Fitch: Saudi Arabia’s Green Financing Framework Facilitates Sustainable Funding

Saudi Arabia’s Green Financing Framework enhances trust among investors (SPA)
Saudi Arabia’s Green Financing Framework enhances trust among investors (SPA)
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Fitch: Saudi Arabia’s Green Financing Framework Facilitates Sustainable Funding

Saudi Arabia’s Green Financing Framework enhances trust among investors (SPA)
Saudi Arabia’s Green Financing Framework enhances trust among investors (SPA)

Bashar Al Natoor, global head of Islamic finance at Fitch, praised Saudi Arabia’s launch of its “Green Financing Framework” as a key move to support sustainable funding efforts and boost investor trust.

The Saudi Ministry of Finance introduced the Green Financing Framework on Thursday, outlining eight types of projects eligible for funding through green bonds.

These projects include support for clean transportation, renewable energy, and initiatives to help the kingdom adapt to climate change.

Under the framework, the government can sell green bonds for projects that meet set standards. These bonds will be issued by the Ministry of Finance, with oversight from two committees. They’ll handle sales and funding allocation for the projects.

According to Al Natoor, Saudi Arabia’s Green Financing Framework release is a big step towards smoother sustainable funding efforts, boosting trust among investors and stakeholders in environmental safety.

This move follows other efforts by Saudi Arabia to improve transparency and governance in the environmental sector, like setting up bodies such as the National Compliance Center for Environmental Affairs and the National Waste Management Center.

Al Natoor stressed that these steps are vital for enhancing the credibility of the Green Financing Framework.

He further explained that using sukuk to fund green projects adds depth to sustainable financing, appealing to Sharia-compliant investors while supporting environmental goals."

Following Islamic finance principles alongside green initiatives offers an attractive option for diverse investors, stressed Al Natoor.

Sukuk and Islamic finance are expected to play a crucial role in funding, as the Kingdom needs significant investments from both public and private sectors to fulfill climate commitments, he explained.

In 2023, sustainable governance-related sukuk notably grew, reaching $36.1 billion globally by year-end, revealed Al Natoor.

Fitch expects the market share of ESG-compliant sukuk to rise to over 7.5% from the current 4.3% by the end of 2023.

This growth could be driven by issuers diversifying funding to meet the needs of global investors focused on ESG, along with government sustainability efforts.

The Public Investment Fund (PIF) issued $5 billion in green bonds early last year, with strong demand indicating interest in such investments from Saudi Arabia.



Gold Lingers Near Two-week High as Focus Shifts to Payrolls Data

Gold bars from the vault of a bank are seen in this illustration picture taken in Zurich November 20, 2014. REUTERS/Arnd Wiegmann/File Photo
Gold bars from the vault of a bank are seen in this illustration picture taken in Zurich November 20, 2014. REUTERS/Arnd Wiegmann/File Photo
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Gold Lingers Near Two-week High as Focus Shifts to Payrolls Data

Gold bars from the vault of a bank are seen in this illustration picture taken in Zurich November 20, 2014. REUTERS/Arnd Wiegmann/File Photo
Gold bars from the vault of a bank are seen in this illustration picture taken in Zurich November 20, 2014. REUTERS/Arnd Wiegmann/File Photo

Gold prices were flat near a two-week high on Thursday after softer-than-expected US economic data spurred hopes of interest rate cuts as early as September, and the market spotlight is now on Friday's non-farm payrolls data.

Spot gold edged 0.1% higher to $2,358.19 per ounce as of 9:53 a.m. ET (1353 GMT), after prices hit their highest level since June 21 on Wednesday. Most US markets were closed for Independence Day holiday on Thursday.

Bullion prices in the previous session gained more than 1% after a weak services report and ADP employment report on Wednesday depicted a slowing US economy, Reuters reported.

"It appears that there's a strong chance that the rate cuts might occur some time in the end of third quarter or early part of the fourth quarter, which just makes gold a lot more attractive than the alternative (which is) bonds," said Alex Ebkarian, chief operating officer at Allegiance Gold.

Lower rates reduce the opportunity cost of holding non-yielding gold.

Minutes of the Fed's June meeting acknowledged the US economy appeared to be slowing and "price pressures were diminishing".

"Long-term wise, we're seeing the sanctions that the US placed (on Russia) inducing a lot of central banks and other governments to move towards gold specifically to eliminate the counterparty and default risk," Ebkarian added.

The sanctions, announced last month, are aimed at cutting off Russia's access to products and services needed to sustain military production for its war in Ukraine.

Traders are now focused on US nonfarm payrolls data, due on Friday. The market is looking for weaker job creation last month, said Ole Hansen, head of commodity strategy at Saxo Bank.

"Together with an expected easing in wage pressure, the precious metal market is likely to react positively should these numbers be confirmed," Hansen added.

Spot silver fell 0.2% to $30.409 while platinum rose 1.6% to $1,012.50.

Palladium was 0.5% down at $1,024.66, after scaling its highest level since mid-April in the previous session.