GCC should develop green bond market for sustainable development

The global bond issues were more than $3tn this year with major issues coming from European Investment Bank - $62.86bn and Federal Bank of Germany - $56.35bn. In first 9 months of 2015 it was more than $2.98bn and in 2015 it was $3.768tn.Treasury prices plunged last week—pushing yields to their highest level since the UK’s vote to leave the European Union—as the market’s interest-rate hike expectations rose following hawkish comments from the Federal Reserve officials. The yield on the benchmark 10-year Treasury note added 7.4 basis points over the week and 5.7 on the day to 1.671%, its highest level since June 23, the day of the Brexit vote. In Europe, the yield on Germany’s 10-year bond turned positive for the first time since the Brexit vote, rising 7.7 basis points to 0.011%. The German bond move came amid a broad selloff in developed-world government debt that started on Thursday after the European Central Bank declined to commit to further stimulus. UK government bonds were leading the way lower on Friday, with 10-year yields up around 0.1 percentage point at 0.860%The Global Islamic bond issues were more than $30bn this year. The major bond issues include Republic of Indonesia - $2.98bn, Islamic Development Bank - $2.66bn and $1.5bn from Malaysia. In the first 9 months of 2015 it was more than $25.74bn and in entire 2015 it was more than $35bn. The sharp decline in oil prices, fiscal consolidation efforts and upcoming refinancing needs are expected to keep commercial debt issuance in the GCC. The sizeable fiscal assets accumulated by Abu Dhabi, Kuwait, Qatar, and Saudi Arabia have provided them with the option to either issue debt or liquidate some of these assets. In 2016, the GCC bond issues were more than $40bn. The GCC sukuk was more than $8.5bn and the GCC conventional bonds were more than $31.5bn. The major sukuk issues in 2016 are from DP World - $1.2bn, Investment Corp of Dubai - $750mn, Emirate of Dubai - $569mn and Emirate of Sharjah - $500mn. The major GCC conventional bond issues in 2016 are from Emirate of Abu Dhabi - $5bn, QNB - $2.58bn and Kingdom of Bahrain - $600mn. The GCC sovereign bond issues were active during this year and exceeded $18bn which include Qatar - $9bn, Emirate of Abu Dhabi - $5bn and Oman - $3bn.The GCC bond issues exceeded $58bn in 2015. In this year, the GCC syndicated loans were close to $80bn unlike in the first 9 months of the previous year it was more than $65.4bn. This year the major syndicated loans were raised by Kingdom of Saudi Arabia - $10bn and Equate Petrochemical - $5bn. The Qatar 5-year CDS is at 107 basis points, Saudi 5-year CDS is at 92 basis points, Dubai 5-year CDS is at 155 basis points, Abu Dhabi 5-year CDS is at 71 basis points and Bahrain 5-year CDS is at 370.370 basis points.The global green bond issues during the year were more than $44bn. Such debt instruments are issued to fund specific clean power projects or projects aimed at reducing climate change risk. In Asia there is a drive for this sustainable approach. The forest fires in Indonesia, air pollution in China and poor waste management in India are just some of the issues which have pushed environmental topics up the Asian agenda. Chinese government has established the Green Financial Task Force and Indian government is also building renewable energy. Sustainable development and climate change mitigation are given thrust in the GCC. Hence the GCC organisations should look forward to tap green bond issues through understanding of “green bond principles” when tapping such investors. The GCC should also develop green bond market as part of its sustainable development.