The global ESG sukuk market is set to surpass $50 billion outstanding in 2025, and remain one of the key dollar funding tools among the Islamic finance markets in Saudi Arabia, the UAE, Indonesia and Malaysia, Fitch Ratings said in its latest report.
Sukuk is a notable ESG funding tool in emerging markets, with around a 20 percent share of emerging-market ESG dollar debt issued in 2024, and the rest bonds.
“The ESG sukuk market has a robust credit profile, with nearly all Fitch-rated ESG sukuk being investment grade,” says Bashar Al Natoor, Global Head of Islamic Finance at Fitch Ratings.
ESG sukuk to cross 15 percent of global dollar sukuk issuance
Market growth drivers include funding diversification goals, enabling regulations, sustainability initiatives and net-zero targets pursued by sovereigns, banks, corporates and government-related entities. ESG sukuk is also likely to cross 15 percent of global dollar sukuk issuance in the medium term compared to 12.3 percent in 2024.
“Sukuk is now a key ESG funding tool in emerging markets, with growth expected amidst sustainability initiatives, funding needs, and a favorable funding environment. However, issuances remain concentrated in a handful of countries,” added Al Natoor.
In 2024, global ESG sukuk expanded 23 percent year-on-year to $45.2 billion outstanding, outpacing global ESG bonds, which were up 16 percent. ESG sukuk also outpaced the global sukuk growth of 10 percent.
Green and sustainable sukuk could help issuers opportunistically tap demand from ESG-sensitive international investors from the U.S., Europe, and Asia, as well as sukuk-focused Islamic investors from the GCC.
GCC ESG debt capital market reaches $46.3 billion
In the GCC region, the ESG debt capital market reached $46.3 billion outstanding, with 44 percent in sukuk. Nasdaq Dubai is the largest primary listing venue for ESG sukuk, holding 35 percent of the global outstanding volumes at end-2024.
Risks facing ESG sukuk market growth include sharia-compliance complexities, such as those linked to AAOIFI Sharia Standard No. 62, weakening sustainability drives, geopolitical risks and oil volatilities.
