Global outstanding environmental, social and governance (ESG) sukuk is expected to exceed US$70 billion as early as end-2026, driven by strong momentum in emerging markets, according to a new report by Fitch Ratings.
Fitch said ESG sukuk accounted for about 40% of emerging market ESG debt issuance in 2025, up sharply from 18% in 2024, highlighting the growing role of Islamic finance instruments in sustainable funding.
Issuance remains concentrated in Saudi Arabia, the UAE, Malaysia and Indonesia, although alignment with International Capital Market Association principles and greater US dollar issuance are expected to broaden the investor base.
“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,” said Bashar Al Natoor, Fitch’s Global Head of Islamic Finance.
He added that while evolving sharia and ESG requirements, geopolitical risks and greenwashing remain concerns, the credit profile of the segment remains strong, with 92% of rated ESG sukuk at investment grade and no recorded defaults.
Global ESG sukuk issuance rose by more than 60% to US$18.5 billion in 2025, led by Saudi Arabia, Malaysia, the UAE and Indonesia.
Outstanding ESG sukuk reached US$58 billion at end-2025, up about 30% from a year earlier, with around two-thirds issued in US dollars.
Fitch noted that sustainability and green sukuk remain dominant, while social, sustainability-linked and climate-linked structures are emerging.
Regulatory and policy support has also expanded, including tax exemptions for Sustainable and Responsible Investment sukuk in Malaysia and new sustainable finance frameworks across the Gulf region.
