(MENAFN- The Arabian Post)
The UAE's rapidly expanding mega projects in sectors like infrastructure, renewable energy, and Real estate are creating a surge in sukuk and bond issuances. As the country follows a clear strategic vision that integrates sustainability into its economic policies, these initiatives are expected to continue influencing the financial landscape in the coming years.
With large-scale developments such as expo 2020's legacy projects, smart cities, and green energy infrastructure at the forefront, the UAE is setting ambitious targets. These projects are not only transforming the nation's economic structure but also aligning with its climate commitments. A focus on sustainability has become integral to these ventures, with green and sustainable bonds gaining traction as financing tools.
The UAE's strategic vision places sustainability at the heart of its development. As part of its long-term plans, the country has emphasized a green economy and has aligned its national policies with global climate goals. The success of initiatives like the Mohammed bin Rashid Al Maktoum Solar Park and the Barakah nuclear energy plant showcases the commitment to renewable energy. These projects have already attracted significant international attention, not only for their scale but also for their environmental focus.
As the government pushes forward with ambitious plans to transition toward a more diversified, knowledge-based economy, the role of sustainable investments cannot be overstated. These initiatives are driving the demand for more sophisticated financial instruments, including sukuk and bonds.
Global credit rating agencies such as Standard & Poor's and Fitch have projected that sukuk and bond issuances will see a significant rise, fueled by the UAE's increasing reliance on alternative sources of funding. In particular, the push towards green and sustainable financing has contributed to the rising prominence of the sukuk market, as investors increasingly seek to align their portfolios with environmental, social, and governance factors. The UAE has emerged as a leader in this space, particularly with the issuance of green sukuk and bonds, which attract investors keen to back projects that adhere to ESG principles.
See also UAE economy to grow at 4% in 2025: IMF
Bashar Al Natoor, Managing Director and Global Head of Fitch Ratings' Islamic Finance Group, highlighted that while traditional financing methods continue to dominate funding for mega projects, these developments are stimulating demand for more innovative funding approaches.“Sukuk issuances have gained traction in parallel with the rise in green projects, which have generated substantial interest from both local and international investors,” Al Natoor explained. The increasing issuance of green bonds and sukuk is not only in line with the UAE's environmental goals but also part of a broader trend in global markets where sustainable financing is rapidly becoming mainstream.
The growing popularity of sukuk as a financing tool in the region is in response to the UAE's dynamic shift toward sustainable infrastructure. Global investors are showing heightened interest in projects that offer financial returns while contributing to sustainable development. This shift in investment preferences has aligned well with the UAE's economic objectives, creating a symbiotic relationship between infrastructure expansion and financial market growth.
The UAE has pioneered the development of a robust sukuk market in the region, and it is now leading the charge in structuring green and sustainable sukuk to meet both financing needs and sustainability objectives. This trend has allowed the country to attract investment from a broader pool of global capital, as international investors increasingly seek opportunities that contribute to both financial growth and environmental sustainability.
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