Green sukuk market won’t ignite without Gulf governments backing, warns top Fitch Ratings analyst

Green sukuk market won’t ignite without Gulf governments backing, warns top Fitch Ratings analyst
Fitch's Bashar Al Natoor sees promising green sukuk market. (Supplied)
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Updated 07 September 2021

Green sukuk market won’t ignite without Gulf governments backing, warns top Fitch Ratings analyst

Green sukuk market won’t ignite without Gulf governments backing, warns top Fitch Ratings analyst
  • The market has grown despite the pandemic
  • However, just 2.5 percent of total outstanding sukuk is green or sustainable

Gulf countries need to lead by example with ambitious infrastructure projects to unlock the true potential of a growing green and sustainable sukuk market that doubled this year, a leading analyst at credit ratings agency Fitch Ratings has told Arab News.

Bashar Al Natoor, the global head of Islamic finance at the agency, pointed to the rapid growth in the Sharia-compliant green sector, which saw issuances rise from $3 billion in 2020 to $6 billion in the first half of this year alone.

But he warned that without leadership from governments in the Gulf region, this branch of the sukuk market may fail to properly “ignite”.

A green sukuk is similar to a conventional Islamic bond, except the proceeds from the product can only be used to fund environmentally-friendly projects. 

The sukuk was first issued in 2017, but despite the global economic downturn caused by the pandemic, the market has continued to grow.

However, Al Natoor says the rise still represents just 2.5 percent of total outstanding sukuk.

He told Arab News: “We’re not yet there, we don’t even have enough projects to push this ahead. 

“We don’t have incentives from the government, we don’t have infrastructure, we don’t have a lot of governments themselves even in the GCC [Gulf Cooperation Council] issuing green and sustainable [sukuk], it continues to be efforts either by a bank or a company rather than a government."

Focusing on green and sustainable projects is very much pushing against an open door in the Kingdom, with the Saudi government putting those areas at the heart of its Vision 2030 programme. 

This includes making renewable energy produce 50 percent of all consumed in Kingdom by 2030, reducing carbon emissions by more than 4 percent of global contributions, and planting 10 billion trees.

Saudi companies are following the government’s lead by pushing ahead with projects to contribute towards these goals.

Saudi Electricity Company became the first corporation in the Kingdom to issue green sukuk in September 2020, raising $1.3 billion in the process.

The proceeds from the offering are set to fund a smart meter rollout scheme, as well as helping to shift the company to a low-carbon footing — in line with Vision 2030. 

Another Saudi-based institution to make use of green and sustainability focused sukuk is the Islamic Development Bank, which raised $2.5 billion through issuances in March. Some 90 percent of the proceeds are earmarked for social development projects, with the remaining 10 percent financing green enterprises.

Despite these examples, Al Natoor believes unless Gulf governments start to embrace the products, the sector will not achieve its full potential.

He added: “We have some regulations, we have some strategies but not yet to the extent that is required to ignite this market. 

“If I were to say one [thing], it’s the topdown element. Awareness is important in general, availability of projects is important in general, understanding of these issues and moving it to a more priority. 

“You need to have the mindset and the culture changing towards sustainability and green to say this is actually a priority. 

“I’m not talking about the government, but in general, corporates, it’s not yet on their radar. It’s good to have, and when it moves from ‘good to have’ to a priority then also you see another ignition to make this market move further.” 

One of the issues facing the sukuk is trust. Not only must investors be confident the bonds are Sharia-compliant, they must also be sure the projects they are funding meet green and sustainability criteria.

Al Natoor called for greater regulation from Gulf governments in these area to help instil confidence in the market.

He said: “All of these are improving, but not yet there to reach a level [of confidence]. 

“So even lack of disclose of issuers, and ‘what do you mean when you issue green?’ and ‘how is that really tested?’ and ‘what’s your framework?’. Disclosure is relatively not advanced in the region compared to other more developed markets, let alone sustainability which is already having an additional issue. 

“I think going the extra mile, and this is key, there’s a lot that needs to be done in general, but you need to go the extra few miles to be focused on sustainable, and additional miles to be focused on Islamic finance and sukuk and what have you, and I think that’s an important message.”


Egyptian business sector debt dropped by 77% in 3 years

Egyptian business sector debt dropped by 77% in 3 years
Image: Shutterstock
Updated 13 sec ago

Egyptian business sector debt dropped by 77% in 3 years

Egyptian business sector debt dropped by 77% in 3 years

RIYADH: Companies in the Egyptian business sector have managed to decrease their debts by a notable 77 percent in three years.

Hisham Tawfik, minister of Public Business Sector said the debts dropped from 44 billion Egyptian pounds ($2.8 billion) to 10 billion Egyptian pounds, with the remainder mostly consisting of taxes.

Tawfik said that a settlement had been reached on the debt with only taxes outstanding.

He added that the original value of the debt in 2018 also included costs such as electricity and petroleum. 


Oil gains after Saudi price hike indicating confidence in the demand outlook

Oil gains after Saudi price hike indicating confidence in the demand outlook
Image: Shutterstock
Updated 9 min 35 sec ago

Oil gains after Saudi price hike indicating confidence in the demand outlook

Oil gains after Saudi price hike indicating confidence in the demand outlook
  • The price hikes were implemented just days after OPEC+ had agreed to boost output in January

RIYADH: Oil prices rose after top exporter Saudi Arabia raised prices for its crude sold to Asia and the US, shrugging off worries around the omicron variant and suggesting confidence in the demand outlook. 

Bloomberg reported that oil giant, Saudi Aramco, raised its key Arab Light grade for customers in Asia by 60 cents from December to $3.30 a barrel above a benchmark, according to a statement.

The price hikes were implemented just days after OPEC+ had agreed to boost output in January.

"The Saudi move to increase pricing is driving the market,” said Warren Patterson, Singapore-based head of commodities strategy at ING Groep NV.

“A bit of an odd move, given the supply hike in January, the omicron uncertainty and the expectation of a better supplied market in the first quarter of 2022.”


US’s Lockheed Martin to design NASA space station

US’s Lockheed Martin to design NASA space station
Image: Shutterstock
Updated 24 min 18 sec ago

US’s Lockheed Martin to design NASA space station

US’s Lockheed Martin to design NASA space station
  • The company will be working on the Starlab project along with Nanoracks and Voyager Space

RIYADH: Lockheed Martin, the US-based aerospace company has confirmed it is one of three partners awarded a $160 million contract by NASA. 

As per the contract, the company is to design NASA’s Starlab commercial space station as part of the US agency’s Commercial Low-Earth Orbit Development program, Cobb County Courier reported. 

The company will be working on the Starlab project along with Nanoracks and Voyager Space. 

“Starlab is the confluence of Lockheed Martin’s rich space expertise and history, Nanoracks’ innovation, and Voyager’s financial savvy,” said Lisa Callahan, vice president and general manager at Lockheed Martin.

“This team is equipped to aid NASA on its mission to expand access to LEO and to enable a transformative commercial space economy,” she added. 

Last month, the company appointed Robert Lightfoot as the new executive vice president of the Space business area as of Jan.1 2022. 


China’s economy expected to grow 5.3 percent in 2022, says govt think tank

China’s economy expected to grow 5.3 percent in 2022, says govt think tank
The main shopping street in Shanghai. Shutterstock.
Updated 06 December 2021

China’s economy expected to grow 5.3 percent in 2022, says govt think tank

China’s economy expected to grow 5.3 percent in 2022, says govt think tank
  • The world’s second-largest economy is expected to have expanded by about 8 percent this year

China’s economy expected to grow 5.3 percent in 2022, says govt think tank

China’s economy is expected to grow around 5.3 percent in 2022, bringing the average annual growth rate forecast for 2020-2022 to 5.2 percent, the Chinese Academy of Social Sciences (CASS), a top government think tank, said on Monday.


Advisers to the government will recommend that authorities set a 2022 economic growth target lower than the target set for 2021 of “above 6 percent,” Reuters reported, amid growing headwinds from a property downturn, weakening exports and strict COVID-19 curbs that have impeded consumption.


The world’s second-largest economy is expected to have expanded by about 8 percent this year, according to the annual blue book on the economy from CASS.

The think tank warned that the property downturn was likely to persist and weigh on the expenditures of local governments next year.


It urged the central government to proactively engineer a soft landing for the property sector, to avoid failed land auctions in big cities and to fend off risks of quickly falling property prices in smaller cities, the report said.


Alibaba appoints new CFO, reshuffles e-commerce businesses

Alibaba appoints new CFO, reshuffles e-commerce businesses
Image: Shutterstock
Updated 06 December 2021

Alibaba appoints new CFO, reshuffles e-commerce businesses

Alibaba appoints new CFO, reshuffles e-commerce businesses
  • Alibaba said that it would be creating an International Digital Commerce team to handle its e-commerce businesses in international markets

China’s largest e-commerce group Alibaba said Monday it is appointing a new chief financial officer and reorganizing its e-commerce businesses amid a regulatory crackdown in the technology industry.


The company said in a statement Monday that Toby Xu will succeed Maggie Wu as its new CFO from April 1, 2022. Xu joined Alibaba from PricewaterhouseCoopers three years ago and was appointed deputy group CFO in July 2019.


Wu, who has been Alibaba’s CFO since 2013 and has helped lead three Alibaba-related company listings, will continue to serve as an executive director on Alibaba’s board.


She will also remain as a partner in the Alibaba Partnership – a group of senior executives who have the right to nominate a simple majority of Alibaba’s board of directors.


“We are focused on the long-term, and succession within our management team on every occasion is always in the service of ensuring Alibaba will be stronger and better positioned for the future,” said Daniel Zhang, chairman and CEO of Alibaba Group.


Separately, Alibaba said that it would be creating an International Digital Commerce team to handle its e-commerce businesses in international markets. A China Digital Commerce team will be in charge of e-commerce operations inside China, according to a post on the company’s Alizila news hub.


The international and domestic digital commerce teams will be led by executives Jiang Fan and Trudy Dai respectively.


Jiang has been in charge of Taobao and Tmall, Alibaba’s core e-commerce sites in China. Dai was the firm’s chief customer officer.


The Hangzhou-based firm was fined a record $2.8 billion for antitrust violations and is under scrutiny as regulators step up oversight of the technology industry at a time when the economy is slowing.


Last month, Alibaba cut its sales outlook for the year amid mounting competition from rivals such as Pinduoduo. It expects growth for its current year to be the slowest since it listed in New York in 2014.


Alibaba’s flagship Singles’ Day shopping extravaganza also posted its slowest-ever growth this year, amid muted marketing campaigns and a shift to sustainability and philanthropy amid Chinese President Xi Jinping’s calls for “common prosperity.”


Alibaba’s New York stock price has plunged more than 50 percent over the last 12 months. The company’s Hong Kong-traded shares were down 4.9 percent Monday.