Outstanding ESG sukuk surges to $36.1bln amid sustainability drive

Outstanding ESG sukuk grew significantly last year, as governments rolled out sustainability initiatives and issuers sought to diversify funding.

Outstanding ESG sukuk surged to $36.1 billion as of the end of 2023, Fitch Ratings said on Wednesday.

The ratings agency said it expects the ESG sukuk market to cross 7.5% of global outstanding sukuk in the coming years.

The growth will be supported by funding diversification plans of issuers to meet investors’ mandates and state-backed sustainability efforts.

ESG sukuk issuance

ESG sukuk issuance, which accounted for 11.8% of all outstanding Fitch-rated hard-currency sukuk, fell by 4.6% year-on-year to $10.5 billion in 2023.

The UAE accounted for 41% of ESG sukuk issuance last year, followed by Malaysia (28%), Saudi Arabia (21%) and Indonesia (10%).

Some countries have recently unveiled initiatives that could help boost ESG debt issuance.

Islamic banks in the UAE have been directed by the Higher Sharia Authority to make sustainable sukuk and financing as part of business lines.

In Oman, a sustainable finance framework was unveiled, with plans to issue green, social and sustainable sukuk and bonds.

Malaysia has also extended from 2023 to 2027 the tax deduction applicable to issuance expenditures for sustainable sukuk.

(Writing by Cleofe Maceda; editing by Seban Scaria) seban.scaria@lseg.com