The sustainable finance market in the Middle East is undergoing a qualitative transformation, placing it at the center of the region’s economic and environmental shifts. Forecasts that sustainable bond issuances will range between 20 and 25 billion dollars in 2026 indicate a clear upward trend, despite global trade disruptions and fluctuations in international markets. This performance should be read as a signal of the region’s strategic repositioning within the global green finance landscape.

The Role of S&P Global in Interpreting the Market

Estimates from the global credit rating agency reflect growing confidence in the ability of Middle Eastern markets to attract capital aimed at sustainability projects. Notably, the regional growth in sustainable issuances comes at a time when the rest of the world has seen a noticeable decline in this type of bond, highlighting the uniqueness of the Gulf experience and the strong domestic and international demand for these instruments.

At the same time, traditional bond issuances by corporations and financial institutions in the region rose significantly in 2025, surpassing 80 billion dollars, demonstrating the depth of the regional debt market and the broadening investor base. The key point, however, is that sustainable finance is no longer marginal; it has become a growing segment within the overall debt market structure.

The Gulf Leads the Transformation… Turkey on a Different Path

Data show that the Gulf Cooperation Council countries, particularly Saudi Arabia and the United Arab Emirates, have become the main drivers of the region’s sustainable bond market. Together with Turkey, these countries accounted for more than 90% of regional issuances, while Saudi Arabia and the UAE alone represented nearly 80% of the total value in 2025.

In contrast, Turkey experienced a marked decline in sustainable bond issuances, with activity shifting more toward sustainability-linked loans. This divergence reflects differences in financing structures and economic policy priorities, as well as the influence of local monetary and financial conditions.

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Sustainable Bonds: A Regional Competitive Advantage

One of the most notable features of the regional market is the rise of sustainable bonds, which reached record levels in 2025, exceeding 11 billion dollars compared to less than 8 billion in the previous year. These bonds accounted for nearly half of all sustainable issuances in the region.

This development reflects the Gulf markets’ ability to integrate Islamic finance instruments with global sustainability standards, giving them a dual competitive advantage: attracting investors interested in ethical finance, and drawing global funds that prioritize ESG criteria in their investment strategies.

Where Is the Capital Being Deployed?

Proceeds from sustainable bonds are primarily directed toward sectors such as:

• Renewable energy

• Energy efficiency improvements

• Low-emission buildings

• Water resource management

• Clean transportation

It is unsurprising that green projects dominate the largest share of issuances, given the Gulf countries’ commitments to reducing emissions and achieving carbon neutrality in the coming decades.

New Instruments: Transition and Blue Bonds

The region is expected to see growth in newer debt instruments, such as transition bonds, which finance the gradual decarbonization of high-emission sectors, and blue bonds, which fund marine and water management projects. This trend is particularly significant given the Middle East’s reliance on oil and gas, as well as the acute challenges posed by water scarcity.

The development of local regulatory frameworks further strengthens confidence in these instruments and reduces the risk of “greenwashing” through stricter disclosure standards.

A Funding Gap Remains

Despite significant growth, sustainable finance levels still fall short of the region’s actual needs, particularly for projects related to climate adaptation and infrastructure resilience. Here, private finance and blended finance—combining public and private resources—play a key role in bridging the funding gap.

From an economic perspective, Dr. Bilal Allam, an economist, told Annahar: “The sustainable bond market in the Middle East has entered a stage of institutional consolidation, not experimentation. Gulf countries no longer use these instruments for symbolic or marketing purposes; they are now part of a broader economic diversification strategy tied to long-term national visions.”

However, according to Allam, the real challenge lies in three areas: “Expanding the base of issuers to include medium-sized companies, deepening the secondary market to enhance liquidity, and ensuring consistency of standards with international frameworks to avoid discrepancies in ratings.”

“If the region succeeds in addressing these points, it could evolve from an emerging sustainable finance market into a regional and global hub for these instruments—especially with continued momentum in Saudi Arabia and the UAE, and Turkey returning to growth once its economic environment stabilizes,” Allam added.

In conclusion, the projected figures for 2026 are more than just financial forecasts—they reflect a structural shift in the philosophy of finance in the Middle East: from an economy reliant on traditional resources to one seeking to finance its environmental transition through modern debt instruments that are more transparent and linked to developmental impact.