London Daily

Focus on the big picture.
Wednesday, Jun 03, 2026

Are green bonds the future for the Gulf or just a gimmick?

Are green bonds the future for the Gulf or just a gimmick?

Analysts ponder the rise of green bonds in a region known for oil wells, tankers and sprawling natural-gas plants
In a region known for oil wells, tankers and sprawling natural-gas plants, green bonds might raise some eyebrows.

But when Saudi Electricity Co and Qatar National Bank sold notes this month designed to fund projects including environmentally friendly buildings, smart meters and infrastructure for distributing renewable power, investors piled in.

“If you have an ESG mandate and are looking for a yield pickup in a name with a phenomenally strong balance sheet, then you would be willing to buy,” said Patrick Esteruelas, head of research at Emso Asset Management in New York. “The combination of public-relations benefits and the opportunity to tap a growing pool of capital means there will be a significant increase in green-bond issuance.”

In the Gulf, the decline in oil prices that was fueled by the coronavirus pandemic served as a reminder of why nations need to diversify their economies away from energy exports. While not everyone is convinced that the environmental, social and governance, or ESG, bonds go much beyond good PR, the global rush for placements means more issuance from the region is a given.

Saudi Electricity’s $1.3 billion of green sukuk was the first such deal in the world’s largest oil-exporting nation, where per-capita energy use is triple the average for Europe.

It helped drive placements in the Middle East to almost $2.5 billion this year, a nearly five-fold increase from 2017, when the region issued its first green debt. Egypt is also in an advanced stage of issuing $500 million of green securities.

“Given their high carbon-dioxide emissions per capita, Gulf economies are good targets for such schemes,” said Thomas Le Guay, a Dubai-based analyst for Moody’s Investors Service. “Green initiatives are also a good way for Gulf countries to balance their generous welfare systems with declining revenues from oil exports.”

Fitch Ratings estimates the Saudi budget deficit will rise to 15 percent of gross domestic product in 2020, one of the highest levels in the Middle East. The government’s revenue fell almost 50% year-on-year in the second quarter.

Not everyone is embracing the deals.

“It’s just a label,” said Paul McNamara, a money manager at GAM Investments in London, who didn’t buy green bonds from the Saudi or Qatari companies. “There are lots of countries doing things that aren’t good for the environment, but Saudi Arabia is probably the worst of all. There is nothing about Saudi Arabia selling a bond with a green label that makes any difference from Saudi Arabia selling any other sort of bond.”

HSBC Global Asset Management this week said it’s challenging companies and governments to ensure they have proper environmental policies with carbon-reduction targets, and aren’t simply issuing green bonds opportunistically.

Still, seven in 10 money managers said environmental, social and governance factors will influence their decisions over the next decade, according to a survey by Vontobel Asset Management.

“It is very important for issuers out of the Gulf Cooperation Council, both sovereigns and corporates, to get broader avenues for funding for the near future,” said Sergey Dergachev, a money manager in Frankfurt at Union Investment Privatfonds GmbH who bought bonds of both Saudi Electricity and QNB.

“The ESG theme is globally on the rise, and Covid-19 in many ways accelerated the importance of the ESG theme. Issuing green debt signals to investors that sovereigns and corporates do take ESG related issues seriously, and that is a positive.”
Newsletter

Related Articles

0:00
0:00
Close
Japanese Technology Firm Fujitsu Launches Advanced Artificial Intelligence Tool for Corporate Disclosures
South Africa Officially Launches Nationwide Campaign for Highly Contested Local Government Elections
United Kingdom Commits Additional Funding for Unexploded Ordnance Clearance in Laos
Singapore Announces Stringent New Greenhouse Gas Regulations for Commercial Cooling Systems
Cambodia and Thailand Hold High-Level Border Security Talks at United Nations Headquarters
Myanmar Military Government and China Sign Major Agreement to Upgrade Media and Cultural Cooperation
Knife Attack at Swiss Train Station Leaves Three Injured in Suspected Act of Domestic Terrorism
Transnational Extortion Gang Threatens Canadian Police With Army of One Thousand Armed Operatives
Australia Imposes Forty-Two-Day Quarantine on Cruise Ship Passengers Following Deadly Hantavirus Outbreak
International Monetary Fund Unlocks Seven Hundred Million United States Dollars for Sri Lanka Following Economic Reforms
Australia Launches Record One Point Four Billion Dollar Lawsuit Against Chemical Giant 3M Over Contamination
China and Canada Foreign Ministers Meet in Ottawa in Effort to Stabilize Strained Diplomatic Ties
Indonesia Demands Urgent United Nations Security Council Reform Amid Escalating Global Conflicts
Extreme Weather Patterns Trigger Severe Drought in Madagascar and Destructive Flooding in East Africa
Indian State of Karnataka Faces Political Upheaval as Chief Minister Siddaramaiah Abruptly Resigns
Philippines and Japan Reaffirm Defense Ties as Crucial for Indo-Pacific Regional Stability
Norway Joins French Nuclear Deterrence Initiative in Major Shift for European Security Architecture
Global Critical Mineral Alliances Expand as Western Nations Move to Counter Chinese Supply Dominance
United States Imposes Fifty Percent Tariffs on Mexican Steel and Aluminum Ahead of Trade Pact Review
European Union and China Head Toward Major Trade Conflict Over Clean Technology Exports
United States Economic Growth Severely Downgraded to One Point Six Percent as Stagflation Fears Mount
World Health Organization Warns Central African Ebola Epidemic is Outpacing Containment Efforts
United States Treasury Department Conditions Sanctions Relief on Reopening of the Strait of Hormuz
Iranian Air Defenses Intercept and Destroy United States Military Drone Over Bushehr Province
Iranian Armed Forces Launch Ballistic Missiles Toward Unspecified Targets Prompting Regional Condemnation
United Nations Secretary-General Warns Global Order Facing Highest Level of Conflict Since 1945
Israel Issues Sweeping Evacuation Orders in Southern Lebanon Amid Intensified Hezbollah Conflict
Russia Announces Systemic Military Strikes Targeting Ukrainian Defense and Energy Infrastructure
United States and Iranian Negotiators Reach Draft Agreement to Extend Ceasefire and Resume Nuclear Talks
United Nations Security Council Deeply Divided Over United States Capture of Venezuelan President
US and Iran Exchange Direct Military Strikes Amid Fragile Gulf Ceasefire
World Health Organization Warns of Catastrophic Ebola Outbreak in DR Congo
Russia Threatens New Wave of Strikes on Ukrainian Infrastructure and Embassies
Scientists Warn Atlantic Ocean Currents Could Collapse Faster Than Projected
Anthropic Reaches $900 Billion Valuation in Historic AI Funding Round
Washington Imposes Crippling Sanctions on Iranian Maritime Authority
Japan and the Philippines Initiate Strategic Intelligence-Sharing Pact
Microsoft Deploys Autonomous Computer-Using AI Agents to Global Markets
Anthropic Secures $45 Billion Compute Infrastructure Agreement With SpaceX
U.S. Director of National Intelligence Resigns Amid Administration Shakeup
Micron Technology Crosses Trillion-Dollar Valuation Amid Unprecedented Hardware Demand
Canada and Germany Finalize Historic Long-Term LNG Export Agreement
China Expands International Travel Restrictions on Domestic AI Researchers
Japan Approves Sweeping Overhaul of National Intelligence Apparatus
Global Airlines Scramble Logistics as Middle East Airspace Remains Fractured
Japan's Naphtha Imports Plunge 47 Percent Amid Strait of Hormuz Closure
Global Crude Prices Retreat Below $96 as Gulf Tensions Momentarily Ease
Generative AI Outperforms Human Baselines in Landmark Global Creativity Study
NASA Partners With Private Aerospace to Unveil Permanent Lunar Base Architecture
South Korean Equity Markets Surge on Next-Generation Memory Chip Frenzy
×