The global market for ESG sukuk is expected to exceed $70 billion by the end of 2026, fueled by robust demand in emerging markets and growing investor interest in sustainable finance instruments. According to Fitch Ratings, ESG sukuk accounted for around 40% of emerging market ESG debt issuance in US dollars in 2025, up from 18% in 2024, reflecting the rapid adoption of environmentally and socially responsible financial instruments across the region.
Saudi Arabia, Malaysia, the UAE, and Indonesia remain the leading issuers, collectively driving the bulk of global ESG sukuk issuance. Increased alignment with ICMA principles and a rise in dollar-denominated sukuk are also broadening institutional participation, while the market continues to show strong credit quality. Fitch notes that 92% of rated ESG sukuk are investment grade, all with stable outlooks, and there have been no defaults to date.
The ESG sukuk market grew over 60% in 2025, with issuance totaling $18.5 billion. Saudi Arabia contributed 33% of this volume, Malaysia 28%, the UAE 19%, and Indonesia 9%. Total outstanding ESG sukuk reached $58 billion by the end of the year, of which 66% were dollar-denominated, representing a 30% increase compared to 2024. While the majority of ESG sukuk are labeled as ‘sustainability’ or ‘green,’ social, sustainability-linked, orange, and climate sukuk are emerging, expanding the range of instruments available to investors.
Notable developments in the market include Pakistan issuing its first sovereign green sukuk and Oman Electricity Transmission Company SAOC launching Oman’s inaugural ESG sukuk with a BB+ rating. Policy and regulatory support in key markets is further underpinning growth. Malaysia has introduced tax exemptions for Sustainable and Responsible Investment sukuk, while Saudi Arabia’s Capital Market Authority has issued ESG debt guidelines. Qatar’s central bank launched a Sustainable Finance Framework, and the UAE central bank is developing a Sustainable Islamic M-Bills programme.
Bashar Al Natoor, Fitch’s Global Head of Islamic Finance, highlighted that momentum in the ESG sukuk market is expected to continue in 2026, supported by sustainability mandates, net-zero targets, emerging frameworks, robust investor demand, and the upcoming COP31 conference in Turkiye. He also noted challenges such as geopolitical tensions, evolving Sharia and ESG compliance requirements, and potential greenwashing risks.
With strong issuance momentum, rising regulatory support, and growing global investor appetite, ESG sukuk are set to become a cornerstone of sustainable Islamic finance, particularly in emerging economies. This trend underscores the increasing importance of ESG-compliant instruments in shaping the future of global debt markets and integrating sustainability into financial decision-making.
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