Middle East’s Sustainable Bond Issuance to Hit USD 23 Billion in 2025

Sustainable bond issuances in the Middle East are projected to reach between USD 18 billion and USD 23 billion in 2025, with the United Arab Emirates (UAE) and Saudi Arabia expected to contribute around 60 percent of this total, according to a report by S&P Global Ratings.

Despite a decline in issuance in 2024, sustainable bonds now account for over 25 percent of total corporate and financial institution bond issuances in the region, significantly outpacing the global average of 9 percent. However, the Middle East's overall share of the global sustainable bond market remains below 3 percent, highlighting room for growth.

The Middle East recorded USD 16.7 billion in sustainable bond issuances during the first nine months of 2024, an 18 percent drop compared to the same period in 2023. This slowdown is attributed to a combination of factors, including rising interest rates and a post-COP28 normalisation following the climate summit held in Dubai in late 2023.

The UAE and Saudi Arabia have remained at the forefront of the sustainable finance market, accounting for the majority of green and sustainability-linked bond issuances. However, Qatar and Kuwait have also shown increased activity, with growing demand for sustainable finance options to fund infrastructure and energy transition projects.

In addition to conventional bonds, the issuance of sustainable sukuk (Islamic bonds) has been on the rise. In 2024, the total volume of sustainable sukuk in the Middle East reached USD 7.9 billion, with Saudi Arabia accounting for the largest share.

The Gulf Cooperation Council (GCC) countries remain the dominant players in the sukuk market, and S&P expects this trend to continue as Islamic finance plays a growing role in funding sustainability initiatives.

Around 60 percent of sustainable bond issuances in the Middle East are directed toward the energy sector, particularly renewable energy projects such as solar power. However, there is increasing interest in sustainable financing across other sectors, including logistics, real estate, tourism, and hospitality.

The UAE’s total sustainable bond issuance stood at USD 7.4 billion in 2024, reflecting a 28 percent decline from the previous year. Similarly, Saudi Arabia saw a 27 percent drop, with total issuances reaching USD 5.6 billion. While these declines are largely attributed to market adjustments, industry experts believe the sector is poised for a rebound in 2025.

Looking ahead, S&P Global Ratings expects localisation efforts to drive the development of new types of sustainable bonds in the Middle East. The introduction of blue bonds (focused on ocean and water conservation) and transition bonds (aimed at financing carbon-intensive industries in their shift toward sustainability) is expected to gain momentum.

The Middle East remains a relatively small player in the global sustainable finance market, but with increasing regulatory support and growing investor interest, the region is likely to expand its role in the coming years.

The shift toward sustainable finance is seen as a critical component of achieving national climate goals, particularly as countries like Saudi Arabia and the UAE aim for net-zero emissions in the coming decades.

Despite short-term market challenges, the long-term outlook for sustainable bond issuance in the Middle East remains strong, with new instruments and policies expected to further accelerate growth in green finance across the region.