Green finance surges in MENA region in first half of 2021, exceeding global growth rates

Green and sustainability-linked debt issuance in the MENA region reached $6.4 billion in the first half of 2021, already exceeding the total for the whole of last year, according to Bloomberg’s H1 2021 Capital Markets League Tables.

H1 2021 green and sustainability-linked debt issuances in the MENA region (approximately $6.4 billion) are already up approximately 38% on total 2020 volumes in the same category (approximately $4.7 billion). The majority of this increase can be attributed to the Red Sea Development green loan which stood at around $3.8 billion. As a result of these new developments, and as an effect of the green bond issuances from First Abu Dhabi Bank (FAB), financials have taken a lead from a sector-wide perspective. The proceeds from such debt have been used in real estate, project finance, refinance and general corporate purposes.

Banks in the MENA region are increasing their capabilities and infrastructure to provide green financing. The MENA region saw its first sustainability-linked loan to refinance existing debt, issued by Emirates NBD for $1.75 billion in March 2021, its first Swiss-franc denominated green bond, issued by FAB for CHF 260 million in January 2021, and first Chinese Yuan-denominated green bond, issues by FAB for CNY 150 million in June 2021. With regards to local currency issuances, Red Sea Development secured a SAR14.1 billion green loan in March 2021.

A variety of international banks participated in green and sustainability-linked financing deals in H1 2021, with Credit Suisse ranked top for its role as manager in the FAB green bond issued in CHF. This was followed by HSBC who participated in the CNY green bond issuance by FAB and the green loan by Red Sea Development in Saudi Arabia.

Adeline Diab, Head of ESG and Thematic Investing EMEA and APAC for Bloomberg Intelligence, said: "As the global ESG market may represent a third of global AUM by 2025, ESG debt issuance has surpassed $3 trillion with record speed in May 2021 prompted by the pandemic, race to net-zero emissions, global green fiscal stimulus plans and record low interest rates. As the ESG green, social and sustainability debt exponential growth is set to accelerate, the MENA region opportunity is emerging; while it currently only represents 1.3% of this year's global issuance, the market has surpassed last year sales by 38% in just six months."

MENA region bucks global trend

Global green and sustainability-linked debt issuance volumes stood at approximately $541 billion in the first six months of 2021. The global market has witnessed strong growth in H1 2020 but issuances saw slow growth 12% above the total for the whole of 2020 (approximately $482 billion). Globally, the financials and government sectors jointly comprise 50% of market share.

A variety of local MENA banks, such as Abu Dhabi Commercial Bank, Emirates NBD and Mashreq Bank, have participated in the USD/EUR loans taken by Turkish banks ING Bank AS, Yapi ve Kredi Bankasi AS, Turkiye Vakiflar Bankasi TAO and Akbank TAS over the last two months for sizes ranging between USD 300-900 million.

2021 is poised to be a pivotal year for ESG in reframing markets globally. According to Bloomberg Intelligence’s recent Global ESG 2021 Outlook, more than $3 trillion in fiscal stimuli globally will be dedicated to financing a green recovery, while ESG assets may top $53 trillion by 2025, representing more than a third of projected total assets under management, as ETFs and debt expand.

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