National Bank of Abu Dhabi has postponed the region's first green bond after investors considered the pricing unattractive, banking sources told Reuters on Sunday.

Green bonds have become an increasingly popular source of borrowing for banks in emerging markets, including in India and China in view of the growing demand for funds for renewable projects.

The UAE-based lender launched investor roadshows in late August to market the benchmark-sized bond, the first green bond ever from a Middle Eastern borrower, with the proceeds due to be used to invest in renewable energy projects.

Benchmark size is traditionally understood to be worth upwards of $500 million.

"Investor appetite was low and the pricing was not attractive," a banker familiar with the matter said. "It is being re-evaluated," he added. A spokesman for NBAD declined to comment.

A separate banker said investors were unsure how to price the bond given that NBAD is in the midst of a merger with fellow Abu Dhabi lender First Gulf Bank.

The tie-up, which was recommended by the boards of the two lenders in July, will create one of the largest banks by assets in the Middle East and Africa. It is expected to be completed in the first quarter of 2017.

"The market has been tested, it (the bond) may be re-launched after the merger," the second source said.

The planned green bond would have bolstered renewables, a sector that is gaining prominence in the oil-rich Gulf countries as they seek to bolster their energy production and retain hydrocarbons to sell for export.

In July, Bank of China sold a $3 billion multi-currency green bond, while India's Axis Bank sold a $500 million, five-year green bond in May.  - Reuters