Fitch Ratings-Dubai: Outstanding ESG sukuk grew significantly in 2023, reaching USD36.1 billion globally at year-end (all currencies). Fitch Ratings expects the ESG sukuk market to cross 7.5% of global outstanding sukuk in the coming years (end-2023: 4.3%), with growth likely to be supported by issuers’ funding diversification plans, to satisfy international ESG investors’ mandates, and by government sustainability initiatives.

“Almost all Fitch-rated ESG sukuk are investment-grade,” said Bashar Al-Natoor, Global Head of Islamic Finance at Fitch. “In the medium term, we expect ESG sukuk growth to continue; however, this could be slowed by volatile debt capital markets, governments becoming less willing to pursue sustainable targets, and poor availability of qualified assets”. Fitch rated more than 85% of the global hard-currency ESG sukuk.

ESG sukuk issuance (USD10.5 billion) was down 4.6% yoy in 2023, with issuance from the UAE most common at 41%, followed by Malaysia (28%), Saudi Arabia (21%), and Indonesia (10%). ESG sukuk make up a sizeable 11.8% of all outstanding Fitch-rated hard-currency sukuk. About three quarters of Fitch-rated ESG sukuk were from the Middle East, followed by Asia (22.9%) and Europe (1.7%).

In the UAE, the Higher Sharia Authority directed Islamic banks and windows to create separate sustainable businesses and activities within the existing business lines that include sustainable sukuk issuances and financing. A sustainable finance framework was unveiled in Oman, with plans to issue green, social and sustainable sukuk and bonds. In Malaysia, the tax deduction given on the issuance cost of sustainable sukuk has been extended to 2027 from 2023. These initiatives could help boost ESG debt issuance in the near term.

Fitch rates ESG sukuk using its Sukuk Rating Criteria. The credit rating

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Additional information is available on www.fitchratings.com

Matt Pearson
Senior Associate, Corporate Communications
Fitch Group, 30 North Colonnade, London, E14 5GN
M: +44 (0) 7788 567 797
T: +44 (0) 203 530 2682
E: matthew.pearson@thefitchgroup.com