- The international market for sustainable Islamic finance continues to grow and develop.
- To help establish globally consistent standards, ICMA, IsDB and LSEG recently published practical guidance for issuers and other key market participants on the applicability of the ICMA Principles to Shari’a-compliant investing.
- The guidance was drafted through consultation with key stakeholders, and Dechert’s international capital markets team was pleased to contribute its expertise and feedback to this process.
On April 29, 2024, the International Capital Market Association (“ICMA”), the Islamic Development Bank (“IsDB”) and the London Stock Exchange Group (“LSEG”) published new guidance on the issuance of green, social and sustainability sukuk (the “Guidance”).
The Guidance, which formed part of an initiative announced at the 28th United Nations Conference of the Parties (“COP 28”) in December 2023, has been published in response to the continuing rapid growth of the sustainable sukuk market. According to data published by the LSEG, there has been approximately US$42.7 billion in sustainable sukuk issuances since 2017,¹ of which over 30% (US$13.4 billion) was issued in 2023 (reflecting a more than 40% increase compared to 2022 issuance levels).
The stated aims of the Guidance include:
- Providing practical information to issuers and other market participants on how sukuk may be labelled as green, social or sustainability sukuk aligned with the ICMA Principles;
- Increasing investor awareness of sukuk as an asset class in global fixed income markets;
- Enabling a wider set of bond and sukuk issuers around the world to access sustainable capital; and
- Helping confirm the wide applicability of the ICMA Principles across the global sukuk market and ensuring that the market continues to develop with high standards and integrity.
The Guidance builds upon, and is intended to be used alongside, the existing ICMA Principles, being the Green Bond Principles (GBP), the Social Bond Principles (SBP), the Sustainability Bond Guidelines (SBG) and the Sustainability-linked Bond Principles (SLBP).
ICMA, the IsDB and LSEG have indicated their intention to engage with a broader range of stakeholders on the application of the Guidance in the coming months, including Shari’a boards, regulators, rating agencies and non-profit organizations.
A copy of the Guidance can be accessed here.
