Sustainable bond issuance in the Middle East is expected to remain strong in 2026. S&P Global Ratings projects regional issuance will reach between $20 billion and $25 billion next year. This outlook comes after a year marked by trade volatility and global uncertainty. Despite those pressures, investor appetite in the region remained resilient.
In 2025, conventional bond issuance by corporates and financial institutions in the Middle East grew by 10%–15%, reaching $81.2 billion. At the same time, sustainable bond issuance in the region increased by about 3%.
This contrasts sharply with global trends. Worldwide sustainable bond issuance declined by 21% in 2025. The Middle East, therefore, outperformed the broader global market.
Growth in 2025 was largely supported by the Gulf Cooperation Council (GCC) countries. Saudi Arabia and the United Arab Emirates (UAE) were especially important. Their strong activity offset a slowdown in Turkiye.
Issuance Concentrated in Three Countries
Sustainable bond activity in the Middle East remains highly concentrated. Turkiye, Saudi Arabia, and the UAE captured more than 90% of the sustainable bond market in the region.
The bond market itself is mainly driven by Saudi Arabia and the UAE. Together, they accounted for a combined 80% of sustainable bond issuance by value in 2025.
Turkiye plays a different role. Sustainable loans dominate the market in that country rather than bonds. In fact, sustainable loan issuance in Turkiye represented about 60%–65% of the regional market by value, and 70%–75% by volume.
In 2025, labeled bond issuance slowed sharply in Turkiye. Banks reduced their activity in the bond market. However, renewable energy projects increased in both bond and loan markets. Wind and solar capacity growth could support issuance again in 2026.
In Saudi Arabia and the UAE, issuance remained resilient across markets. Volume stayed strong even during periods of volatility.
Sustainable Sukuk Breaks Records
One of the most notable trends is the rapid growth of sustainable sukuk. Sustainable sukuk are designed to fund projects that have environmental or social benefits, while complying with Shariah principles.
Total sustainable sukuk issuance in the Middle East reached a new record of $11.4 billion in 2025, compared with $7.9 billion in 2024. This type of financing now accounts for more than 45% of regional sustainable bond issuance by value and more than 40% by number of issuances in 2025.
This represents a major increase from the end of 2024, when sustainable sukuk made up 33% of value and 24% by number. Saudi Arabia and the UAE continue to lead sukuk issuance.
Guidance published by the International Capital Market Association (ICMA) in April 2024 on green, social, and sustainability sukuk has helped improve transparency. Regulatory and government initiatives may further support growth in 2026.
Sukuk structures are particularly important in the GCC, where Islamic finance plays a central role in capital markets.
Renewable Energy Drives Issuance
Renewable energy remains the main use of proceeds in the region’s sustainable bond market. Solar energy is especially popular in GCC countries because of high solar irradiance. Large-scale renewable projects require significant capital. And green bonds and sukuk help finance these investments.
Energy companies such as Masdar in the UAE are expected to continue issuing green bonds to expand renewable portfolios.
Saudi Arabia is preparing to commission the world’s largest utility-scale green hydrogen project in Neom in 2026. The project will use solar, wind, and energy storage systems. It forms part of Saudi Vision initiatives aimed at diversifying the economy and reducing reliance on hydrocarbons.
Other common project categories include:
- Energy efficiency
- Green buildings
- Sustainable water management
- Clean transportation
Climate adaptation projects are still limited but growing. In Saudi Arabia, the sovereign has included climate adaptation in its green bond framework. Banks in the UAE and Saudi Arabia have also started financing adaptation projects.
New Bond Types Emerging
The Middle East sustainable finance market is evolving beyond traditional green bonds.
Transition finance is expected to grow in 2026. This is particularly relevant for hydrocarbon-linked economies. Issuers with credible transition strategies may use transition bonds or transition loans. These can finance emissions reductions and methane abatement projects.
Guidelines for sustainability-linked loan financing bonds (SLLBs) were introduced in June 2024. These instruments allow issuers to finance portfolios of sustainability-linked loans aligned with international principles.
In 2025, Emirates Islamic issued the first SLLB sukuk in the region. This may encourage more banks to follow.
Blue bonds are also gaining attention. The UAE has positioned itself as a leader in this segment, in line with its UAE Water Agenda 2036.
In August 2025, First Abu Dhabi Bank issued the region’s first blue bond by a financial institution. In January 2026, Emirates NBD raised $1 billion through a dual-tranche issuance, including $300 million in blue bonds and $700 million in green bonds.
Eligible blue projects include:
- Offshore wind
- Wetland and coral reef conservation
- Flood and drought-resilient infrastructure
- Sustainable water and wastewater management
Digital bonds may also emerge. In January 2026, Emirates NBD issued the largest UAE dirham-denominated digital bond listed on Nasdaq Dubai. Although not labeled sustainable, digital issuance could improve liquidity and attract foreign investors.
Stronger Rules Lay the Foundation for Growth
Finally, regulation is gradually strengthening across the region. In April 2025, Saudi Arabia’s Capital Markets Authority published guidelines for issuing labeled debt instruments. These align closely with ICMA standards.
In the UAE, Federal Decree Law No. 11 (2024) requires all entities to measure, report, and reduce greenhouse gas emissions by May 2026. The law supports the country’s Net Zero 2050 strategy. Also, Turkiye is developing its own Green Taxonomy, largely based on the European Union framework.
Although there are currently no fully implemented local taxonomies in the region, policymakers are considering classification systems similar to Singapore’s “traffic light” approach. This system classifies activities as Green, Amber (transition), or Red (ineligible).
Such frameworks may help clarify which activities qualify for sustainable financing and could boost investor confidence.
What Will Power the $25B Forecast?
S&P Global expects issuance between $20 billion and $25 billion in 2026. The key drivers include:
- Continued renewable energy expansion
- Growing sustainable sukuk issuance
- Increased transition finance activity
- Regulatory developments and disclosure requirements
- Rising attention to climate adaptation and water resilience
However, sustainable finance volumes remain below what is needed to meet the region’s environmental challenges. Climate adaptation and water scarcity are still underfinanced. Private and blended finance may play a larger role in closing this funding gap.
Despite global volatility, the Middle East sustainable bond market has shown resilience. Strong issuance from Saudi Arabia and the UAE, combined with innovation in sukuk and new bond types, positions the region for continued growth in 2026.
If projections hold, the region could surpass $25 billion in sustainable bond issuance next year, reinforcing its expanding role in global sustainable finance.
The post Middle East Sustainable Bonds Set to Hit $25B in 2026 as Sukuk Surge appeared first on Carbon Credits.
Most businesses that decide to act on their net-zero targets reach the same point of friction. Buying carbon credits has meant tracking down brokers, sitting through sales calls, and requesting a quote just to learn a price, sometimes with limited proof of what you are buying.
The earnings calls that quietly reframed climate from sustainability question to operating risk.
Three earnings calls in the last 18 months tell the story without any help from a press release.
Hershey, May 2024: cocoa price exposure compresses margin, and the company attributes part of the cost shock to West African weather. Olam, July 2024: coffee climate exposure quantified in the annual report. JBS, January 2025: supply chain climate disclosures expanded materially in response to investor pressure and regulatory expectation. None of these companies issued the announcement as climate news. They issued it as financial news. The climate-linked supply chain risk did not arrive with a sustainability framing; it arrived as a P&L line.
You are probably reading this article because you suspect the same thing is happening to your business. This piece walks through what is showing up on which earnings calls, how procurement and finance leaders are quantifying the exposure, and what serious corporates are doing about it before the regulator asks.
Where climate risk has already appeared in earnings
The pattern is consistent across resource-intensive sectors. A weather event compresses supply, the price spikes, the cost flows through the income statement, and the analyst on the call asks whether the event is anomalous or structural. Increasingly, the honest answer is the second one.
Cocoa is the cleanest example. The 2023 to 2024 West African harvest fell sharply on the back of erratic rainfall and disease. Cocoa futures more than tripled. Companies with concentrated West African sourcing absorbed the cost; companies with diversified sourcing absorbed less. The exposure was not climate as ESG topic. It was climate as cost of goods.
Coffee follows the same pattern. Brazilian and Vietnamese harvests have moved on weather more sharply across the last several seasons. Roasters with long-tenor supplier relationships and origin diversification have managed the volatility; roasters with spot-market exposure have not. Wheat, sugar, palm oil, beef: the same dynamic in different commodities, a pattern the IPCC AR6 Working Group II report projects will intensify across agricultural systems through mid-century.
What this means: climate risk is no longer a footnote in the 10-K. It is a line item the CFO has to explain on the call.
The three commodity exposures that hit margin first
For most companies with material Scope 3 exposure, three exposures dominate the near-term P&L risk.
- Concentrated single-origin sourcing in a climate-vulnerable region. If your tier-one supply for any material commodity sits in one geography, you have a concentration risk that climate amplifies. Diversification across origins is the obvious hedge, but it takes years to build and requires relationships you cannot acquire by tender.
- Supplier financial fragility under climate stress. Smallholder farmers, who supply a large share of the global cocoa, coffee, and palm oil market, do not carry the balance sheets to absorb yield shocks. When yields collapse, they exit. When they exit, your supply base shrinks, and the surviving suppliers raise prices. The risk is structural, not cyclical.
- Logistics and storage exposure to extreme weather. Hurricane disruptions to Gulf shipping, drought-driven Panama Canal restrictions, flooding in European inland waterways: each of these has moved input costs in the last three years, a pattern documented in Munich Re’s natural catastrophe data. The exposure shows up as a one-quarter event in the financial press but accumulates over time on the cost line.
TCFD and ISSB disclosure changes
The disclosure architecture has now caught up with the risk. The Task Force on Climate-related Financial Disclosures, whose recommendations are now embedded in the ISSB’s IFRS S2 climate standard, requires companies to disclose climate-related risks across physical and transition categories, with quantification where possible.
For physical risk specifically (the climate-linked supply chain risk you are reading about), the disclosure must address both acute exposures (extreme weather events) and chronic exposures (gradual changes in temperature, precipitation, and growing seasons). The disclosure must address the time horizon over which the risk is material, the parts of the value chain exposed, and the financial impact under different scenarios.
The CSRD imposes similar requirements under European law, with double materiality (both financial and impact materiality) embedded in the assessment. The practical effect: your auditors and your investor relations team now need a defensible answer to the climate-linked supply chain risk question, and the answer needs to be quantified.
What procurement and finance can do now
Three actions matter near-term.
Map your exposure. Most companies do not have a clear view of which tier-one and tier-two suppliers sit in which climate-vulnerable geographies. Without the map, you cannot quantify the risk, and without the quantification, you cannot disclose it credibly. The map is the foundation, and World Resources Institute climate risk research provides useful public tooling to start.
Diversify and deepen, in that order. Diversification across origins reduces concentration risk, but the deeper move is to invest in the resilience of the suppliers you already have. Regenerative practices, agroforestry, soil health interventions: these reduce yield volatility under climate stress and protect your input cost trajectory.
Embed the climate spend inside procurement, not outside it. Treating climate risk as a sustainability cost line subordinates it to the ESG budget. Treating it as a procurement and resilience investment puts it in the budget that matters, which is the cost-of-goods budget that the CFO defends quarterly.
Nature-based supply chain investments are the asset class designed for exactly this purpose. They sit inside the value chain, they reduce climate-linked supply risk, they generate verifiable Scope 3 reductions, and they produce the documentation an auditor and a regulator can both test.
If you are quantifying climate-linked supply chain risk in advance of the next earnings cycle or the next disclosure period, the carbon and sustainability experts at Carbon Credit Capital can help you map your exposure and structure a Dual-Value Model response that addresses reduction, resilience, and disclosure-readiness in a single program. Schedule a consultation.
More and more small and medium-sized businesses are hearing the same question from their larger customers: What is your carbon footprint? That question now travels down entire supply chains, and it arrives next to tender requirements, certification criteria, and rising customer expectations.
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