Sustainable bond issuance in the Middle East defied global trends in 2025, rising by about 3% even as global volumes declined by 21%, according to S&P Global. The ratings agency expects regional issuance to reach between $20 billion and $25 billion in 2026.

Growth was largely driven by markets in the Gulf Cooperation Council, particularly Saudi Arabia and the United Arab Emirates, offsetting a slowdown in Turkey, where issuance volumes and value declined by 50% and 23%, respectively.

Sustainable bonds, fixed-income instruments that finance eligible green or social projects, remain concentrated in the Gulf. The UAE and Saudi Arabia accounted for around 80% of regional sustainable bond issuance in 2025, with activity focused primarily on renewable energy and real estate.

Sovereigns have mainly issued labeled debt in bond form, often incorporating climate adaptation projects into their frameworks. Saudi Arabia introduced a green bond framework in 2025 that includes adaptation spending, a trend S&P expects to expand as issuers respond to rising physical climate risks.

By contrast, the sustainable loan market was dominated by Turkey, which represented 60 to 65% of total value and as much as 75% of volume. Corporations were the main borrowers, particularly in sectors facing more complex decarbonization pathways, including non-renewable energy, transport, and chemicals.

S&P attributed this to the relative flexibility of loan structures, particularly around repayment terms and the allocation of proceeds.

“Green projects will continue to dominate the bond market in the region,” said Rawan Oueidat, an analyst at S&P Global Ratings based in Dubai. She added that sustainable and sustainability-linked instruments are likely to remain more prominent in the loan market, with growth expected in sustainable sukuk, transition finance, and, to a lesser extent, blue bonds.

Sustainable sukuk issuance reached a record $11.4 billion in 2025, up from $7.9 billion in 2024, driven by activity in Saudi Arabia and the UAE. These instruments accounted for more than 45% of regional sustainable bond issuance by value, compared with 33% a year earlier.

S&P said the market is expected to mature further, supported by guidance issued in 2024 by the International Capital Market Association and by regulatory initiatives across the region.

In a separate report, Fitch Ratings projected that global ESG sukuk outstanding could surpass $70 billion by year-end, citing funding diversification, refinancing needs, net-zero commitments, and supportive interest rate and oil price dynamics as key drivers of issuance momentum in 2026.