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As the world gathers for COP28, Fitch Ratings highlights the pivotal role of the conference in shedding light on sustainability concerns and steering financial landscapes toward eco-conscious paths.
Bashar Al-Natoor, Global Head of Islamic Finance and Managing Director at Fitch Ratings, is optimistic about COP28 accelerating the emergence of sustainable bonds on a substantial scale. Al-Natoor highlights that sustainable bonds in the Gulf region benefit from the increased awareness fostered by COP28, as 51% of sustainable issuances are in the form of bonds.
Highlighting the UAE’s strong performance in the ESG bond arena, Al-Natoor noted that by the third quarter of 2023, the nation had surged to $6.4 billion, a significant 41% increase from the preceding quarter’s $4.5 billion. Stressing the UAE’s influence in the global ESG bond market, Al-Natoor noted that the nation not only constitutes over 19% of this market but also represents more than 30% of Fitch Ratings’ classified ESG bonds.
Further underscoring the UAE’s prowess, Al-Natoor said, “The UAE emerged as the leading issuer of sustainable bonds globally during the third quarter of 2023, contributing $1.8 billion or approximately 80 percent of the global total, which stood at $2.3 billion.”
Al-Natoor emphasized the potential for Islamic finance in the UAE to benefit from COP28, with a 29% share in the 2022 banking sector funding. He highlighted that UAE institutions are leaders in Sukuk, playing a pivotal role in arranging issuances.
In the UAE, all sustainable issuances evaluated by Fitch are rated as “investment grade,” with 35% linked to financial institutions and 25% tied to companies and infrastructure projects. Al-Natoor also highlighted global trends, noting that green issuances constitute 45% of total ESG issuances in the third quarter of 2023.
He highlighted the growth of ESG sukuk, which surged by 66% annually to hit $33.3 billion by the end of 2023. 67.2% of these sukuk are in hard currency, primarily US dollars, aiming to lure environmentally conscious foreign investors.
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How can COP28 maximize its impact on climate action?