Fitch Ratings’ Global ESG Sukuk Outlook Dashboard report for 1Q24 has forecast that ESG sukuk will cross USD50 billion globally within the next two years.
This, it said, will be driven by issuers seeking to meet their funding diversification goals and ESG mandates, alongside new regulatory frameworks and government-led sustainability initiatives.
Fitch outlined that global ESG sukuk rose by 60.3 per cent yoy to reach USD40 billion outstanding at the end of the first quarter of this year for all currencies.
It made up 12 per cent of global outstanding sukuk at the end of the first quarter (hard currencies).
Fitch rated about 90 per cent of the global hard-currency ESG sukuk, or USD24.7 billion outstanding, at the end of the first quarter (up 56 per cent yoy).
Saudi Arabia has the highest share (45 per cent) of Fitch-rated ESG sukuk, followed by the UAE (33 per cent), it was shared.
In the GCC countries, ESG sukuk reached USD15.9 billion outstanding, representing 45 per cent of the ESG debt mix, with the balance in bonds.
However, it was noted that ESG sukuk and bond issuance remain nascent in most Organisation of Islamic Cooperation (OIC) countries.
Additionally, the report highlighted that risks include:
- Geopolitical volatilities,
- Surging oil prices that could reduce funding needs in some core sukuk markets,
- New sharia requirements that could alter sukuk credit risk, and
- The weakening of the sustainability drive in core markets.
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