The Middle East’s sustainable bond market is demonstrating remarkable resilience, growing by approximately 3% in 2025 even as global volumes contracted by 21%, according to a new report by S&P Global. The ratings agency forecasts that regional issuance is set to reach between $20 billion and $25 billion in 2026, signaling a robust appetite for ESG-focused investments.
This upward trend is predominantly powered by the Gulf Cooperation Council (GCC) markets, with Saudi Arabia and the United Arab Emirates emerging as clear leaders. Their strong performance has more than compensated for a slowdown in Turkey, where issuance volume and value saw significant declines.
GCC Leads The Charge
The UAE and Saudi Arabia were the driving forces behind the region’s growth, collectively accounting for around 80% of all sustainable bond issuance in 2025. Investment has been heavily concentrated in financing green projects, particularly within the renewable energy and real estate sectors.
Sovereign entities have been key players, frequently issuing labeled debt in bond form. Notably, Saudi Arabia introduced a comprehensive green bond framework in 2025 that incorporates spending for climate adaptation projects. S&P Global anticipates this trend will expand as regional issuers increasingly address the tangible risks posed by climate change.
Bonds vs Loans A Tale Of Two Markets
While the GCC dominates the sustainable bond market, the sustainable loan sector is led by Turkey, which represented 60% to 65% of the total value. Corporate borrowers were the main drivers, especially in sectors with challenging decarbonization paths like non-renewable energy, transport, and chemicals.
S&P attributes this divergence to the inherent flexibility of loan structures, which offer more adaptable terms for repayment and the allocation of proceeds compared to bonds.
“Green projects will continue to dominate the bond market in the region,” noted Rawan Oueidat, an analyst at S&P Global Ratings. She added that sustainability-linked instruments are likely to remain prominent in the loan market, with future growth expected in sustainable sukuk and transition finance.
The Rise of Sustainable Sukuk
The market for sustainable sukuk, or Islamic bonds, is experiencing explosive growth. Issuance soared to a record $11.4 billion in 2025, a significant jump from $7.9 billion in 2024. This surge was primarily driven by activity in Saudi Arabia and the UAE.
These sharia-compliant instruments now represent over 45% of the regional sustainable bond issuance by value, up from 33% the previous year. This growth is further supported by new guidance from the International Capital Market Association and proactive regulatory initiatives across the Gulf.
Echoing this positive sentiment, a separate report from Fitch Ratings projected that the global outstanding ESG sukuk market could exceed $70 billion by the end of 2026, citing funding diversification and net-zero commitments as key drivers.
About S&P Global
S&P Global is a leading provider of transparent and independent ratings, benchmarks, analytics, and data to the capital and commodity markets worldwide. The company’s divisions include S&P Global Ratings, S&P Global Market Intelligence, S&P Dow Jones Indices, and S&P Global Platts.
Source: Fast Company Middle East
