Generating Insights from Data

Sustainability initiatives redefine future for MENA

Adnan Halawi

Senior Proposition Manager – Islamic Finance, Refinitiv

An overview of recent developments related to sustainability in the Middle East and North Africa (MENA) region, supported by data from Sustainable MENA (SUSTAINMENA) app in LSEG Workspace.

  1. MENA Green and ESG Bonds and Sukuk in first seven months of 2023 almost double what was issued in 2022.
  2. UAE tops charts in MENA PRI Signatories.
  3. COP28 speeds adoption and issuance of sustainability frameworks and initiatives.

High water-stress and fossil-fuel dependency

MENA region – comprising 21 Arab League states – is home to a population of 450 million and has one of the biggest deserted or smallest forest spaces in the world. By 2030, the amount of water available per capita in MENA will fall below the absolute water scarcity threshold of 500 cubic meters per person, per year and, as the population grows, the problem will become even more acute according to the World Bank.

According to a new report by the World Resources Institute, the most water-stressed region in the world is the Middle East and North Africa, where 83% of the population is exposed to extremely high-water stress. Meanwhile, the region is highly dependent – in most parts – on production of oil and is home for high stocks of CO2 emissions.

As the region embarks on hosting the COP summit for the second year in row – having been hosted in Egypt in 2022 and to be hosted in UAE in 2023 – we shed light on the state of sustainability in the region using data and statistics from a newly launched Sustainable MENA app in LSEG Workspace which provides tools and content to analyse performance and track progress of sustainability efforts in the region.

Financing the transition

In 2023, the region has witnessed an unprecedented growth in issuing green and Environmental, social, and governance (ESG) debt whether through bonds and sukuk or in the form of loans. Around USD14 billion in green and ESG bonds and sukuk were sold in the first seven months of 2023, compared to USD8.9 billion in 2022.

In a push to support green financing, UAE’s Securities & Commodities Authority (SCA) announced corporates listing their green or sustainability-linked bonds or sukuk on the local capital markets are exempt from paying any registration fees during 2023.

Additionally, MENA borrowers are increasingly leveraging green, and sustainability linked loans.

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MENA banks have seen improvement in their ESG Scores aligning with their respective governments’ sustainability drives, as well as the growing investors’ and clients’ appetite for everything sustainability related. The SustainMENA app league table shows National Bank of Bahrain as the bank with the highest ESG Score in the region.

The app features a number of Datastream charts showing various indicators of concern in MENA region. The gulf region – home to one of the biggest oil and gas reserves as well petrochemical factories – is also home to the largest stocks of CO2 emissions.

There are early signs of adoption of UN PRI in MENA as evidenced by a growing number of signatories. UAE tops all other countries with 18 signatories, followed by Saudi and Tunisia which had four signatories each by end of July 2023.

PRI signatories in MENA (Jul 2023)
Bahrain 1
Egypt 3
Kuwait 2
Morocco 1
Oman 1
Qatar 1
Saudi Arabia 4
United Arab Emirates 18

Source: Sustainable MENA App in LSEG Workspace.

Frameworks and initiatives

A good number of corporates across various sectors as well as governments and quasi-sovereigns launched their green and sustainability frameworks, and in many cases followed that by selling a debut green or ESG debt.

In the UAE, in May, the cabinet approved a total of 78 environmental initiatives in preparation for hosting COP28. They include national strategies to reduce carbon and regulate the use of solar energy products, sustainable tourism and other initiatives that support sustainable and environment- friendly development. Six Emirati banks have supported the green energy initiatives in the UAE by funding projects worth USD51.8 billion in 2022, according to the UAE Banks Federation. In July, Abu Dhabi Global Market (ADGM) announced the implementation of its sustainable finance regulatory framework with immediate effect.

In November 2022, Saudi Arabia announced 13 new renewables projects in latest move towards net-zero. Saudi Arabia is constructing the world’s largest green hydrogen plant at NEOM, the USD500 billion futuristic megacity being built on the Red Sea. The USD8.4-billion plant will integrate solar and wind energy to produce up to 600 tonnes of green hydrogen a day by the end of 2026, officials say.

Moving west, the Government of Egypt and the United Nations signed the United Nations Sustainable Development Cooperation Framework 2023-27, in May.

Meanwhile, Morocco has set an ambitious target of achieving a 52 percent share for renewable energy in its electricity mix by 2030. At the end of 2021, the country had 4,109MW of renewable energy capacity in operation from wind, hydro and solar projects.

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