Bullishness in global green bond market spilling over to MENA region
Green Bonds accounted for 3% of global bond market transactions in the second quarter of 2017. The Climate Bond Initiative documents in it’s Green Bonds Mid-Year Summary 2017 that with almost § 30 billion, the second quarter is the largest of issuance on record. A total of 82 green bond deals were rcorded from 74 issuers, with over 50% first time issuers. Bloomberg New Energy Finance indicates in its most recent analysis that the annual green bonds issuance is set to reach $134.9 billion by the end of 2017, a new record so far.
The prospects for green bonds and green sukuk in the Middle East and North Africa (MENA) region. To date, more than $200 billion of green bonds have been issued globally but only §1 billion in the MENA region. The mood in the local financial sector, however, is bullish. Intervening at a recent roundtable on the subject, Michael Grifferty from the Gulf Bond & Sukuk Association, said “Last year was a breakout year, in a sense, where issuance more than doubled and this year is going to be very strong again… we have the combination of the general debt capital markets in the process of exploding, and huge infrastructure need, much of which is green". Hani Ibrahim, from QInvest, added ”We have seen GCC sovereigns such as Dubai, Abu Dhabi and more recently the Kingdom of Saudi Arabia embrace both the bond and sukuk markets. In a similar way, as the investment community in Europe and the US, is shifting towards Socially Responsible Investments /Green agenda, I hope that a similar trend is picked up by the investor community in this part of the world”.
Expanding financing for climate investments. The first Green bond in the MENA region has been issued this year by the National Bank of Abu Dhabi, raising $587 million to finance projects which contribute to the fight against climate change and the protection of natural resources. A mitigation bond, was also proposed earlier this year by the EU-funded ClimaSouth project, as a potentially novel financial instrument tailored to the needs of the region. The World Bank’s International Finance Corporation (IFC), made its first green bond investment in the MENA region. It committed €100 million in a bond issuance by Banque Centrale Populaire, the first such issuance in foreign currency in Morocco, with the aim to support long-term investments in green assets. Earlier in the year, the IFC teamed up with the European asset manager Amundi to create the Green Cornerstone Bond Fund, a $2 billion green bond fund dedicated to emerging markets. The facility, will buy green bonds issued by banks, relying on the Center for International Climate and Environmental Research (Cicero), for third-party opinion on environmental standards, as investors look to evaluate the impact of projects in the program.
Resources: Global Green Bonds Mid-Year Summary 2017 | Green Bond Impact Report IFC 2016 | Algeria plans to issue its first sukuk