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.
