Sukuk Innovation: Powering Sustainable Finance

Mustafa Adil (), Henk Jan Hoogendoorn () and Zul Hakim Jumat ()
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Mustafa Adil: London Stock Exchange Group
Henk Jan Hoogendoorn: Qatar Financial Centre
Zul Hakim Jumat: Hamad Bin Khalifa University

A chapter in Islamic Finance, FinTech, and the Road to Sustainability, 2023, pp 145-158 from Palgrave Macmillan

Abstract: Abstract Sustainable bonds are gradually approaching critical mass due to qualitative ESG-related factors such as increased investor appetite, lower ESG investment costs relative to non-ESG investments, and increased awareness of ESG issues. Unsurprisingly, Shariah-based finance, ESG concerns (which are essentially based on ethical finance), and the SDG goals, in addition to their broadly similar goals, share many foundational principles or values that make them natural allies in the global movement toward sustainable finance. This chapter shall discuss the emergence of ESG sukuk through four key sections. First, it will look at the growing convergence between Environmental, Social, and Governance (ESG) considerations, Islamic finance, and the United Nations’ Sustainable Development Goals (SDGs). This analysis of the convergence will look at aspects such as demand for ESG sukuk, the similarities in principles between ESG, Islamic finance, and the SDGs, and the role of Islamic capital markets in fulfilling the SDGs. Second, it will take a closer look at one of the areas of convergence between ESG and Islamic finance, namely, ESG Sukuk. After surveying the landscape for ESG sukuk, this section will look into key developments, such as issuances and regulatory and strategic announcements. Third, this chapter will illustrate how sukuk is driving next-generation innovation in Islamic capital markets in three key aspects: green sukuk, sustainability-linked sukuk, and the nascent development of blue sukuk. Finally, this chapter will conclude with a brief outlook for the ESG sukuk sector—given that we are slowly moving into a post-pandemic environment and new countries are entering the ESG sukuk market.

Keywords: Sukuk; Islamic finance; Sustainable development goals; ESG (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/978-3-031-13302-2_7

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