Research provider Fitch Ratings has predicted that ESG sukuk issuance will decrease in the third quarter of this year, in line with global sukuk market seasonality. The market will likely regain momentum towards the end of the year and early 2025, Fitch Ratings said. Global outstanding ESG sukuk rose by 41% year-on-year (yoy) to reach US$43 billion at the end of H1 2024, with issuance seeing a 13% yoy increase in core Islamic markets to reach US$6.3 billion. Meanwhile, ESG bonds issuance declined by 34% yoy to US$7.8 billion. “Almost all (99%) of Fitch-rated ESG sukuk are investment-grade, with issuers on stable outlooks,” said Bashar Al Natoor, Global Head of Islamic Finance at Fitch Ratings. “The promising medium-term potential for ESG debt issuance is fuelled by governments’ increasing commitment to sustainability, and issuers’ aims to meet ESG mandates and funding diversification plans.” However, the ESG debt segment is still at a nascent stage compared to more developed markets, Al Natoor noted.
