Executive Summary
The global growth in sustainable finance is a unique opportunity to transition to a more sustainable economic model and mitigate the risks associated with climate change. The report “Turning MENA Markets Green” examines the progress of non-GCC MENA countries in attracting sustainable financing – particularly green financing, which specifically targets environmentally sustainable projects and practices.
The report draws on case studies of Egypt, Morocco, Jordan and Lebanon to assess the progress made by non-GCC MENA countries in 1. integrating environmental sustainability into the financial sector and 2. financing green projects and infrastructure.
Efforts to green the financial sector are gaining momentum in non-GCC MENA countries; however, MENA economies remain highly exposed to financial risks associated with the transition. The foundations have been laid to support the greening of the financial sector and the development of green financial instruments in the region, particularly green bonds.
Green loans are spearheading the growth in green financial instruments in the region. A total of 85 green loans from 31 unique issuers were issued by Egypt, Morocco and Jordan in 2020 to 2023. Green bond issuances are not on a linear path and markets for this type of instrument remain fragile.
Issuing green bonds requires technical know-how, capacity building, and resources; moreover, the pricing and marketing of bonds is challenging. However, the diverse issuer base of sustainable bonds in the region highlights institutional backing of bond instruments and their ability to meet NDC commitments.
Key enablers of green finance and insights into measures that could further facilitate the development of green finance in MENA:
Countries that are gaining momentum in green finance have put in place supportive policies and regulatory frameworks for green finance mechanisms and instruments. The other key enablers identified in this report are:
- Maintenance of political and economic stability
- Enhancement of the business investment climate
- Leveraging of international partnerships
Collaboration between regional countries and with international partners are two key, linked steps that could unlock green financing across MENA as a whole. Other recommendations of this report include:
- Harmonisation and standardisation of green bonds governance frameworks across countries to optimise resource use.
- Creation of a regional green finance centre to enhance capacity building and financial products’ knowledge transfer.
- Further engagement with the private sector on mechanisms such as co-financing, risk-sharing, and joint ventures.
- Adoption of climate insurance products by lenders to increase the resilience of MENA economies to climate-related risks.