PHOTO
Fitch Ratings, Dubai: Fitch Ratings expects slower ESG sukuk issuance in 3Q24, in line with global sukuk market seasonality, before the markets regain momentum after summer holidays, over 4Q24–1Q25.
“Almost all (99%) of Fitch-rated ESG sukuk are investment-grade, with issuers on Stable Outlooks. The promising medium-term potential for ESG debt issuance is fuelled by governments’ increasing commitment to sustainability, and issuers’ aims to meet ESG mandates and funding diversification plans,” said Bashar Al Natoor, Global Head of Islamic Finance at Fitch Ratings. “However, the ESG debt segment is at a nascent stage compared to developed markets.”
Global outstanding ESG sukuk rose 41% yoy to reach USD43 billion at end-1H24 (all currencies). In the Islamic finance core markets (GCC countries, Malaysia, Indonesia, Turkiye and Pakistan), ESG sukuk issuance in 1H24 rose 13% yoy to USD6.3 billion, while ESG bonds issuance declined by 34% yoy to USD7.8 billion. Outstanding ESG sukuk represent a sizeable share (12.9%) of global outstanding sukuk (hard currencies). Sukuk had sizeable share of the hard-currency ESG debt mix in Indonesia (2Q24: 59%), Malaysia (52%) and Saudi Arabia (48%), with the rest in bonds.
Qatar Central Bank’s announced ESG and sustainability strategy for the financial sector could support ESG sukuk and bond development. Saudi Arabia, Malaysia, UAE, and Oman had previously launched ESG frameworks and initiatives.
ESG sukuk in GCC countries reached USD18.5 billion outstanding, or 43% of global ESG sukuk. Saudi Arabia accounts for the largest portion (42.7%) of Fitch-rated ESG sukuk, with the UAE coming in second at 33.8%. Fitch rated the USD0.6 billion green sukuk (BBB) issued by Indonesia in 2Q24. In the UAE, ESG sukuk has been issued by Emirates Islamic Bank (USD0.75 billion sukuk, rated ‘A+’) and Aldar Investment Properties (USD0.5 billion), while in Saudi Arabia, Al Rajhi Banking and Investment Corporation issued USD1 billion sustainable sukuk. Pakistan aims to issue domestic green sukuk by December 2024, according to a statement by the Federal Minister for Finance and Revenue.
-Ends-
Contact: Matt Pearson
Senior Associate, Corporate Communications
Fitch Group, 30 North Colonnade, London, E14 5GN
E: matthew.pearson@thefitchgroup.com