CMA Approves New Guidelines For Issuing Green, Social, And Sustainable Debt Instruments In Saudi Arabia

The Capital Market Authority (CMA) board has approved new guidelines for issuing green, social, sustainable, and sustainability-linked debt instruments. These guidelines are effective immediately and align with the CMA's Corporate Sustainability Strategy. This strategy was developed by the Ministerial Committee for Corporate Sustainability in collaboration with both public and private sectors.

The initiative is part of the CMA's 2024–2026 Strategic Plan, focusing on developing the sukuk and debt instruments market. The guidelines aim to encourage local issuances and deepen the debt market. This contributes positively to financing the national economy and supports the Financial Sector Development Program targets under Saudi Vision 2030.

The guidelines define four categories of debt instruments: green, social, sustainable, and sustainability-linked. Green, social, and sustainable instruments must allocate proceeds exclusively to projects with environmental or social benefits. In contrast, sustainability-linked instruments use proceeds for general corporate purposes but are classified based on sustainability performance targets.

Globally, sustainability-linked assets have grown significantly, reaching $3.52 trillion by 2024—a 92.7% increase from 2020. Green bonds alone surpassed $580 billion by 2023, indicating a global shift towards sustainable investment and finance.

Issuers of these debt instruments must adhere to all applicable rules under the Capital Market Law and its Implementing Regulations. While the guidelines are advisory, issuers offering these instruments in Saudi Riyals through public or private placements must disclose any deviations from them in their debt framework or offering documents.

The guidelines do not replace existing rules or procedures in the capital market but cover instruments whose proceeds finance projects with positive environmental or social impacts—or both.

Sustainability Practices in Saudi Arabia

In Saudi Arabia's capital market, companies disclosing sustainability practices increased to 94 in 2024 from 81 in 2023. Among the top 100 listed companies on the Saudi Main Market, the sustainability disclosure rate rose to 65% in 2024 from 58% in 2023. This reflects a growing commitment to transparency and sustainability principles.

The CMA emphasizes that these guidelines support diverse issuances while enhancing transparency and raising disclosure standards. They also expand funding channels through the capital market while aligning with global best practices and ongoing developments.

Investor Opportunities

The guidelines offer investors opportunities to support sustainable development while earning returns on their investments through these instruments. By supporting diverse issuances, they aim to address pressing environmental and social challenges.

This initiative helps build a more sustainable future by enhancing transparency and expanding funding channels through the capital market.

With inputs from SPA