Saudi authority approves new guidelines for sustainable debt instruments

28/05/2025 01:50 AST

Saudi Arabia's Capital Market Authority has approved new guidelines for issuing green, social, sustainable, and sustainability-linked debt instruments.

These guidelines, which came into effect on may 27, represent a crucial milestone in the CMA's broader strategy to deepen the domestic debt market and align the Kingdom's financial sector with the sustainability objectives outlined in Vision 2030.

The initiative is part of the CMA's strategic plan for 2024-2026 and supports the Sustainability Strategy of the Ministerial Committee for Corporate Sustainability Strategy.

Developed in collaboration with both public and private sector stakeholders, the guidelines serve as a key deliverable under the initiative titled "Establish the regulatory framework for sustainable debt instruments."

This initiative aims to encourage local issuances and enhance the role of debt financing in the national economy.

The approval of these new guidelines aligns with the CMA's comprehensive strategy, which includes over 40 initiatives designed to advance sustainable finance and develop the capital markets.

Among these efforts are the creation of regulatory frameworks for green and ESG-linked bonds, the adoption of open finance practices to foster innovation, and the strengthening of corporate governance regulations to boost accountability and investor confidence.

This development is particularly important as it accelerates the adoption of sustainable finance by creating a clear framework for issuing ESG-compliant debt instruments, enabling public and private entities to raise funds for environmentally and socially responsible projects.

Furthermore, it strengthens the local debt market by encouraging wider participation from issuers and investors through enhanced regulatory clarity, which in turn improves market liquidity and access to capital.

The CMA highlighted that while the new guidelines are non-binding, issuers offering green, social, sustainable, or sustainability-linked debt instruments denominated in Saudi riyals - whether through public or private placements - are required to disclose any deviations from the guidelines in their issuance framework or offering documents.

"The guideline does not entail any changes to the regulatory rules and procedures currently in place in the capital market," the CMA stated.

According to the regulator, the guidelines define four categories of instruments: green debt, social debt, sustainable debt, and sustainability-linked debt.

Green, social, and sustainable instruments require that proceeds be used exclusively for projects that deliver positive environmental and/or social outcomes.