Green Bonds: A Catalyst for Climate Resilience and Economic Growth in MENA and SSA

Green-Inclusive Finance (GIF) emerges as an effective mechanism to address the vulnerabilities faced by low-income populations in the Middle East and North Africa (MENA) and Sub-Saharan Africa (SSA) regions in the context of climate change. By expanding access to diverse financial tools, GIF enables these communities to better mitigate and adapt to the adverse impacts of climate variability. This study analyzes the relationship between green bond issuances and poverty reduction across 73 countries, including 10 representative nations from the MENA and SSA regions, over the period from 2005 to 2021. Applying the System Generalized Method of Moments dynamic panel estimation methodology, the analysis provides strong evidence that a 1% increase in green bond issuances corresponds to a 0.13% reduction in the poverty headcount ratio within the full sample. A non-linear analysis reveals distinct threshold levels for green bond effectiveness—2.03% of total annual issuances for the full sample and 0.95% for the MENA and SSA regions. Notably, countries such as Egypt, Israel, Mauritius, Morocco, Nigeria, Seychelles, South Africa, Turkey, and the UAE surpass the regional threshold, reflecting strong green finance activity. In contrast, Namibia falls below this benchmark, signaling the need for strategic interventions to enhance green bond issuances in the region. These findings highlight the critical importance of exceeding these thresholds to unlock the full poverty-reducing potential of green bonds. As policymakers and stakeholders prioritize this innovative financial tool, it is essential to develop customized approaches that not only meet but surpass these thresholds. Doing so will maximize the impact of green bonds on poverty alleviation and reinforce their role as a transformative instrument in the global effort to achieve equitable and sustainable development.