RIYADH, April 30 — New guidance on sustainable sukuk have been issued by International Capital Market Association (ICMA), the Islamic Development Bank (IsDB) and LSEG (London Stock Exchange Group) during the IsDB annual meeting here.

The guidance is the result of a collaboration between ICMA, IsDB and LSEG during the 28th session of the Conference of the Parties (COP28) in December last year, aimed at providing issuers and other key market participants among others, with practical information on how sukuk may be labelled as green, social or sustainability and aligned with the ICMA principles.

ICMA chief executive Bryan Pascoe said the launch of the new guidance 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,” he said.

Also present during the launch was London Stock Exchange chief executive officer Julia Hoggett.

Among others, the guidance revealed key findings such as growth of the sustainable sukuk market, which has recorded over US$47 billion (RM224 billion) in issuance since 2017.

In 2023, US$13.4 billion worth of sustainable sukuk was issued, up by 42 per cent compared with the previous year.

Commenting on the new guidance, IsDB president Muhammad Al-Jasser noted that there is a pressing need to accelerate the issuance of sukuk, particularly green and sustainability sukuk to mobilise and increase financing for the sustainable and development goals (SDGs) including climate finance.

He said the sustainability sukuk’s measurable impact on the ground aligned with the SDGs empowers investors across various sectors to enrich their threefold bottom line simultaneously.

"First, earning financial returns, second, safeguarding the environment and third, fostering social development.

"At the Islamic Development Bank, underpinning our strategy is the pursuit of green economic growth entailing the transition to low carbon economies by prioritising investment and renewable energy sources,” he said.

Muhammad Al-Jasser said this strategic approach is designed to assist the IsDB member countries in advancing towards their net zero targets and the bank has set a climate finance target of 35 per cent by 2025.

He said the IsDB has surpassed the goal two years ahead of schedule.

"In 2023, 40 per cent of our total approvals were geared to climate finance with a significant portion directed towards investments and renewable energy and energy efficiency.

"With our growth trajectory in the upcoming years, especially in climate finance, we remain steadfast in our commitment to practise what we preach. This entails a continued focus on the issue of green and sustainability sukuk aligning with our financial practices with environmental principles.”

In addition, he said, as the bank commemorated its Golden Jubilee, it reflected with deep appreciation on its five decades of journey, having mobilised over US$46 billion through triple A rated sukuk issuances for sustainable development initiatives worldwide.

Muhammad Al-Jasser reiterated that green and sustainable sukuk are fully aligned with the globally accepted International Capital Market Association (ICMA) principles.

Originally a single institution with 22 member countries, the IsDB has grown into a group of five institutions serving 57 member states across four continents. Its total project approvals have surpassed US$182 billion since inception. — Bernama