The credit rating agency "Fitch" revealed that the issuance of Sukuk related to environmental, social and governance objectives exceeded $50 billion, after rising by 60.3% on an annual basis to $40 billion in all currencies by the end of the first quarter of 2024.

Fitch stated in its report that issuers aim to achieve diversification of financing by issuing these sukuks, and highlighted that geopolitical turmoil is among the risks associated with these issuances, and weak sustainability drivers in the underlying markets, in addition to the rise in oil prices, which could reduce Funding needs in some of the underlying sukuk markets, as well as new Sharia-related requirements that could change the credit risk on sukuks.

The report added that Sukuk issuances related to environmental, societal, and governance objectives represented 12% of the total Sukuk outstanding globally in hard currency by the end of the first quarter of 2024.

Fitch classifies about 90% of global sukuks linked to environmental, societal and governance objectives issued in hard currency.

Saudi Arabia comes at the top of the list of the largest issuers of these sukuks, rated by Fitch, at 45%, followed by the UAE at 33%.

The agency stated that the issuances of these sukuks amounted to $15.9 billion in the Gulf Cooperation Council countries, which constitutes 45% of the debt mix related to environmental, societal, and governance objectives, while the remaining percentage is represented by bonds related to those objectives.

The agency added that the issuance of sukuks and bonds linked to environmental, societal and governance objectives is still at an emerging stage in the OIC countries.

The report quoted Bashar Al-Natour, Global Head of Islamic Finance at Fitch, that approximately 99% of the sukuks linked to environmental, societal and governance objectives that Fitch categorizes are considered investment-worthy.

He pointed out that the current year 2024 began with the issuance of major regulatory initiatives. Which may lead to supporting standardization, enhancing transparency and developing the work system.

Al-Natour explained that there is great potential for the growth of sukuks linked to environmental, societal and governance objectives, which will be achieved through continued efforts and increased confidence.

The UAE Securities and Commodities Authority extended the exemption from registration fees for green and sustainability-related bonds and sukuks in April, and Saudi Arabia and the Sultanate of Oman have also introduced green financing frameworks, according to Fitch.