THE MIDDLE EAST IS STEPPING UP THEIR GAME TOO. SUSTAINABLE FINANCING OPPORTUNITIES ARE THE WAY TO GO AND EVERY CORNER OF THE GLOBE WANTS IN ON IT. THE MIDDLE EAST GETTING READY TO ISSUE GREEN BONDS IS VERY WORTH WATCHING BECAUSE THIS GREEN BOND MARKET IS HOW OUR EXISTING BOND MARKET IS GONG TO WRITTEN DOWN. LOANS ARE BEING REFINANCED OUT OF WHERE THEY ARE AND PUT INTO BETTER QUALIFYING GREEN BONDS. REMEMBER THIS MARKET OF GREEN BONDS IS BACKED BY PRIVATE CAPITAL AND IS OVER 100 TRILLION DOLLARS LARGE AND GROWING.
Explosive growth in ‘green bonds’ paves the way for takeoff in MENA markets
The rapid growth of green finance has sparked interest from many audiences. The use of bonds to finance green projects have become an exciting market development, with demand from investors consistently outstripping supply. Across the globe, borrowers and investors are keen to engage in sustainable financing opportunities and we have seen increasing activities in Asia, paving the way for the markets in the Middle East to take off.
The green finance edge
Green bonds are bonds whose proceeds are directed to projects supporting environmental and climate benefits. These include a broad range of projects, from renewables, energy efficiency, sustainable water, waste management to clean transportation. To date, most green bonds have been issued in a senior unsecured format, referencing the general credit of the issuer, rather than specific project cash flows. Hence green bonds achieve the same financing rate as conventional or sukuk senior bonds.
Green bonds are a relatively new asset class, having started only in 2007. However, since 2014, the market for such bonds has seen explosive growth, with issuance volumes surging globally. Year to date, USD47 billion worth of bonds have been issued, well exceeding the $42 billion (Dh154.2 billion) in green bond issuance’s for the entire 2015.
GREEN BONDS WERE ALWAYS SOMETHING DONE IN THE WEST AND WAS NOT REALLY IN A POPULAR CLASS, BUT IN THE LAST YEAR THIS ALL CHANGED.
Historically, Western issuers have dominated the green bonds market and continue to play a major role today — they account for 38 per cent of total volumes year to date. Of late, there has been a notable shift of activity to Asia, with China and India making significant strides off the back of regulatory developments. China in particular has made a concerted push in green initiatives, and is the only country to have issued very prescriptive green bond guidelines. In a similar vein, India identified eight institutions to play a proactive role in green financing in order to help meet the government’s ambitious targets in the renewable energy space.
Asia now leads the West by a wide margin in green issuance and the broader market is poised to continue growing this year on the back of this expansion. As the market has swiftly developed, so have other more innovative forms of green bonds, such as securitized and project bonds. For example in August, NTPC, India’s largest power generation company, became the first ever issuer of a green Masala bond, tapping into the growing offshore rupee funding route for Indian corporates. Standard Chartered was joint lead manager and book runner on the NTPC transaction.
WE ARE GOING TO CONTINUE WATCHING AS THE NEW SYSTEM EVOLVES BEFORE OUR EYES, THIS IS GOOD STUFF FOLKS AND I HOPE YOU ARE ALL UNDERSTANDING THAT.