April 16, 2021

HSBC: The prospects for sustainable financing growth in the Middle East are increasing


Thomas: 50 percent increase in green and sustainable bond issuance in the Middle East

A global survey released by the “HSBC” Group showed how sustainable finance is gaining strong momentum for growth in the Middle East, with ethical values ​​being the main driver of this momentum among issuers of bonds, loans and other securities in the region.

The HSBC Sustainable Finance and Investment Survey for 2020 highlights how the market for sustainable finance in the Middle East is still at an early stage of development compared to the European, Asian and North American markets, with some mixed results between investors and issuers.

Of the issuers surveyed in the Middle East region, 93 percent say environment, society, and governance issues are very important to them – yet only 65 percent of investors feel this (compared to the overall global average of over 90 percent) .

He stated that among these majorities, “We find that the percentage of investors who see environmental and social issues as very important is also lower than other regions. Moreover, only 7 percent of investors said that they always take environmental, social and governance factors into consideration in their investments. Few of them support projects that are environmentally or socially desirable, with the risk of getting lower returns.

However, it should be noted that a large proportion of investors in the Middle East region (41 percent, more than anywhere else) intend to develop policies at the institutional level in the matter of responsible investment or in environmental, social and governance issues.

He added that among the investors who already have these policies, very large numbers of them seek environmental, social, economic and corporate governance issues when they make their investments, and it seems that many investors in the Middle East are also very optimistic about the benefits of environmental governance more than anywhere else. In their view of the potential for environmental and social governance strategies to outperform.

Gareth Thomas, Regional Head of HSBC Global Banking Services for the Middle East, North Africa and Turkey, said: “The results of the HSBC survey of sustainable finance and sustainable investment reflect what we see on the ground, as the rate of green and sustainable bond issuance in the Middle East has increased so far this year. By nearly 50 percent, compared to total issuances in 2019.

He added, “The year 2019 witnessed a growth of nearly 60 percent compared to 2018, and environmental and climate protection programs are still in place. Therefore, it is imperative that investors and issuers in the Middle East interact more with this issue to achieve a better understanding of how to benefit from the economic benefits. Environmental and social business models are more sustainable ».

The past few months have seen the region’s sustainable finance market deepen and increasingly diversify. In September, the Saudi Electricity Company raised $ 1.3 billion in the first public issuance of green bonds denominated in US dollars in the kingdom, followed a few weeks later by Egypt issuing the first green sovereign bonds in the region. Besides the bond market, in July the Saudi Finance Ministry raised $ 258 million through the first green loan from the ECA in the region. It is clear that moral values ​​have a great impact in the region. When investors are asked why they care about environmental and social issues, 62 percent of issuers and 47 percent of investors say, “We believe this is correct” – and in each case, it is the highest in the world. .

The results of the survey also indicate that the global Covid-19 pandemic has significantly accelerated the interaction of investors and issuers with environmental, social and governance issues in the Middle East region. Above average ratios for issuers (44 percent versus the global average of 41 percent) and investors (30 percent versus 29 percent) indicate that they now believe in the importance of becoming more sustainable or taking environmental, social, and governance issues into account in their investments more strongly than Before.

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