Fitch: $62 billion in global sustainable sukuk

Waleed Mansour – Fitch Ratings has projected that ESG-compliant sukuk will maintain a prominent presence in emerging markets, despite continued concentration of issuances in Malaysia, Saudi Arabia, Indonesia, and the United Arab Emirates. The agency noted that global economic volatility, geopolitical risks, and additional Shariah compliance and sustainability requirements constrain sector growth.

Bashar Al-Natour, Global Head of Islamic Finance at Fitch, stated that sustainable sukuk accounted for approximately 20% of total USD-denominated sustainable debt instruments in emerging markets, excluding China, by the end of the third quarter of 2026. He clarified that 95% of rated sukuk carry an investment-grade rating, while about 75% of issuers have a stable outlook. He added that the sector benefits from demand by global investors interested in sustainability, alongside issuers’ efforts to diversify their funding sources, while cautioning that geopolitical volatility, uncertainty regarding interest rates, and investor appetite for emerging market debt could impact market sentiment.

The agency reported that the total outstanding value of sustainable sukuk rose by 13% year-on-year to approximately $62 billion. However, new issuances declined by 46% to $7.1 billion during the first nine months of 2026, amid fluctuations linked to tensions with Iran. Malaysia accounted for 67% of issuances during the period, compared to 29% for Saudi Arabia. Fitch noted that several Gulf and Malaysian Islamic banks are adopting sustainability targets encompassing issuances and investments, thereby supporting sector growth.

In Malaysia, the 2027 budget includes tax deductions on issuance costs for “Prisma” sukuk from 2027 to 2030, as well as tax exemptions for grants provided under the Socially Responsible Investment Sukuk program and bond grants starting in 2027. Meanwhile, the Turkish Capital Markets Board issued guidelines for green, sustainable, social, and sustainability-linked financial instruments. Fitch also rated the first sustainable sukuk denominated in Indonesian rupiah.

The agency confirmed that social sukuk were the only category to record growth in issuances during the first nine months of 2026, supported by Saudi Arabia, while issuances of green sukuk and sustainability sukuk declined. It highlighted increased financing by Saudi Islamic banks for eligible sustainable projects and the role of sustainable secondary debt instruments in supporting their capital strategies.