MENA

Lately a hotspot for sustainable finance, MENA states could face lower demand in the wake of the Gulf conflict.

This article appears in the September 2026 issue of Global Finance Magazine.

Investors abhor uncertainty but are not afraid of risks. That dictum is being tested in the Middle East and North Africa (MENA), which has emerged as a hotspot for sustainable finance in recent years, driven by economies transitioning toward renewable energy, low-carbon infrastructure, and water efficiency, among other goals. 

Sustainable bond issuance in the region has expanded sevenfold since 2020 and reached $35.1 billion in 2025, according to Bloomberg Intelligence.

Last year, MENA issuance rose despite global markets recording a 21% decline. 

But the buzz is cooling. The Gulf conflict that has dragged on since the U.S. and Israel attacked Iran in February, accompanied by higher energy prices, rising bond yields, weaker growth, and tighter financial conditions, saw sustainable bond offerings decline by 24% in the first half of this year, according to S&P Global.

Sustainable issues started the year on a high, with deals worth $5 billion in the first quarter and $4 billion logged in January alone. The effect of the U.S.-Iran war has been flat growth in volumes, however, while values plunged to $7 billion in the first half of 2026 compared to $10 billion in the same period last year.

That reality has prompted S&P Global to cut its 2026 forecast, projecting issuances of $15 billion to $20 billion, down from its earlier projection of $20 billion to $25 billion. Also cooling is sustainable sukuk issuance, which totaled $2.1 billion in the first half, down from $5.1 billion in the same period last year.

Critically, a large chunk of MENA sustainable bond issuance is denominated in local currencies, an indication of both the competitiveness of the region’s capital markets and its rising status as a haven for value-driven dealmaking.

Despite the decline, investor confidence has not been dampened, said Patrice Cochelin, managing director, Sustainability Methodology and Research at S&P Global: “Medium-term demand-drivers remain positive and are fueled by energy-transition strategies and a significant pipeline of upcoming maturities.”

That investors are hanging on is evident. Early last month, the International Finance Corp. said it was among the principal investors in Jordan Kuwait Bank’s (JKB) second green bond issuance with a $100 million investment.

Notably, banks are spearheading the expansion of sustainable finance in the Middle East. In 2025, they were involved in some of the largest regional issuances and accounted for 80% of total value; in the first half of this year, they accounted for 87% by volume. Saudi Arabia and the United Arab Emirates remain the epicenter, accounting for 98% by value and 73% by volume.  

John Njiraini is a contributing writer based in Kenya.