ICMA, IsDB and LSEG publish sustainability sukuk guide

May 3rd, 2024

Leading groups in sustainable finance have released guidance for issuers of green, social and sustainability sukuk.

The International Capital Market Association (ICMA), the Islamic Development Bank (IsDB) and London Stock Exchange Group (LSEG) published Guidance on Green, Social and Sustainability Sukuk, which includes practical information on how sukuk may be labelled as sustainable.

Sukuk is a Sharia-compliant bond-like instruments used in Islamic finance, offering an alternative to investors as investing in an interest-paying bond structure is not permissible under Sharia law.

The guidelines included examples, case studies and best practices on labelling green sukuk and how they can be aligned with the ICMA Principles.

The organisations said the guidance aims to help the development of the sustainable sukuk market, increase investors’ awareness of sukuk as an asset class in global fixed income markets and enable a wider set of bond and sukuk issuers around the world to access sustainable capital and thus help unlock further investment towards the achievement of the United Nations Sustainable Development Goals.

LSEG data found the sustainable sukuk market has now seen over $47 billion in issuance since 2017, with $13.4 billion issued in 2023 – a 42% increase from the previous year.

Bryan Pascoe, chief executive of ICMA said: "Today’s launch marks a critical step in establishing and maintaining globally consistent standards in the key growth segments of sustainable finance and Islamic finance.

“We believe the guidance is an important building block for further 'scaling-up' of sustainable finance instruments, including sustainable sukuk, to help plug the massive climate funding gap, as well as raise finance for other environmental and social goals."

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