Green finance volumes surge in Middle East in first half of 2021
Region bucks the global trend and growth rates
Dubai: Green and sustainability-linked debt issuance in the Middle East and North Africa (MENA) region reached $6.4 billion in the first half of 2021, 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 are already up approximately 38 per cent on total 2020 volumes in the same category ($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 join the bandwagon
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.
"As the global ESG market may represent a third of global assets under management (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,” said Adeline Diab, Head of ESG and Thematic Investing EMEA and APAC for Bloomberg Intelligence.
MENA 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 per cent above the total for the whole of 2020. 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 $300-900 million.