Green Sukuk: The race to be first
A number of GCC governments, including those in Dubai and Saudi Arabia, have set clean energy targets, as well as ambitious energy efficiency targets. Compounding the difficulty of achieving these targets, the population of the GCC is expected to grow to over 53 million by 2020, a 30% increase over the population in 2000, making the GCC one of the fastest growing regions in the world. Such a population growth trajectory will create an unprecedented rise in demand for energy, water, transport, urban development and infrastructure. Substantial amounts of investment will be required in order to finance the clean energy and energy efficiency projects necessary to meet the needs of the future population.
Increasingly, investors in other parts of the world are looking to the capital ©Islamic Finance news markets as a low-cost alternative to fuel growth in these sectors through green bonds. Given the growth of the Islamic finance industry, a green Sukuk that funds these projects in compliance with Shariah law is the obvious next step. We have yet to see either a green bond or a green Sukuk issued in the CCC but increasingly, we see signs that this might change. Mosl recently, the Dubai Supreme Council o£ Energy (DSCE) annOLmced its partnership with the World Bank to develop a green investment strategy incorporating Sukuk. If this strategy succeeds, governments in the CCC could play a key role in developing a green Sukuk market. Such a market could play a key role in financing the region’s ambitious clean energy and infrastructure projects.