Sustainable debt issuance across the Middle East and North Africa (Mena) has surged in recent years, tripling since 2020 to reach $94 billion, a report showed on Tuesday.

The report, Scaling Sustainable Debt in Emerging Markets, reveals that labelled instruments - green, social, sustainability-linked, and transition bonds - now account for 3.2 per cent of all debt financing in Mena and emerging Asia-Pacific markets, up from just 0.8 per cent in 2020. While issuance peaked in 2024, recent quarters have seen a slowdown amid shrinking pricing benefits and geopolitical uncertainty.

The report was jointly created by the Dubai Financial Services Authority (DFSA) and the Hong Kong Monetary Authority (HKMA), with BloombergNEF as knowledge partner. The findings underscore the region's growing role in global climate finance, even as momentum faces headwinds in 2025.

Green debt remains the backbone of sustainable finance in Mena, representing 52 per cent of total labelled issuance since 2020, largely driven by major energy infrastructure projects. Renewable energy accounts for 36 per cent of labelled bond financing, followed by clean transportation at 12 per cent. However, experts warn that over-reliance on green labels could limit market resilience.

“Broadening the scope beyond green to include social, sustainability-linked, and transition instruments is critical,” said Mark Steward, Chief Executive of the DFSA.“Our focus is on supporting all forms of sustainable and transition finance to ensure long-term credibility.”

Social bonds remain underdeveloped in Mena, comprising just 1 per cent of labelled issuance, though recent activity - such as a Shariah-compliant SME financing platform in Saudi Arabia - signals potential growth. Sustainability bonds have gained traction, particularly in Saudi Arabia, where issuance quadrupled between 2023 and 2024.

Regional leaders and innovative instruments

The UAE and Saudi Arabia dominate Mena's sustainable debt landscape, accounting for 74 per cent of issuance since 2023. Both countries have leveraged national strategies - such as the UAE Energy Strategy 2050 and Dubai Clean Energy Strategy - to position themselves as hubs for green and transition finance.

Innovation is also reshaping the market. DP World's $100 million blue bond, issued in late 2024, marked the region's first maritime-focused instrument, channeling funds into sustainable shipping and marine ecosystem projects. Similarly, Emirates NBD's $500 million sustainability-linked loan bond (SLLB) introduced transparency to a market often criticised for opacity, setting a benchmark for regional and global issuers.

Challenges and opportunities

Despite strong growth, barriers remain. Labelling costs, complex reporting requirements, and fading“greenium” pricing advantages have deterred some issuers. Government incentives, such as Hong Kong's Green and Sustainable Finance Grant Scheme, which subsidized over 620 instruments worth $170 billion, offer a model for Mena policymakers.

Investor appetite for long-tenor instruments presents another opportunity. Case studies like MTR Corporation's 30-year green bond in Hong Kong highlight unmet demand for ultra-long debt - a segment virtually absent in Mena markets.

The road ahead

With trillions needed globally to achieve net-zero targets, scaling sustainable finance in emerging markets is imperative. The DFSA-HKMA report calls for greater corporate participation, diversified labels, and robust regulatory frameworks to sustain growth. These themes will headline discussions at the DFSA–HKMA Joint Climate Finance Conference in Dubai on November 26, under the banner *“Transforming Tomorrow: Harnessing Green Finance for Sustainability.”*

As Eddie Yue, Chief Executive of HKMA, noted:“Sustainable debt is a promising tool for bridging the multi-trillion-dollar climate financing gap. Collaboration between financial hubs like Hong Kong and Dubai can accelerate progress toward global sustainability goals.”

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