RIYADH: Environmental, social and governance debt issuance is set to rise from the fourth quarter of 2026, with Saudi Arabia and the UAE remaining central to growth, a senior official at ratings agency Fitch Ratings told Arab News.
In its latest report, Fitch said it expects the GCC to continue to be the leading emerging market contributor, supported by sustainability and transition plans, funding diversification and demand from sustainability-focused international investors.
The findings come amid broader expansions in Gulf debt markets, with GCC bond and sukuk issuance reaching $160 billion in the first nine months of 2026, up 3.3 percent year on year, according to investment firm Kamco Invest figures previously reported by Arab News.
Bashar Al-Natoor, managing director and global head of Islamic finance at Fitch, highlighted the region’s sizeable sukuk market as a key strength, saying ESG sukuk “can help issuers access both Islamic liquidity and sustainability-focused international investors.”
He added: “Saudi Arabia and the UAE are likely to remain central to future growth, as activity is still concentrated in the two markets.”
Regional lead
Fitch's latest report showed the region accounted for about 39 percent of emerging-market US dollar ESG issuance excluding China.
The Kingdom was the largest single contributor at 20.9 percent, followed by the UAE at 17.8 percent, and Brazil at 15.9 percent, as well as India at 12.5 percent and Turkiye at 11.7 percent, the report showed.
Outstanding GCC ESG debt exceeded $72.9 billion at the end of the third quarter, up 18 percent year on year, with sukuk making up 43 percent, according to Fitch.
More than 95 percent of the ESG sukuk Fitch rates in the GCC were investment grade, and none has defaulted to date, the agency said.
Digital push
Fitch also highlighted UAE lender First Abu Dhabi Bank’s 1 billion dirham ($272 million) digitally native green notes, the region’s first digital green bond, as a sign that UAE issuers are extending ESG funding into digital capital markets.
Growth drivers
Al-Natoor said growth would be driven by sustainability and transition financing needs, funding diversification and continued investor demand, with regulatory initiatives and upcoming maturities also supporting issuance.
He noted that Saudi banks have continued to increase exposure to eligible sustainable projects since 2020, while ESG subordinated debt issuance has supported their capital strategies.
Uneven path
The outlook follows a 44 percent drop in GCC ESG issuance to about $8 billion in the first nine months, with UAE issuance up 12 percent and Saudi volumes down 66 percent, according to the report.
Al-Natoor said the dip “mainly reflected weaker broader debt capital market activity during the Iran conflict.”
He highlighted geopolitical volatility as a downside risk, adding: “We expect growth to continue, but it is likely to remain uneven across markets and issuer types.”