RIYADH: The global market for environmental, social and governance sukuk is on track to exceed $70 billion in outstanding value by the end of 2026, supported by refinancing needs, funding diversification and sustainability mandates, according to Fitch Ratings.
Momentum in ESG sukuk issuance is expected to continue as net-zero targets, the prospect of lower interest rates and oil prices, and expanding regulatory frameworks encourage issuers across emerging markets, the ratings agency said in a report published this month.
ESG sukuk are structured to finance environmentally and socially sustainable projects, including renewable energy, clean transportation and climate-resilient infrastructure.
Earlier this month, a separate report by S&P Global set out similar views, noting that ESG sukuk issuance is set to accelerate as Gulf Cooperation Council countries step up climate transition efforts and roll out incentives for sustainable practices.
Commenting on the Fitch report, Bashar Al-Natoor, global head of Islamic finance at the agency, said: “We expect ESG sukuk to maintain its solid momentum into 2026, supported by sustainability mandates, net-zero targets, new frameworks, robust demand, along with the upcoming Turkiye-hosted COP31.”
He added: “While evolving Shariah and ESG requirements, geopolitical tensions and greenwashing remain key risks, the credit profile is robust: 92 percent of rated ESG sukuk are investment grade, all issuers have Stable Outlooks, and there have been no defaults.”
According to Fitch, ESG sukuk accounted for around 40 percent of emerging-market ESG debt issuance in US dollar terms in 2025, up from 18 percent in 2024.
Global ESG sukuk issuance rose more than 60 percent year on year to $18.5 billion in 2025, with Saudi Arabia accounting for 33 percent of the total.
Malaysia followed with a 28 percent share, while the UAE and Indonesia accounted for 19 percent and 9 percent, respectively.
Outstanding ESG sukuk reached $58 billion at the end of 2025, representing a 30 percent year-on-year increase.
The report noted that social sukuk are also gaining traction globally, alongside sustainability-linked, orange and climate sukuk.
Recent developments include Pakistan issuing its first sovereign green sukuk and Oman Electricity Transmission Co. SAOC launching Oman’s first ESG sukuk.
Highlighting regulatory progress, Fitch said Malaysia has granted tax exemptions for Sustainable and Responsible Investment sukuk under its income tax rules.
“Saudi Arabia’s Capital Market Authority issued guidelines for green, social, sustainable and sustainability-linked debt, while Qatar’s central bank launched a Sustainable Finance Framework. In addition, the UAE’s central bank has begun developing a Sustainable Islamic M-Bills program,” the agency said.
