The Fitch Ratings reported that the global market of environmental, social, and governance sukuk is projected to exceed $70 billion of outstanding value by 2026, with the assistance of the demand to refinance, fund the diversification and sustainability requirements.
According to a ratings agency published report, this month the trend towards ESG sukuk will persist in the future, as net-zero goals, the possibility of reduced interest and oil prices, and widening regulatory standards are motivating issuers in emerging markets.
ESG sukuk are designed to finance environmentally and socially beneficial projects, such as renewable energy, clean transportation, and climate-resilient infrastructure.
A separate report by S&P Global earlier this month identified similar opinions, with the authors saying that the issuance of ESG sukuk will increase in pace as the Gulf Cooperation Council countries increase their climate transition efforts and introduce incentives for sustainable practices.
In response to 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 stated, “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.”
Fitch estimated that ESG sukuk represents approximately 40 percent of ESG debt issuance in US dollar terms in emerging markets in 2025, compared to 18 percent in 2024.
However, the global ESG sukuk issuance increased by over 60 percent year-on-year to $18.5 billion sukuks in 2025, of which Saudi Arabia issued 33 percent. Malaysia came in with a share of 28 percent, with the UAE and Indonesia constituting 19 and 9 percent, respectively.
Meanwhile, at the close of 2025, outstanding ESG sukuk stood at 58 billion, marking a 30 percent year-on-year growth. The report indicated that social sukuk is also gaining traction globally, alongside sustainability-linked, orange, and climate sukuk.
The most recent are the issuance of the first sovereign green sukuk by Pakistan and the issuance of the first ESG sukuk by Oman Electricity Transmission Co. SAOC.
On the regulatory developments, Fitch noted that Malaysia has established a tax exemption on Sustainable and Responsible Investment sukuk under its income tax provisions.
The agency said, “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.”
