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Middle East borrowers tipped to boost transition bond market

Fears over greenwashing claims have often dissuaded issuers from the Middle East from entering the sustainable bond markets. That could be set to change.

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Debt capital markets bankers are predicting a surge in sales of sustainability bonds from the Middle East in 2021, as issuers tap into investor appetite for new transition-friendly structures.

Until last year, the concept had struggled to gain traction in the region. First Abu Dhabi Bank set the ball rolling with a green bond in 2017 but the following three years saw just three more deals emerge.

The revival of global bond markets last summer, however, set the stage for a flurry of green bond debuts from borrowers including Saudi Electricity, Qatar National Bank and Egypt, as well as a ground-breaking sustainability sukuk from Islamic Development Bank.

That pace of growth can be maintained over the coming months, says Gareth Thomas, head of global banking in the Middle East, North Africa and Turkey at HSBC, which on January 20 announced the formation of a dedicated sustainable and transition finance team for the region.

“Green, social, sustainable (GSS) and sustainability-linked issuance out of the Middle East roughly doubled to almost $5 billion last year and we are expecting an even bigger year in 2021,” he says. “Most of the issuers we are talking to in the region have already started to incorporate sustainability into their financing strategy.”

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