Saudi Arabia is trending with its first green bond issuance
A debut green bond from Saudi Arabia’s state-owned Public Investment Fund (PIF) last week attracted more than $20 billion in orders.
So-called sustainability-linked bonds are becoming more and more appealing to governments who pledged to zero-carbon projects like energy efficiency.
But despite their publicly communicated targets, not so much is being done to improve inadequate national emissions, according to Climate Action Tracker.
PIF has raised $3 billion through its first bond issuance, as the kingdom’s sovereign wealth fund considers financing or refinancing its green investments in renewable energy, energy efficiency, green buildings, and clean transport.
The issuance included a hundred-year tranche, with buyers who seemed to be drawn to the near 7% yield on offer.
Saudi Arabia has a hydrocarbon-dependent economy, so an eight-times oversubscribed issuance may prove that investors trust the kingdom can successfully transition to a zero-carbon society, with no social costs.
Other countries are attracted to green bonds too, with nearly 40 sovereigns as well as other local public entities having issued this kind of financial instrument in recent years.
Government issuers jumped from 4.2% of the total in 2019 to 7.5% at the end of June.
All the while, corporate issuance has accounted for most of the $2.9 trillion in outstanding green bonds between 2017 and the end of June, according to the Bank for International Settlements.
The issued green debt is at increasingly longer tenors also: in August, the Monetary Authority of Singapore raised $2.4 billion via a 50-year green bond.
The strategy is within reason, mostly due to rising interest rates around the globe.
Investors have fewer coffers to put their money in, so debt with a green tinge becomes extra-appealing.
This doesn’t mean that much progress towards meeting decarbonizing targets has been achieved.
And Saudi Arabia is, nevertheless, a heavy polluter, being rated as “highly insufficient” in terms of progress to hit its own pledge to be net zero by 2060.