Sustainable financing is fast gaining ground in the Middle East, with the outstanding ESG sukuk in the UAE growing 43 percent in the third quarter compared to the same period last year.
Sukuks are Islamic financial certificates, similar to bonds, representing ownership of a tangible asset or project.
They comply with Sharia law, which prohibits interest payments. Instead of earning interest, investors receive returns based on the profits generated by the underlying asset or project.
The proceeds from ESG sukuk are invested in projects that align with environmental, social and governance objectives, driving sustainable development in the region.
Sustainability in Spotlight
According to Emirates News Agency, the value of the outstanding ESG sukuk touched $9.1 billion between July and September this year.
The agency further stated that the gulf nation’s total bond portfolio registered a 59 percent increase to $13.4 billion in the third quarter compared to the same period last year.
ESG sukuk now constitute around 15.6 percent of the UAE’s overall sukuk issuance as of the third quarter of 2024, up from 12.7 percent YoY.
The UAE also holds a significant 47 percent share of the Gulf Cooperation Council’ ESG sukuk market, underscoring its leading role within the region.
Globally, the UAE ranks second after Malaysia, accounting for 20.5 percent of all ESG sukuk worldwide, reaffirming its role as a key player in sustainable finance.
Bashar Al-Natoor, global head of Fitch Ratings’ Islamic Finance Group, highlighted the UAE’s progress in ESG sukuk, a vital part of the country’s green growth strategy.
Widespread Adoption
ESG sukuks have witnessed a broader adoption of green finance in the region, addressing critical environmental challenges like water scarcity, renewable energy needs, and sustainable urban development.
According to Fitch Ratings, the value of outstanding sukuks in the Gulf Cooperation Council countries reached $18.5 billion in the first half of this year compared to the corresponding period in 2023.
The proceeds held 43 percent of the global ESG sukuk issuance.
Saudi Arabia accounted for the lion’s share of 42.7 percent of Fitch-rated ESG sukuk between January and June, while the UAE came in second at 33.8 percent.
The issuance in Islamic finance core markets such as the GCC, Malaysia, Indonesia, Turkey and Pakistan rose 13 percent in the first half to $6.3 billion compared to the same period last year.
Also Read:
UAE Spearheads Global Sustainability Efforts with Innovative Strategies
