A lack of regulatory and institutional frameworks has deterred Gulf governments and corporations from deploying sustainability-related finance, although recent actions by Saudi Arabia’s sovereign wealth fund and the UAE’s largest bank could spur wider take-up of green bonds and loans.
Green investments in six major Gulf industries agriculture and food, construction, power, transport, water, and waste management – could have a “profound impact” by 2030, contributing up to $2 trillion in cumulative GDP and creating more than 1 million jobs. Green finance, although relatively undeveloped in the Gulf will be crucial to diversify the region’s economy and halt a longstanding decline in foreign direct investment relative to GDP.
“Middle East companies generally haven't been on the leading edge of green finance due to a lack of a regulatory or institutional framework. Those frameworks are really important to give everybody confidence in the market and have been slow to develop. The Gulf also relies less on foreign direct investment than other regions, so attracting environmentally conscious investors from Europe and the U.S. has been a lower priority. The demand-side push for green instruments has been smaller,” said Jeffrey Beyer, Managing Director of Zest Associates, a UAE-based sustainability consultancy.
UAE institutions lead the Gulf in green finance. This year, First Abu Dhabi, the UAE’s largest bank by assets, has issued a 500-million-euro five-year green bond as well as its third green bond denominated in Swiss francs. The latest, for 200 million francs, has a four-year tenor. Abu Dhabi’s government-controlled Sweihan PV Power Co, which owns and operates the emirate’s Noor Abu Dhabi solar power plant issued a $700.1 million green bond.
Other notable initiatives include Dubai-based mall owner Majid Al Futtaim (MAF) selling $500 million in perpetual green hybrid bonds in June, while in April state-run Aluminium Bahrain (Alba) refinanced a $1.25 billion syndicated loan tied to sustainability-linked targets. The loan’s interest rates will vary according to three performance indicators that include the amount of solid waste the company recycles.
