Global ESG sukuk set to exceed $60B by 2026 despite market headwinds: Fitch

The global stock of ESG (Environmental, Social, and Governance) sukuk is projected to surpass $60 billion by the end of 2026, Fitch Ratings said in a new report, citing growing demand for sustainable financing and wider issuer diversity.

According to the rating agency, ESG sukuk is playing an expanding role in funding sustainability initiatives, with just over 40% of all emerging-market ESG U.S. dollar debt issued in the first half of 2025 (excluding China) issued in sukuk format. The remainder came through conventional bonds.

Fitch anticipates a temporary dip in ESG sukuk issuance in the third quarter of 2025 due to typical seasonal slowdowns in core markets during the summer. However, a rebound is expected in the final quarter of the year, in line with broader sukuk market trends.

“Fitch-rated ESG sukuk have been resilient to the Middle East geopolitical conflict,” said Bashar Al Natoor, global head of Islamic finance at Fitch Ratings. “All issuers have stable outlooks, and almost all are investment-grade. There were no defaults.”

Al Natoor noted that ESG sukuk continue to attract both Islamic finance and ESG-focused investors, offering issuers diversified funding sources while aligning with sustainability goals.

As of 1H25, global ESG sukuk issuance had grown 12% year-on-year to approximately $50 billion outstanding. More than 10% of global dollar-denominated sukuk now carry an ESG label.

The Gulf Cooperation Council (GCC) accounted for over half of ESG sukuk supply, led by Saudi Arabia and the UAE. Meanwhile, Malaysia and Indonesia contributed a combined 40%.

Fitch Ratings currently covers about three-quarters of the global dollar ESG sukuk market. Most instruments are senior unsecured, with around 1% classified as subordinated. Frankfurt, London, Stuttgart, and Nasdaq Dubai remain key listing venues for these instruments.

Issuer diversity also increased notably in the second quarter of 2025. Among new entrants were UAE-based Omniyat Holdings Ltd., which launched its first green sukuk rated ‘BB-’, and Pakistan, which issued its first-ever rupee-denominated sovereign green sukuk (unrated).

However, Fitch cautioned that several factors could temper ESG sukuk issuance growth. These include ongoing geopolitical tensions, evolving shariah compliance frameworks, oil price fluctuations, and rising concerns around greenwashing.

Despite these risks, the long-term outlook for ESG sukuk remains robust, underpinned by growing regulatory clarity, rising sustainability mandates, and investor appetite for ethical finance solutions.