Saudi’s first sovereign green bond oversubscribed six times

• First Euro green bond
• Funding green projects
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Saudi Arabia’s sale of its first sovereign “green” bonds – together with more conventional fixed-income bonds – was oversubscribed six times, according to the Saudi National Debt Management Centre.

The sale consisted of €1.5 billion ($1.58 billion) of seven-year, euro-denominated green bonds and €750 million 12-year conventional debt.

A green bond is where the seller commits to using the funds for environmental or climate change purposes.

The bond sale coincides with the one-year anniversary of Saudi Arabia publishing its Green Finance Framework, where the largest Arab economy indicated it would sell green debt.

The framework states that sovereign green bonds or green sukuk – bonds which are compliant with Islamic law – will be used to finance or re-finance projects related to energy transition or green projects that support the kingdom’s Vision 2030 economic and social strategic plan.

Saudi Arabia, the world’s second-largest oil producer, is borrowing to finance billions of dollars of spending on infrastructure and other projects as it seeks to diversify its economy away from hydrocarbons and create jobs for a growing population.

However, this is happening at a time when oil prices are at a more than three-year low. Saudi Arabia depends on oil for more than two-thirds of its government revenue, and around a third of its national wealth.

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The kingdom has projected a budget deficit of $27 billion for this fiscal calendar year, after posting a $30.8 billion shortfall last year.

While so-called sustainability bonds are on the rise in the Middle East, as elsewhere, Saudi Arabia is only the fourth country in the region to sell green sovereign bonds, after Egypt in 2020, Israel in 2023 and Qatar last year. However, it is the first to sell such bonds in euros.

Last month, the kingdom sold $12 billion worth of sovereign bonds that were similarly oversubscribed as the latest sale.

The kingdom’s sovereign wealth fund, the Public Investment Fund, has previously sold green bonds in 2022.