Tayyab Ahmed, Head of Research for Islamic Finance at the London Stock Exchange Group (LSEG) Data and Analytics, presented valuable insights from the “Green and Sustainability Sukuk 2024: Crossing Borders” report. He highlighted the rapid growth of the green and sustainability Sukuk market, the evolving regulatory landscape, and the steps needed to scale the market further.
One of the key highlights Tayyab mentioned is the impressive growth in the issuance of green and sustainability Sukuk, which reached $11 billion by the third quarter of 2024. This marks a significant rise since the market’s inception in 2017, indicating strong momentum. Despite this growth, green and sustainability Sukuk still represent a small fraction of total ESG bonds and Sukuk issuance, suggesting substantial room for expansion.
Tayyab pointed out that while demand is increasing—with 55% of investors planning to invest in green and sustainability Sukuk in the next three years—there are supply-side challenges. Nearly 45% of investors cite limited offerings as a key obstacle, and 60% have only a basic understanding of Sukuk and sustainability principles. This underscores the need for capacity building and greater awareness to bridge the knowledge gap and expand the market.
To address these challenges, Tayyab called for promoting common regional and international standards, building capacity within the market, and expanding the investor base beyond traditional Sukuk investors. He emphasized that supportive regulatory frameworks and taxonomies in countries like Malaysia, Indonesia, and the UAE are crucial in fostering the growth of the green Sukuk market.
In his closing remarks, Tayyab highlighted that achieving significant growth in the green and sustainability Sukuk market is a collective effort. By enhancing market depth through innovation and education, and leveraging supportive regulatory environments, the industry can move towards raising annual issuance from $30 billion to $50 billion, contributing meaningfully to global sustainable finance objectives.
Key Takeaways:
- The green and sustainability Sukuk market is rapidly growing but remains a small fraction of total ESG issuance.
- Increasing investor demand exists, but supply limitations and knowledge gaps need to be addressed.
- Capacity building, common standards, and expanding the investor base are essential for scaling the market.
Tayyab’s presentation underscores the significant potential of green and sustainability Sukuk in bridging the financing gap for sustainable development. By addressing current challenges and leveraging opportunities, the Islamic finance industry can play a pivotal role in advancing global sustainability goals.