UAE mega projects drive sustainability, boosting bonds and sukuk issuances

UAE’s Mega Projects Drive Surge in Sukuk and Bond Issuances, Promoting Sustainability

Abu Dhabi, UAE – February 1: The UAE is experiencing significant growth in its large-scale projects, covering important sectors such as infrastructure, renewable energy and real estate development. This surge in growth is consistent with the country’s broader strategic vision, which positions sustainability as a key component of its economic policies.

As the UAE focuses on sustainability to achieve climate action goals and rapidly builds mega projects, sukuk (Islamic bonds) and conventional bond issuances are expected to increase in the coming years. These projects are shaping the future of the financial market in the region, and are expected to revolutionize key industries, especially in opening the door to sustainable investments.

Two international credit rating agencies, Standard & Poor’s and Fitch Ratings, have predicted that sukuk and bonds will be used more frequently to finance significant developments. This prediction is in line with the UAE’s efforts to expand its financing options and continue to innovate in sustainable investment opportunities.
According to Bashar Al Natoor, Managing Director and Global Head of Fitch Ratings’ Islamic Finance Group, while most financing for mega projects still leans heavily on traditional methods, the need for innovative, sustainable funding mechanisms has been growing. This shift is creating strong demand for sukuk and bonds as a method of financing, which has already proven effective in partially funding past projects.

As public and private sector organizations in the UAE and other regional markets look for alternatives to traditional funding methods, Al Natoor also projects that the use of sukuk and bonds as financing vehicles will only grow in the future. This tendency will only be fueled by a number of significant initiatives that are anticipated to be launched in the near future, particularly in the areas of renewable energy, real estate, and infrastructure.

In the emirate of Dubai, for instance, infrastructure development will play a pivotal role in the city’s growth. The infrastructure sector alone contributed 46% of all government spending in the 2025–2027 budget, with funding reaching key projects such as roads, tunnels, bridges, transportation systems, sewage treatment plants, parks, renewable energy facilities and stormwater drainage systems.

One of Dubai’s flagship projects for the future is the expansion of Al Maktoum Airport, which aims to improve mobility and support sustainable transport systems in line with the emirate’s smart city initiatives.

Al Natur added that the UAE’s strategic goal of achieving net-zero emissions by 2050 is paving the way for various green initiatives, further highlighting the country’s commitment to sustainability. Sukuk and bond markets are expected to be significantly impacted by these developments, attracting domestic and foreign investors who are increasingly interested in sustainable, environmentally friendly financial products.

The UAE’s green projects are not only aligned with the country’s environmental goals but also reflect a larger global trend towards sustainability-linked finance. As these projects gain traction, they are expected to provide substantial opportunities for sukuk and bond issuances, fostering the growth of the financial market in the region and supporting the UAE’s vision for long-term sustainability.

Meanwhile, Zahabia Gupta, Director and Lead Analyst for Middle East and Central Asia at S&P Global Sovereign Ratings, also forecasts a significant rise in sukuk and bond issuances in the UAE in the next two to three years. She attributed this increase to the UAE’s strong public investment plans, which include projects such as the US$35 billion expansion of Al Maktoum Airport and the US$8.2 billion rainwater drainage network in Dubai, which is scheduled to be completed in phases by 2033.

Gupta also underlined that the nation’s present low interest rates, which make it easier for individuals and enterprises to obtain capital, are another factor driving the increase in borrowing activity. This is especially true for industries that stand to gain from the advantageous lending climate, such as mortgage financing.

Beginning in 2021, the UAE government issued foreign currency bonds as part of its efforts to expand its capital markets at the federal level. The issuance of local currency sukuk in April 2023 and local currency treasury bonds in May 2022 came next. In order to build the nation’s financial infrastructure and encourage the continuous growth of its capital markets, the government is working to create a yield curve for non-sovereign issuers, which includes these issuances.

As the UAE continues to implement these ambitious projects and sustain its commitment to economic and environmental sustainability, the country is poised to be a key player in the global sukuk and bond markets, attracting investors and financing innovative projects that will help shape the region’s future.