Kuala Lumpur – According to recent research*, experts in Islamic finance anticipate a boom in the green Sukuk market as demand rises. This worldwide growth would need more standards and regulations.
In preparation for the Global Islamic Finance Forum 2022 (GIFF2022), held on October 5-6 in Kuala Lumpur, IslamicMarkets.com, a leading platform providing access to professional information and financial possibilities, performed the study.
The Association of Islamic Banking and Financial Institutions in Malaysia (AIBIM) is hosting a forum with the theme “Take the Reins”. It is to raise awareness for the Malaysia International Islamic Financial Centre (MIFC). It encourages discussion about how to further Islamic finance’s position as a global leader.
According to the survey of industry leaders in Islamic finance, 83% of respondents anticipate a rise in demand for green Sukuk during the next three years. While 75% believe that demand for green Sukuk will remain stable, 25% are optimistic that it will expand significantly.
A new analysis suggests the Gulf Cooperation Council (GCC) can unleash USD $2 trillion in cumulative GDP contribution, and research refers to the decarbonization initiatives of Gulf nations. In addition to attracting FDI in sustainable businesses via green financing, this will result in the creation of over a million jobs.
An enormous majority of Islamic finance experts (87%) believe that the green Sukuk market is significantly boosted by the GCC’s emphasis on sustainable initiatives. The Islamic Finance Council UK (UKIFC) predicts the green Sukuk market to grow by $30–50 billion in 2025. The fact that total issuance of green Sukuk has only reached $15 billion since 2017. Six in ten (60%) Islamic finance experts polled agreed with that figure, and 17% believed the industry will eventually exceed $50 billion. Only 23% are anticipated that the market size will be less than $30B in 2025.
In addition, 87 percent of Islamic finance experts said that, with COP27 and COP28 taking place in the Arab world. This is a great moment for investors to take advantage of green Sukuk. Nonetheless, the research showed that further standards, including regulation, are required for green Sukuk to take off internationally. 88 percent of experts in Islamic finance are certain that this will improve within the next three years.
Many experts in Islamic finance predict that other countries will follow Malaysia’s lead. It starts paying for independent audits of SRI green bonds. A large majority, close to 80%, expects an increase in government incentives for individuals contemplating investing in green Sukuk during the next five years. However, there may be a problem if Shariah scholars lack the technical understanding needed to make green and sustainable investments. Although 49% of respondents rate it as good or outstanding, 19% express concern that it is bad or very poor, and 36% rate it as only ordinary.
GIFF2022 Chairman Arsalaan Ahmed said, “Confidence is building in the green Sukuk market with optimistic predictions on growth in demand.” This optimism has a solid grounding in the growing focus on sustainable investments in the Arab world.
Strategy for Conducting Research
*In the month of August 2022, IslamicMarkets.com surveyed 346 top-tier experts in Islamic finance from a variety of fields. It includes banking, insurance, asset management, asset ownership, private equity, regulation, and technology.