Fitch Ratings expects full-year ESG sukuk issuance to stay below 2025 levels, reflecting the broader global sukuk slowdown amid Middle East volatility. Issuance in the GCC is likely to moderate, while the agency expects Malaysia to lead global ESG sukuk supply in 2H26, supported by tax incentives, strong investor demand and a deep domestic market, albeit largely in ringgit. Growth could also be affected by shifts in sustainability priorities, complex and evolving sharia and ESG requirements, changes in ESG investor sentiment, and ‘greenwashing’ risks.
About 95% of Fitch-rated ESG sukuk were investment grade at end-2Q26, most in the ‘A’ (49.6%) and ‘BBB’ (41.6%) categories. Issuers on Stable Outlook remained dominant at 74%, while Negative Outlooks rose to 19%(Indonesia) and Rating Watch Negative rose to 6% (UAE corporates and Qatari bank). All rated ESG sukuk issuers were on a Stable Outlook at end-2025. Fitch-rated dollar ESG sukuk made up around 11% of all rated dollar sukuk, equivalent to USD 25.2 billion. The ratings agency rates more than 65% of global dollar ESG sukuk.
Issued ESG sukuk’s share of dollar emerging market (EM; excluding China) ESG debt fell to 14% in 1H26 (1H25:41%), as dollar EM ESG sukuk issuance plunged by 74% yoy while dollar EM ESG bond issuance rose 11.5%. Total ESG sukuk issuance (all currencies) fell 32% yoy to USD4.9 billion amid Iran war volatilities and rising yields. This marks the first decline in first-half issuance in the past four years. Malaysian issuers accounted for 67% of total ESG sukuk issuance.All was issued in Malaysian ringgit and nearly tripled 1H25’s figure, led by energy, utilities and transportation. ESG sukuk outstanding was over USD61 billion at end-2Q26, up about 24% yoy (dollar share: 62%), and concentrated in Malaysia (31%), Saudi Arabia (27%), the UAE (20.2%), and Indonesia (15.3%).
ESG sukuk outpaced ESG bonds outstanding growth in Malaysia, Saudi Arabia and Indonesia, and made up over 12% of global dollar sukuk outstanding. In EM, excluding China, ESG sukuk depresented 20% of dollar ESG debt outstanding (1H25: 17%).
Türkiye launched its National Green Finance Strategy and Action Plan 2026–2029 to expand green finance products, and is set to host COP31. ESG sukuk remains niche in Türkiye, with the last issuance in 2023. Indonesia prioritises sustainable bonds and sukuk under OJK’s 2026–2030 roadmap, targeting 55% annual growth in cumulative issuance. In Qatar, AlRayan Bank listed the first green sukuk on the Qatar Stock Exchange, while SECP introduced Pakistan’s first ESG mutual funds framework.
ESG sukuk’s importance in hard-currency ESG debt differs across key Islamic finance markets. It accounts for a strong share in Malaysia (72%), Indonesia (51%) and the GCC (44%), but remains marginal in Türkiye at about 3% and has yet to emerge in Pakistan
