Saudi Arabia Issues First Euro Green Bond In MENA

In a first in the world of sustainable finance, Saudi Arabia has emerged as the first MENA region sovereign to issue a euro-denominated green bond. The Kingdom raised €1.5 billion ($1.6 billion) successfully, marking its increasing commitment to sustainable development and aligning its financial plans with Vision 2030 goals. J.P. Morgan led the issuance, which was instrumental in structuring and executing the transaction, leveraging its long-standing relationship with Saudi Arabia and its extensive experience in environmental, social, and governance (ESG) finance.

The euro-denominated green bond attracted outstanding demand from investors, with bids totalling an unprecedented €7.2 billion—over four times the offer size. The outpouring of interest mirrors increased global investor faith in Saudi Arabia's sustainability vision and strengthens demand for green investments in Europe. The strategic choice to offer the bond in euros was motivated by a need to access this strong demand among Eurozone investors for sustainability-themed bonds. Paul O'Connor, J.P. Morgan's Head of EMEA Sustainable Finance, said that the strong demand for green-labeled financial products in Europe was one of the considerations in choosing the euro as the denomination for the bond.

The proceeds of the green bond are reserved for projects consistent with Saudi Arabia's Green Financing Framework. They cover projects focused on improving energy efficiency, increasing public transport infrastructure, and supporting the country's ambitious environmental agenda, including the planting of 10 billion trees. These projects are at the heart of the Kingdom's overall economic diversification strategy under Vision 2030, a program that aims to lower the dependence on oil revenues and shift to a more sustainable and diversified economy.

Aditya George, CEEMEA DCM Sustainable Finance Head at J.P. Morgan, underscored the importance of the transaction, saying, "This deal reflects our dedication to our clients and our particular experience in assisting sovereign issuers in the complicated and fast-moving sustainable finance debt capital markets." J.P. Morgan's participation went beyond structuring the transaction. The bank closely collaborated with the National Debt Management Center of Saudi Arabia in creating a strong sustainable financing framework and ensured wide investor participation before launching the bond sale to create curiosity and momentum.

The competitively priced seven-year green bond tranche tightened 40 basis points and closed at 115 basis points over its benchmark. In addition to the green bond, the issuance consisted of a $820 million 12-year conventional bond that priced at 145 basis points over mid-swaps. The dual-tranche structure reflects Saudi Arabia's proactive utilization of capital markets to finance traditional projects as well as advance its sustainability initiatives.

J.P. Morgan's participation in this blockbuster issuance cements its position as a global sustainable finance leader. The bank has long experience with Saudi Arabia, having previously led a succession of landmark bond transactions which together raised in excess of $100 billion. J.P. Morgan's CEEMEA DCM team's Salman Alhammadi highlighted the significance of this alliance, citing the bank's pivotal role in advising the Kingdom on a number of strategic transactions.

This issuance of the green bond is more than a financial record; it represents a turning point in the history of ESG investing in the MENA region. It shows how sovereign issuers are coming to use green finance more and more as a means of achieving climate objectives and mobilizing international capital. The successful issuance not only deepens Saudi Arabia's footprint in the sustainable finance space but also represents a larger trend among emerging economies toward environmentally conscious funding approaches.

As global leadership in sustainability further develops, the Kingdom's leadership move into the euro-denominated green bond market serves as an example to other countries in the region. It also indicates the increasing convergence of institutional investor interests with the long-term sustainable development aspirations of sovereign issuers. In this issuance, Saudi Arabia has set the pace for green finance in the MENA region and is likely to be followed by sovereign and corporate issuers in the future.