The Arab Monetary Fund publishes a Guidance Note on “Sovereign Sustainable Instruments” for the Arab region

Provide clear definitions for ESG terms and activities at the national level

Maintain a coordinated approach in designing sustainable finance plans

Debt managers assess readiness factors for Sovereign Sustainable Instruments

Raise public awareness and capacity development across government entities

to enhance commitment to national sustainable finance objectives

Build a national data repository for sustainable bankable projects,

Set initiatives to enhance data collection and bridge data gaps 

Pilot country’s sustainable finance agenda through a formal governance scheme

The Arab Monetary Fund (AMF) in cooperation with World Bank Group, and The Gulf Capital Market Association has issued today March 16th 2023, a Guidance Note on “Sovereign Sustainable Instruments for the Arab region”. The note is issued under the framework of the Fund's endeavours to promote awareness of the requirements for developing the green and sustainable agenda in the Arab region.

The guidance note aims to promote awareness of ESG investing in the sovereign debt asset class and how it pertains to sovereign issuers in the Arab region.  It also provides regional policymakers with an insight into these key developments, to help promote a supportive ecosphere for sustainable finance including the local capital markets and banking sectors.

This guidance note takes stock of recent ESG sovereign market trends and opportunities, the sovereign debt management perspective, complementarity between sovereign sustainability-linked instruments and the traditional use of proceeds model, the diverse global and regional guidelines and frameworks, as well as challenges and complexities surrounding the issuance of Sovereign Sustainable Instruments including greenwashing concerns and how they can be addressed. It also highlights other regions and countries’ experiences with issuing labeled instruments. 

Moreover, the guidance note includes a glossary on sustainable finance terms related to ESG activities.

The note draws on an AMF survey on Sovereign Sustainable Instruments conducted in 2022, which provides insights into relevant Arab Agencies perception on the topic. It also sheds light on the main milestones of policies adopted by Arab countries to address climate change and sustainable finance.

The guidelines derive a set of policy recommendations that support officials in Arab countries in their decisions to introduce Sovereign Sustainable Instruments, the related requirements, and how to put in place a fully-fledged enabling environment.

Moreover, the guidance note outlines recommendations and actions for policymakers in adopting Sovereign Sustainable Instruments. These are classified into three main interrelated areas, namely: (i) a policy perspective, (ii) a debt management perspective, and (iii) an issuer perspective.

Noting that the guidelines is a product of collaboration between the Arab Monetary Fund, the World Bank Group, and The Gulf Capital Market Association, it has profited from the insights of many regional and international experts.

Commenting on this guidance note, His Excellency Dr. Abdulrahman A Al-Hamidy, Director General Chairman of the Board of the Arab Monetary Fund, praised the collaborative work with industry players backing the guidelines. H.E. referred to the great opportunities of embracing green and sustainable finance and expressed his wish that the guidance note would contribute to developing the capacities of officials in the region to deploy such instruments. Finally, H.E. stressed that developing a regional ESG taxonomy would be an area for further exploration, aiming to support robust regulations and practices while directing investments toward ESG projects and activities.

You can download the Guidance Note by clicking on the this link.