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The issuance of environmental, social and governance (ESG) sukuk is poised to expand further this year, as the capital market instrument is increasingly becoming a key funding tool in Islamic finance markets.
Global ESG sukuk issuances are poised to reach $50 billion outstanding this year, up from $45.2 billion in 2024, according to Fitch Ratings. Last year’s issuances, which were 23% higher than a year ago, outpaced ESG bonds, which posted a 16% year-on-year growth.
Among the key drivers are countries like Saudi Arabia, the UAE, Indonesia, Malaysia and other emerging markets amid diversification, net-zero and sustainability efforts.
“Sukuk is now a key ESG funding tool in emerging markets, with growth expected amidst sustainability initiatives, funding needs and favourable funding environment,” said Bashar Al Natoor, Global Head of Islamic Finance at Fitch.
Within the GCC, sukuk accounted for a huge chunk (44%) of the ESG debt capital market, which reached $46.3 billion last year.
Nasdaq Dubai emerged as the largest primary listing venue for ESG sukuk at the end of last year, holding more than a third (35%) of the global outstanding volumes.
(Writing by Cleofe Maceda; editing by Seban Scaria) seban.scaria@lseg.com