The global ESG sukuk market is set to surpass USD50 billion outstanding in 2025, and remain one of the key dollar funding tools among the Islamic finance markets in Saudi Arabia, the UAE, Indonesia, and Malaysia, Fitch Ratings says. Sukuk is also a notable ESG funding tool in emerging markets, with around a 20% share of emerging-market ESG dollar debt issued in 2024 (excluding China), and the rest bonds. Growth drivers include funding diversification goals, enabling regulations, sustainability initiatives and net-zero targets pursued by sovereigns, banks, corporates, and government-related entities. ESG sukuk is also likely to cross 15% of global dollar sukuk issuance in the medium term (2024: 12.3%).

“The ESG sukuk market has a robust credit profile, with nearly all Fitch-rated ESG sukuk being investment grade,” says Bashar Al Natoor, Global Head of Islamic Finance at Fitch Ratings. “Sukuk is now a key ESG funding tool in emerging markets, with growth expected amidst sustainability initiatives, funding needs, and a favourable funding environment. However, issuances remain concentrated in a handful of countries.”

In 2024, global ESG sukuk expanded 23% yoy to USD45.2 billion outstanding, outpacing global ESG bonds, which were up 16%. ESG sukuk also outpaced global sukuk growth (10%). Green and sustainable sukuk could help issuers opportunistically tap demand from ESG-sensitive international investors from the US, Europe, and Asia, as well as sukuk-focused Islamic investors from the GCC.

ESG debt capital market (US dollars) reached USD46.3 billion outstanding in GCC countries, with 44% in sukuk. Nasdaq Dubai is the largest primary listing venue for ESG sukuk, holding 35% of the global outstanding volumes at end-2024. Risks facing ESG sukuk market growth include sharia-compliance complexities, such as linked to AAOIFI Sharia Standard No. 62, weakening sustainability drives, geopolitical risks, and oil volatilities.