The market for sustainable debt has risen significantly in recent years. In the Middle East, North Africa and Asia-Pacific regions, the size of this sector is relatively small, suggesting high potential for growth. Recent issuance volumes have weakened, however, suggesting conditions are not so easy.

The issuance of what is called sustainable finance debt – which set records for Asia and the Middle East last year – has started to run out of steam, as banks come under pressure to pull away from sustainability commitments, a new report says.

The findings come in a new report from The Dubai Financial Services Authority (DFSA), and the Hong Kong Monetary Authority (HKMA). The report is called Scaling Sustainable Debt in Emerging Markets. Bloomberg was a “knowledge partner” for the 23-page study.

Such findings, coming as the COP30 conference in Brazil continues the topic of tackling climate change, suggest that the political “weather” for sustainability ideas – including reducing Co2 emissions – has become tougher. Rising energy costs, worries about “greenwashing” and geopolitics have made the topic more difficult. To some extent, the old “ESG” label (environment, society and governance) has fallen into disuse.

Sustainable debt issuance that is labelled as such is a “small but growing market” in the Middle East and Asia-Pacific region, the report said. It makes up just 3.7 per cent of the $9.6 trillion in global labelled sustainable debt issued between 2020 and the first half of 2025. Yet, within these markets, issuance has more than tripled between 2020 and 2024, a faster growth rate than some advanced APAC economies, including the likes of South Korea and New Zealand.

Total sustainable debt issuance in these emerging markets set records in 2024 with $94 billion from a combination of green, social, sustainable, sustainability-linked and transition debt. In 2024, 3.2 per cent of all debt financing in these markets came from the labelled sustainable debt market. 

Getting tougher
But the report warned that “some segments of the market are starting to face headwinds.” 

“Since mid-2024, issuance of labelled sustainable debt market has been declining. Activity in the first half of 2025 reached $42 billion, compared to $48 billion issued in the first half of 2024. The contraction mirrors global trends observed through the first half of this year, where issuance is slower than 2024 levels over the same time, when securitised products are excluded,” it said. 

The report said that governments can help growth by giving guidance to ease the challenges issuers face when they go to market.

The report also features three case studies which it says demonstrate innovation in sustainable finance: a blue bond from DP World, a sustainability-linked loan bond from Emirates NDB, and long-tenor green bond and loan from MTR Corporation Limited. (A “blue bond” is about sustainable finance in the maritime area.)

Difficulties in issuing "green bonds" even involve the world of Shariah-compliant debt-like instruments known as Sukuk. Back in 2022, this news service talked to Bedford Row Capital about this green bond market, the potentially stretched valuations of green bonds, and more.