Outstanding ESG sukuk reached US$58 billion at the end of 2025 after issuance jumped more than 60% to US$18.5 billion, according to Fitch Ratings. The momentum broke in 2026: global ESG sukuk issuance fell 32% year on year to US$4.9 billion in the first half, and Malaysian issuers supplied 67% of it, The Star reported in July 2026.
ESG sukuk are sukuk whose proceeds fund environmental, social or sustainability projects, such as renewable energy, affordable housing or healthcare. They include green, social, sustainability and sustainability-linked sukuk.
About the reports
This summary draws on two Fitch Ratings reports on the ESG sukuk market. The first, published in January 2026, reviewed full-year 2025 and set out the agency’s outlook, as reported by BusinessToday. The second, published in July 2026, covered the first half of 2026 (1H26). The July review is the most recent available and updates the January outlook. We keep the two periods separate below so that figures from different dates are not mixed.
Key findings: full-year 2025
- Record issuance: Fitch Ratings says global ESG sukuk issuance rose by more than 60% to US$18.5 billion in 2025.
- Outstanding stock: ESG sukuk outstanding reached US$58 billion at end-2025, up about 30% year on year.
- Emerging market share: ESG sukuk made up about 40% of emerging market ESG debt issuance in 2025, up from 18% in 2024.
- Credit quality: 92% of rated ESG sukuk are investment grade, with no recorded defaults.
- Issuers: 2025 issuance was led by Saudi Arabia, Malaysia, the UAE and Indonesia. About two-thirds of outstanding ESG sukuk are in US dollars.
Key findings: first half of 2026
- Issuance down: Fitch Ratings says global ESG sukuk issuance across all currencies fell 32% year on year to US$4.9 billion in 1H26.
- Dollar market hit hardest: US dollar ESG sukuk issuance fell 74% year on year, while conventional ESG bond issuance rose 11.5%.
- Share collapse: ESG sukuk’s share of US dollar ESG debt issuance in emerging markets, excluding China, dropped to 14% from 41% a year earlier.
- Malaysia leads: Malaysian issuers accounted for 67% of global ESG sukuk issuance in 1H26, mostly in ringgit.
Why did the outlook change between January and July?
In January, Fitch expected ESG sukuk to keep its momentum into 2026 and forecast that outstanding ESG sukuk could pass US$70 billion as early as end-2026. It pointed to sustainability mandates, net-zero targets, new Gulf frameworks and COP31, which Türkiye is hosting.
By July, the picture had shifted. Fitch now expects the global ESG sukuk market to soften in 2026, citing volatility from the Iran war and rising bond yields, which hit dollar issuance from the Gulf hardest. It also lists slower-moving risks: changing sustainability priorities, increasingly complex Shariah and ESG requirements, shifting investor sentiment and greenwashing concerns. The US$70 billion milestone was part of the January outlook and should be read in that light.
Why is Malaysia ahead?
Fitch credits Malaysia’s lead to three things: tax incentives for Sustainable and Responsible Investment (SRI) sukuk, strong investor demand and a deep domestic market. Because most Malaysian issuance is in ringgit, it was less exposed to the swings in the dollar market that hit Gulf issuers. Fitch expects Malaysia to outperform the wider market and lead global ESG sukuk supply in the second half of 2026, while GCC issuance moderates.
What this means for issuers and impact-minded investors
- A local currency market is a buffer. Malaysia’s experience shows that a deep domestic investor base and clear tax incentives keep ESG sukuk flowing when dollar markets close. Regulators in newer markets, including in Africa, can take that as a design lesson.
- Credibility matters more in a slower market. With greenwashing named as a risk, issuers that publish clear use-of-proceeds frameworks, external reviews and impact reports are more likely to hold investor attention.
- The long-term case is intact. A 92% investment-grade share and no defaults give ESG sukuk a solid credit record. The 2026 slowdown reflects market conditions more than a loss of investor interest in the asset class.
This summary is for information only and is not investment advice. For broader sukuk market data, see our summary of Fitch’s first-half 2026 sukuk review.
Read the original: Fitch Ratings publishes its ESG sukuk research at fitchratings.com.
FAQ
A sukuk whose proceeds fund environmental, social or sustainability projects. Green, social, sustainability and sustainability-linked sukuk all fall under the label.
Fitch Ratings put outstanding ESG sukuk at USD 58 billion at the end of 2025.
In 2025 Saudi Arabia led issuance. In the first half of 2026 Malaysian issuers accounted for 67% of global supply.
Fitch forecast that in January 2026, but its July review expects the market to soften this year, so the milestone is less certain.
