The global Environmental, social and governance (ESG) sukuk market is projected to exceed $50 billion in 2025, cementing its position as a key funding tool in emerging markets, including Saudi Arabia, the UAE, Indonesia, and Malaysia, according to Fitch Ratings. ESG sukuk accounted for around 20 per cent of emerging-market ESG dollar debt issued in 2024, with sovereigns, banks, corporates, and government-related entities driving growth through sustainability initiatives and net-zero targets. The market is also expected to make up 15 per cent of global dollar sukuk issuance in the medium term, up from 12.3 per cent in 2024. "The ESG sukuk market has a robust credit profile, with nearly all Fitch-rated ESG sukuk being investment grade," said 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." The ESG sukuk market's robust credit profile is evident, with most Fitch-rated issuances classified as investment grade. In 2024, the market grew 23 per cent year-on-year (YoY) to $45.2 billion, outpacing both global ESG bonds (up 16 per cent) and global sukuk growth (up 10 per cent). The GCC region remains a major player, with 44 per cent of ESG debt in sukuk form, and Nasdaq Dubai leading as the primary listing venue, holding 35 per cent of global outstanding volumes. However, challenges such as Sharia compliance issues, geopolitical risks, and market volatility may pose risks to the sector's growth. Attribution: Amwal Al Ghad English Subediting: Y.Yasser
