Green financing becomes popular among Middle East and North Africa firms

Dubai: The Middle East and North Africa (MENA) region’s syndicated market for green and sustainability-linked bonds and loans continued to deepen and mature in 2021 as total issuance reached $18.64 billion, compared with $4.5 billion in 2020, according to data from Bloomberg’s Capital Markets League Tables.

After a strong first half ($6.9 billion), total issuance surged by 70 per cent in the second half of 2021 ($11.74 billion) to complete a record year.

The MENA region outpaced global growth in 2021, although the market still only accounts for a small fraction of international volumes. Total global issuance of green and sustainability-linked bonds and loans in 2021 increased to $1.62 trillion, compared with $765 billion in 2020.

The size, quantity and transparency of MENA issuance increased in 2021 as more participants entered the market and implemented dedicated sustainable finance frameworks. Riyad Bank, National Bank of Kuwait and Qatar National Bank were among the regional participating banks that joined First Abu Dhabi Bank (FAB), Emirates NBD and Saudi National Bank in committing towards ESG debt financing in 2021.

Last year also saw a number of landmark transactions, including a first green loan by Egypt of $3 billion, following a green bond issuance by the country in October 2020; Masdar Abu Dhabi Future Energy Co. signing a $100 million revolving green loan in December 2021, having signed their first green loan in September 2018; and Etihad Airways raising a $1.2 billion sustainability-linked loan in October 2021, the first in global aviation.

More green loans

In a reversal of previous years, more green loans were issued than green bonds in 2021 in the MENA region. Syndicated green loans totaling $6.95 billion were issued in the MENA region in 2021, compared with $1.6 billion of green bonds.

Notable green loans included Masdar ($100 million), Saudi Electricity ($500 million), the Government of Egypt ($1.5 billion) and the Red Sea Development (approximately $3.8 billion). In the green bond space, 2021 saw FAB issue a series of six multi-currency green bonds totaling $605 million.

Contrastingly, syndicated sustainability-linked loans totaled $5.08 billion in 2021, with deals exceeding $500 million or above including Gulf International Bank ($625 million), Etihad ($1.2 billion), Majid al Futtaim ($1.5 billion) and Emirates NBD ($1.75 billion). Sustainability-linked bonds totaled $5.01 billion in 2021.

A variety of international banks participated in green bonds in 2021, with Credit Suisse, Barclays and Citi the top managers. The region’s top bookrunners for green and sustainability-linked loans in 2021 were FAB, HSBC and Mizuho Bank.

The region’s Islamic finance sector was increasingly prominent in the green finance space in 2021. March saw the Islamic Development Bank (IsDB) issue a $2.5 billion sustainability sukuk committed towards financing and refinancing green and social development projects eligible under its Sustainable Finance Framework.