COP28 Could Boost ESG Sukuk Issuance

Research by Fitch Ratings says ESG sukuk will continue to be a key issuance theme in H2 2023 as Organisation of Islamic Cooperation (OIC) countries promote sustainability and economic diversification. In Q2, ESG sukuk “maintained strong growth”, with US$30.5 billion outstanding, an increase of 22% quarter-on-quarter, Fitch Ratings said, predicting that ESG sukuk will exceed a 7.5% market share of global outstanding sukuk over the next five years. Bashar Al-Natoor, Global Head of Islamic Finance at Fitch, said: “With COP28 to be held in the UAE in 2023, ESG sukuk could receive an awareness and issuance boost. There is a crossover between Islamic finance and ESG principles due to built-in sharia filters. However, Islamic finance needs to go the extra mile to achieve the targeted ESG impact. This is because unlike bonds, ESG sukuk need to be structured in a sharia-compliant manner as well as in a manner that meets green or sustainability mandates.” ESG sukuk issuers are concentrated in Saudi Arabia, Indonesia, Malaysia and UAE.

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