Arab News
Arab news,
Wed, Oct 22, 2025 | Rabi al-Thani 30, 1447
Global ESG sukuk market hits record $6.5bn in Q3, set for strong 2026, says Fitch
Saudi Arabia:
The global market for environmental, social and
governance sukuk reached a record $6.5 billion in the third quarter, bringing
total issuance this year to $13.5 billion, Fitch Ratings said.
The surge has already set a new full-year record
for 2025, underscoring the growing investor appetite for sustainable Islamic
finance instruments, according to the US-based agency.
ESG sukuk accounted for more than 40
percent of all emerging market US-dollar ESG bond issuance excluding China in
the first nine months of 2025, up sharply from 18 percent during the same period
last year, the report showed.
This rise comes amid a broader push by governments
and financial regulators in the Gulf, Southeast Asia, and other emerging markets
to develop sustainable finance frameworks.
The global sukuk market topped $1 trillion in
2024, with ESG sukuk exceeding $50 billion, underscoring sustainability’s
growing role in Islamic finance, according to a joint report from the London
Stock Exchange Group and the Islamic Corporation for the Development of the
Private Sector, a member of the Islamic Development Bank.
Bashar Al-Natoor, Fitch’s global head of
Islamic Finance, said: “We expect ESG sukuk issuance to maintain strong momentum
into 2026, fueled by robust demand, regulatory support, and sustainability
mandates.”
He added: “Risks such as oil price volatility,
greenwashing and evolving sharia requirements persist, but fundamentals remain
solid.”
The market’s expansion is also growing more
sophisticated, marked by a rise in subordinated ESG sukuk.
These neared $5 billion in issuance by the third
quarter of 2025, all from Saudi issuers, raising their share of Fitch-rated
dollar ESG sukuk to 5 percent in the third quarter from just 1 percent in the
first half.
Outstanding ESG sukuk across all currencies
reached over $55 billion at the end of September, making up around 40 percent of
all ESG debt in member countries of the Organization of Islamic Cooperation.
Fitch reported that approximately 95 percent of
its rated portfolio is investment grade. All issuers carry a Stable Outlook, and
no rated ESG sukuk has ever defaulted, underscoring the asset class’s
resilience.
Geographically, issuance remains concentrated in
key Islamic finance hubs. Gulf Cooperation Council countries hold over half of
all outstanding ESG sukuk, while Malaysia and Indonesia together contribute more
than 40 percent.