According to S&P Global Ratings' report, Sustainable Bond Outlook 2025: Middle East Issuance To Remain High, sustainable bond issuance in the Middle East is projected to reach between $18 billion and $23 billion in 2025. The United Arab Emirates (UAE) and Saudi Arabia will continue to lead the region's sustainable bond markets, though broader participation from other Middle Eastern nations is expected.
Green projects will remain a substantial focus, particularly those aligned with national net-zero targets, such as clean power initiatives. Sustainability bond issuance is also forecasted to be significant due to its growing prevalence in the region. Financial institutions, corporations, and government-related entities are expected to play pivotal roles in driving this issuance.
Emerging growth areas include sustainable sukuks, blue bonds, and transition bonds. Sustainable sukuks are seeing increased interest, with their share of regional sustainable bond issuance rising to over 35% in 2024, up from 26% in 2023. Saudi Arabia remains a dominant player in the sukuk market, while the UAE continues to explore diverse projects, including logistics and real estate.
Blue bonds are also gaining traction, particularly in projects addressing water scarcity and marine sustainability. For instance, UAE-based DP World issued the region's second-ever blue bond to support marine transportation and port infrastructure. Transition bonds, supporting projects aimed at gradual shifts from carbon-intensive operations, are expected to grow as regulatory frameworks evolve.
Regional interest in sustainable bonds is projected to persist through 2025, despite the slowdown in 2024 due to post-COP28 normalization and higher interest rates. Notably, sustainability bonds, including social categories, have risen in prevalence, addressing areas like affordable housing and access to essential services.
In terms of market dynamics, the UAE sustainable bond market reached $7.4 billion in 2024, while Saudi Arabia recorded $5.6 billion. While Saudi Arabia’s projects leaned towards adaptation initiatives, the UAE focused on energy, logistics, and hospitality sectors.
Key drivers for 2025 issuance include renewable energy projects—particularly solar—and social initiatives supporting financial inclusion and healthcare access. Regulatory guidance and government-led initiatives are expected to provide clarity and foster growth in these emerging bond types.
S&P Global concludes that sustainable bond issuance will remain a cornerstone of the Middle East’s financial landscape in 2025, supporting both environmental and economic goals.
