RIYADH: Saudi Arabia and the UAE are expected to continue leading the Middle East’s sustainable bond market, after posting $16.7 billion in issuances in the first nine months of 2024.

A report from US-based credit rating agency S&P Global noted that the value of sustainability bonds offered to the market from January to September fell 18 percent compared to the same period of 2023.

The analysis highlighted that while sustainable bond issuances in the region surged in the first half of this year, they dropped in the third quarter. 

This decline was attributed to higher interest rates and a normalization following the COP28 halo effect in November 2023. 

“The UAE and Saudi Arabia will likely continue leading the region’s sustainable bonds issuances, despite increased activity elsewhere. Sustainability bonds lead the share of issuance, as more banks fuel issuances,” said S&P Global. 

Saudi Arabia’s Public Investment Fund was the first sovereign wealth fund globally to issue sustainable bonds, raising $3 billion through a multi-tranche green bond in 2022 and a larger $5 billion offering in 2023. 

In its latest Allocation and Impact Report, PIF stated it allocated $5.2 billion of the $8.5 billion raised to environmentally focused projects as of June 2024. 

Reflecting on the decline in issuance in the three months to the end of September, S&P Global said:  “In the first two quarters of 2024, sustainable finance activity in the region improved better sequentially compared with global trends. However, this changed in the third quarter, where activity was muted despite continued bond issuances in the region.”

According to the report, sustainable bond issuance in the Middle East may be needed to accelerate the implementation of net-zero policies, alongside increased alignment with sustainability strategies and regulatory reforms. 

The US-based firm also noted that issuance of these financial products in the region is sensitive to economic growth, inflation, and interest rates. 

Sustainable sukuk outlook 

The report further indicated that the total volume of sustainable sukuk globally reached $7.1 billion in the first nine months of 2024, down 11 percent compared to the same period last year. 

In the Middle East, the total sustainable sukuk volume reached $6.1 billion in the same period, relatively unchanged from a year earlier. 

Green sukuk, which are Shariah-compliant investments in renewable energy and environmental assets, have gained traction as markets shift toward sustainable financing. 

S&P Global added that the share of sustainable sukuk in the region continues to increase, constituting close to 35 percent to 40 percent of sustainable bond issuances so far in 2024, compared to 25 percent to 30 percent by the end of 2023. 

In September, another report from Moody’s projected that the issuance of these sustainable Islamic finance products will accelerate in the coming months as Middle Eastern countries roll out energy transition plans and renewable targets. 

It also noted that sustainable sukuk appeal to both Islamic and conventional investors seeking to execute sustainable investing strategies. 

RIYADH: Abu Dhabi’s investment and holding company, ADQ, has signed an agreement with Bank Audi to purchase 96 percent of the share capital in Odeabank, the Turkish subsidiary of the Lebanese institution.

According to a press release, the transaction involved the sale of Bank Audi’s stake in Odeabank, along with shares held by other investors, including the International Finance Corp., IFC FIG Investment Co. Sarl, and the European Bank for Reconstruction and Development.

Odeabank, established in 2012, is Turkiye’s 13th-largest private financial institute by loans and deposits, with 41 branches in 15 cities. It focuses on commercial lending and is expanding its retail and wealth management services. As of June, it had about 1,300 employees, the press statement said.

Mansour Al-Mulla, deputy group CEO at ADQ, highlighted the significance of the acquisition in advancing the institute’s broader strategy in the financial sector. 

“The acquisition of Odeabank reinforces our commitment to investing in assets that lay the foundation for the sustainable development of our portfolio companies as well as the wider economy,” Al-Mulla said. 

He emphasized the benefits Odeabank will experience as part of ADQ’s portfolio, including access to new capital and synergies within the group. 

“We are confident that this will accelerate the execution of Odeabank’s growth plans while driving technological innovation in the financial services sector,” the CEO said. 

According to the statement, ADQ’s acquisition is aligned with its strategic commitment to enhancing innovation within the financial services sector. 

The deal followed a series of additional ADQ investments in Turkiye. 

In 2022, the investment entity launched a $300 million fund in partnership with Turkiye Wealth Fund to invest in companies focused on developing or improving technologies in key sectors. That same year, ADQ acquired the Turkish pharmaceutical company Birgi Mefar Group, which was integrated into ADQ’s global life sciences holding company, Arcera. 

The sale of Odeabank is also aligned with Bank Audi’s focus on its core markets, particularly in Lebanon and Europe. 

Khalil El-Debs, CEO of Bank Audi, said: “This transaction aligns well with Bank Audi Group’s present strategic focus on its home market as well as its presence in Europe. We are pleased to have attracted the interest of a global institution like ADQ in acquiring Odea Bank A.S., our Turkish subsidiary.”

Under ADQ’s ownership, Odeabank is expected to further enhance its position in the Turkish market, leveraging the institute’s expansive portfolio, which spans “key sectors of Abu Dhabi’s rapidly diversifying economy, including energy and utilities, food and agriculture, health care and life sciences, and transport and logistics, among others,” the press statement said.

The completion of the transaction is subject to customary regulatory approvals, including clearance from the Banking Regulation and Supervision Authority and the Competition Authority in Turkiye. 

J.P. Morgan served as the sole financial adviser to Bank Audi on the transaction and provided a fairness opinion, as explained in the press release.