You can read our previous article Sukuk: The Shari’ah compliant response to government bonds if you’d like a bit more insight into the structure of sukuk

Well over 1.3 trillion Dollars and 15 000 sukuk have been issued according to data published by Refinitiv. There has been a general upward trend of sukuk issued over the past few years. In 2021, over 185 billion Dollars of sukuk were issued. Although sukuk is concentrated within five countries - Malaysia, Saudi Arabia, Indonesia, Turkey and Kuwait - the market’s actual expansion and growth began in 2014 when several Muslim-minority countries issued their debut sukuk. These countries include South Africa, Hong Kong, Luxembourg, Senegal, and the United Kingdom. Being the first Western nation to issue a sovereign sukuk, the UK has played an influential role in the development of sukuk in western countries. The London Stock exchange states that to date more than $50 billion has been raised through 68 issuances of Sukuk on the London Stock Exchange. Other European exchanges are also playing an increasingly important role in the issuance of sukuk. The Luxemburg stock exchange has listed sovereign sukuk from countries such as Pakistan, Malaysia and South Africa. As the sukuk market develops, we are witnessing a few trends emerge.

There is a general trend to be more environmentally conscious and sustainable. The last fifteen years have seen an increasing consideration for ESG – environmental, social and corporate governance – in investment circles. Naturally, this trend has extended towards Islamic finance and investments.

Sustainability Sukuk

On 25 March 2021, the Islamic Development Bank issued a statement mentioning that it had issued $ 2.5 billion worth of sustainability sukuk. This brings the total sustainability sukuk issued by the Islamic Development Bank to $ 5.2 billion. This is equivalent to a third of the current ESG and green outstanding sukuk market which stands at over $15bn according to Refinitiv .

Shortly thereafter, on 22 April 2021, the Malaysian ministry of finance issued a media statement claiming that Malaysia had issued the world’s first sovereign U.S. Dollar sustainability sukuk. This was done via the issuance of $ 800 million 10-year Trust Certificates. Proceeds from the sukuk will be used for eligible social and green projects aligned to the United Nation’s Sustainable Development Goals (SDG) Agenda and allow the government to meet its commitments as a responsible nation and signatory to the Paris Agreement. The total offering, which included an additional $ 500 million 30-year tranche, was oversubscribed 6.4 times from investors globally. This is indicative of strong investor appetite for sustainable sukuk offerings.

Green Sukuk

In 2021 Bank Indonesia published documentation of its sukuk issuance. The Republic of Indonesia priced a $ 3 billion global sukuk with 30-year tranche amounting to $ 750 million in green format. Indonesia has been a pioneer in the issuance of green sukuk, having cumulatively issued $ 3.5 billion in green sukuk since 2018. The United Nations Development Programme has come out in support of the Indonesian green sukuk issuance by stating that the green sukuk “has shown the government’s commitment to addressing climate change and mainstreaming innovative financing to achieve the Sustainable Development Goals, while also strengthening Indonesia’s position in the global Shariah market. At the same time, the sale of green sukuk to traditional, Islamic, green, and millennial investors has signaled growing market demand for sustainable and responsible investment. The outlook for growth is optimistic .”

These figures clearly show an immense appetite among investors for ESG and green sukuk. Unfortunately, they also indicate that ESG and green sukuk form a small component of the sukuk market, which, itself already contribute a meagre portion of total infrastructure financing.

Allah Knows Best