been raised globally in the first nine months of 2020, a net increase of 12% compared to the same period last year. Interestingly, amid these issuances, it has been observed that there is a geographical and product diversification compared to previous years, with Egypt issuing its first sovereign green bond and Indonesia issuing a EUR 2.5 billion green sukuk. The green bond market has witnessed impressive growth, but the total number of green bonds account for less than 1% of global bond issuances.
As outlined by this report, the MENA region has embraced green debt financing as an instrument to tackle issues of climate change and sustainability. These emerging economies have started to use green fixed income instruments to redouble their efforts to diversify their energy mix. Morocco pioneered by issuing the first green bonds in the MENA in 2016, following a successful COP22 in Marrakesh, the financing of which went to developing solar PV panels. Majid Al Futtaim issued the region’s first sukuk in 2019.
The report entails a comprehensive outline of all the green debt issuances in the MENA region, up to the end of 2020. Indeed, the sheer growth of issuances to almost $10bn in the MENA by the end of 2020 demonstrates that bonds and sukuk are attractive for investors and gives insight into how the market is set to grow in the future. While the MENA region currently accounts for less than 5% of global issuances, it is contributing to the global uptrend trajectory of the green debt market and given the current rate of growth, it can be inferred that this percentage is set to rise.
This report finds that the support of governments through policymaking or through the issuance of sovereign bonds, such as the region’s first sovereign bond in Egypt in September 2020, is instrumental for the sustainable growth of the green debt market. Countries like the UAE, Lebanon or Morocco have observed some national patronage in the matter via the establishment of green debt principles and frameworks support the market growth and strengthen the investors’ confidence.
Furthermore, the report breaks down the issuances by examining the green debt market by sector, the largest of which is the banking sector at 29.9%. Additionally, the report looks at the breakdown of the public & private sector and shariah compliant & conventional issuances, as well as a historico-geographical analysis of the issuances that showcases the rise of new regional green debt leaders. The research showcases a detailed analysis of the use of proceeds and makes a comparative analysis of all the proceeds of every debt instrument as well as applies the CISERO Shades of Green Methodology to understand the degree of “greenness” of the bonds and sukuk. Lastly, the report outlines the existing policy frameworks in the MENA region. These frameworks have been laid out in order to supplement the issuance of green debt by constructing guidelines for issuers to follow and to ensure the financial instruments are contributing to environmental objectives.
We are grateful and thankful to the contribution and support we received from The Gulf Bond and Sukuk Association who have advised us throughout the process of data collection and writing the report.
|Download the full report for free|
About the CEBC Climate Finance Working Group
The Climate Finance Working Group of CEBC aims to develop and execute a strategy to encourage federal governments in the MENA region to include consideration for financing opportunities and reduce barriers for banks and other investors to develop clean energy solutions that address climate change. The working group, in collaboration with its partners and with the rest of CEBC working groups, enables the above by identifying the concerns of finance organizations, and developing policy papers that address those concerns, in particular, investment banks, insurance companies, and energy developers.
About the CEBC
The CEBC is a non-profit, non-governmental association established in Abu Dhabi, UAE which provides a unique all-inclusive platform bringing together leading local and international organisations participating in the clean energy sector in the Middle East and North Africa.Its mission is to drive the development of appropriate and much needed regulation and policy to support the growth of this vital sector. The CEBC is the only clean energy industry group to cover the MENA region.