Saudi Arabia Unveils Green Finance Framework

Saudi Arabia has launched a green financing framework, outlining how it will use funds raised through green bonds (also known as sukuk) to support environmental projects.

Focus on Sustainability

The framework identifies eight key areas for investment, including renewable energy, energy efficiency, and initiatives to capture and store carbon. It also prioritises green hydrogen development, reducing emissions across industries, and sustainable water management practices. Also, the framework aims to support measures for adapting to the changing climate.

Transparency and Oversight

The Ministry of Finance will oversee the issuance of these green bonds. Funds raised will be allocated to specific environmental programmes within the national budget over the following two years. The total spending on these programmes will be equal to or exceed the amount raised through the bonds. To ensure transparency, an annual report will be published detailing how the funds are used and the environmental impact of these projects.

Collaboration is Key

Two committees will be responsible for managing the framework. The Sustainable Financing Committee, chaired by the Ministry of Finance, will oversee the framework itself and maintain a list of eligible projects. The National Debt Management Center (NDMC) will focus on marketing these green bonds to investors interested in fixed-income securities.

Building on Existing Efforts

It is important to note that this framework is distinct from the Public Investment Fund's (PIF) green financing initiatives. The PIF, a sovereign wealth fund, has already completed two green bond offerings totalling $8.5 billion between 2022 and 2023.

This new framework by the Ministry of Finance demonstrates Saudi Arabia's broader commitment to sustainability and its goal of significantly reducing emissions by 2030 and achieving net zero emissions by 2060.

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Source: Enterprise