Financing a Sustainable Future: High-Level Working Group on Green & Sustainability Sukuk releases its first report

  • Global Green Sukuk issuance of $4.4 billion in H1 2022.
  • Indonesia and the GCC are leading jurisdictions for green and sustainability sukuk, together making up 53% of total issuance.
  • The report recommends promoting common regional and international standards, developing capacity with issuers, and expanding the wider ecosystem.

Global green and sustainability sukuk issuance totalled $4.4 billion during the first half of 2022, following a record annual issuance of $6.1 billion in 2021, according to data published by the High-Level Working Group (HLWG) on Green and Sustainability Sukuk. HLWG has issued its first report titled “Financing a Sustainable Future”.

The HLWG was launched in November 2021, during COP26, by founding members HM Treasury, Ministry of Finance in the Republic of Indonesia, Islamic Development Bank, LSEG (London Stock Exchange Group), and Global Ethical Finance Initiative (GEFI).

The report, produced in partnership with the Islamic Finance Council UK, GEFI Initiative, and LSEG, provides insights on the green and sustainability sukuk market, discusses key recent transactions and regulatory developments, and provides views from key industry stakeholders conducted through discussions of the HLWG and an industry survey.  Featuring a roadmap outlining key recommendations to facilitate the development of the green and sustainability sukuk ecosystem globally, key findings include:

  • Indonesia and the GCC are the leading jurisdictions for green and sustainability sukuk, together making up 53% of total issuance.
  • Sukuk have been the main driver of ESG debt issuance in the GCC, making up 80% of green and sustainability bonds sold by GCC-based issuers during the first half of 2022.
  • On average, 82% of annual green and sustainability sukuk have been issued in international markets since 2018, reflecting strong demand from overseas investors.
  • On average, green and sustainability sukuk generated order books worth 4.4 times their offering values, compared with 3.3 times for comparably sampled traditional sukuk.
  • The report recommends promoting common regional and international standards, developing capacity with issuers, and expanding the wider ecosystem.

Omar Shaikh, Advisory Board Member & Director, Islamic Finance Council UK (UKIFC), commented: “We are pleased the HLWG has filed its first report which finds that despite the increase in the issuance of green and sustainability sukuk, there is scope for greater capacity building across issuers, investors and professional services to scale the market to serve the Islamic world.”

Shrey Kohli, Head of Debt Capital Markets, London Stock Exchange, and Chair of the HLWG on Green and Sustainability Sukuk, said: “The growth of green and sustainability sukuk will enable more countries and companies to access finance in a manner consistent with their faith and values. As sukuk are linked to assets that may be eligible for green and social projects, they will become vital tools to fund the U.N. Sustainable Development Goals and the just transition to net-zero, as has been evidenced by transactions by Working Group members such as the Islamic Development Bank and Etihad Airlines.”

“I sincerely thank all members of the HLWG for their expertise and insights. We look forward to working with the market to implement the recommendations as head towards the next two COPs in Egypt and the United Arab Emirates.”

Mustafa Adil, Head of Islamic Finance, Data & Analytics, LSEG, said: “This July marked five years since the first green sukuk was issued, raising $58 million. Green and sustainability sukuk have made great strides during this time, gaining traction across several Islamic capital markets in Southeast Asia, the GCC and Africa, with cumulative total issuance amounting to $21 billion by the first half of 2022.”

“As we approach COP27, it is our aim this report will inform and encourage more countries to adopt green and sustainability sukuk as an innovative approach for financing their SDGs and sustainable development plans.”

LSEG is well placed at the heart of global capital markets to be a strategic enabler of sustainable economic growth. It plays an important role in accelerating the transition to net zero and supporting the growth of the green economy. Refinitiv, an LSEG business, provides an exclusive Islamic finance database including over 1,500 Islamic financial institutions data covering $4 trillion Islamic finance assets. The London Stock Exchange’s Sustainable Bond Market (SBM) is home to more than 300 green, social, and sustainability bonds, raising a combined £120 billion.

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