Global outstanding environmental, social, and governance (ESG) sukuk is projected to exceed US$70 billion by the end of 2026, driven largely by strong momentum in emerging markets, according to a new report by Fitch Ratings.
Fitch noted that ESG sukuk accounted for roughly 40% of emerging market ESG debt issuance in 2025, up sharply from 18% in 2024, highlighting the increasing role of Islamic finance instruments in sustainable funding.
Issuance remains concentrated in Saudi Arabia, the UAE, Malaysia, and Indonesia. However, greater alignment with International Capital Market Association principles and increased US dollar-denominated issuance are expected to expand the investor base.
“We expect ESG sukuk to maintain solid momentum into 2026, supported by sustainability mandates, net-zero targets, new frameworks, robust demand, and the upcoming COP31 in Turkiye,” said Bashar Al Natoor, Fitch’s Global Head of Islamic Finance.
He added that while evolving sharia and ESG requirements, geopolitical risks, and potential greenwashing are 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 over 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 the end of 2025, up about 30% from a year earlier, with roughly two-thirds denominated in US dollars.
Fitch highlighted that sustainability and green sukuk remain dominant, while social, sustainability-linked, and climate-linked sukuk 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.
