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Green finance in MENA reaches $6.4bn in H1, exceeds global growth rate

Green finance in MENA reaches $6.4bn in H1, exceeds global growth rate
MENA’s ESG market currently represents 1.3% of 2021's global issuance

Mubasher: Green and sustainability-linked debt issuances in the MENA region amounted to $6.4 billion in value during the first half (H1) of 2021, exceeding the global growth rate, according to a report by Bloomberg on Sunday.

The region’s green finance in H1-21 was nearly 38% higher than $4.7 billion in 2020 volumes.

The increase could be mainly attributed to the Red Sea Development green loan which was worth $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,” according to Bloomberg. The proceeds from the green debt have been used in real estate, project finance, refinance, and general corporate purposes.

MENA Banks and Green Finance

Banks across the MENA region are endorsing their capabilities and infrastructure to provide green financing. The first sustainability-linked loan to refinance existing debt was issued by Emirates NBD for $1.75 billion in March this year.

FAB carried out the region’s first Swiss-franc denominated green bond that was issued for CHF 260 million in January, in addition to the first Chinese Yuan-denominated green bond of CNY 150 million that was issued in June.

In terms of local currency issuances, Red Sea Development secured a SAR 14.1 billion green loan in March.

Several international banks participated in green and sustainability-linked financing deals during the first six months of 2021, with Credit Suisse ranked top for its role as manager in the FAB green bond issued in CHF. This was followed by HSBC which participated in green bond and loan issuances by FAB and Saudi Arabia’s Red Sea Development, respectively.

"As the global ESG [environmental, social, and governance] market may represent a third of global AUM [assets under management] 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,” Head of ESG and Thematic Investing EMEA and APAC for Bloomberg Intelligence, Adeline Diab, said.

The region’s ESG market currently represents 1.3% of this year's global issuance, Diab added.

Global trend

On the global level, green and sustainability-linked debt issuance volumes amounted to nearly $541 billion in H1-21.

During H1-20, the global market saw strong growth yet issuances witnessed slow growth of 12% above the total for the full year 2020, nearly $482 billion.

Global financials and government sectors jointly accounted for 50% of the market share.

Outlook

This year is poised to be pivotal for ESG in reframing markets on the global level.

Over $3 trillion in fiscal stimuli globally would be dedicated to financing a green recovery, according to Bloomberg Intelligence’s recent Global ESG 2021 Outlook.

In addition, ESG assets will likely top $53 trillion by 2025, representing over a third of the projected total AUM.