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Home » ESG Sukuk Issuance to Slowdown in 3Q24, Before Rise in 4Q24–1Q25

ESG Sukuk Issuance to Slowdown in 3Q24, Before Rise in 4Q24–1Q25

by Madaline Dunn

Global outstanding ESG sukuk increased in the first half of the year, rising to 41 per cent year-over-year and reaching USD43 billion at end-1H24, according to Fitch Ratings.

In the Islamic finance core markets (GCC countries, Malaysia, Indonesia, Turkiye and Pakistan), ESG sukuk issuance in 1H24 rose 13 per cent year-over-year to USD6.3 billion.

That said, ESG bond issuance declined by 34 per cent year-over-year to USD7.8 billion.

Outstanding ESG sukuk represent a sizeable share (12.9 per cent) of global outstanding sukuk (hard currencies), it shared.

Sukuk had a sizeable share of the hard-currency ESG debt mix in Indonesia (2Q24: 59 per cent), Malaysia (52 per cent) and Saudi Arabia (48 per cent), with the rest in bonds.

Slower ESG sukuk issuance is now expected in 3Q24 before the market regains momentum over 4Q24–1Q25, according to the credit rating agency.

“Almost all (99%) of Fitch-rated ESG sukuk are investment-grade, with issuers on Stable Outlooks,” said Bashar Al Natoor, Global Head of Islamic Finance at Fitch Ratings.

Al Natoor added that 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.

Qatar Central Bank, for example, announced an ESG and sustainability strategy for the financial sector, which could support ESG sukuk and bond development, it said.

Meanwhile, Saudi Arabia, Malaysia, UAE, and Oman have previously launched ESG frameworks and initiatives.

ESG sukuk in GCC countries reached USD18.5 billion outstanding, or 43 per cent of global ESG sukuk.

Saudi Arabia accounts for the largest portion (42.7 per cent) of Fitch-rated ESG sukuk, with the UAE coming in second at 33.8 per cent.

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.

“However, the ESG debt segment is at a nascent stage compared to developed markets,” Al Natoor noted.

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