Growth in green Islamic bonds during Covid, says Moody’s

Investor demand for green Islamic bonds has emerged as one of the few growth areas within the Gulf Cooperation Council’s (GCC) investment industry during the current Covid-19 crisis.

A report from Moody’s Investor Services details a number of recent issuances that underline the strong appetite for the relatively new asset class.

An issuance of a multi-tranche US$1.3 billion green sukuk from Saudi Electric Company generated orders of more than $5.2 billion. The proceeds will be used to finance a number of green projects.

The transaction also highlights the growing importance of sustainability strategies for emerging market issuers including in regions such as the Gulf Cooperation Council (GCC), according to Moody’s.

Demand for green sukuk will benefit from robust growth in institutional investor demand for products that integrate environmental, social and governance (ESG) considerations, given the natural crossover of sustainable investing and Islamic finance in integrating societal impacts, added the report.

“The issuance comes at a time of increasing focus on sustainable strategies internationally and also supports the growth of Islamic capital markets by the government of Saudi Arabia, which aims to rapidly diversify its economy away from oil,” said Thomas Le Guay, an analyst at Moody’s.

“The implementation of sustainable finance guidelines and regulations by the Saudi government will help drive further sustainable debt issuances,” added Le Guay.

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