Global Sukuk Market Hits Historic $1 Trillion Milestone as ESG Issuance Soars 54%

Quick Summary

The global sukuk market achieved a historic milestone in 2025, surpassing $1 trillion in outstanding value. Driven by a 54% surge in ESG-linked issuance and strong demand in the GCC and ASEAN regions, Islamic finance has evolved into a mainstream, multi-trillion-dollar ecosystem for international investors seeking diversification.

How is the Global Sukuk Market Evolving into a Mainstream Asset Class?

The global sukuk market has transitioned from a niche regional offering to a mainstream funding channel, reaching $1 trillion in outstanding value. This growth is anchored by increased sovereign participation and a broadening issuer base that now includes emerging markets like the Philippines, Egypt, and Tanzania. Key performance metrics include:

• $291 billion total issuance in 2025, representing a 14.5% year-on-year increase.
• 41% of issuances conducted in foreign currencies, signaling deep international integration.
• 40% market share of hard-currency sukuk listings captured by the London Stock Exchange.

Mustafa Adil, Head of Islamic Finance at LSEG, comments: "Islamic finance is entering a new phase of maturity, with strong growth across asset classes and rising global investor participation. Sukuk is now established as a mainstream funding tool, while equities and funds continue to expand, supported by demand for diversification and values-based investment strategies. Sustainability-linked Islamic finance is also gaining traction, reflecting its strong alignment with broader ESG themes."

What is Driving the Surge in ESG and Sustainable Islamic Finance?

The convergence of Shariah-compliant principles and ESG investing is accelerating, with ESG sukuk issuance jumping 54% to $24 billion. This segment is becoming a critical sustainability tool for non-financial corporates and sovereigns alike. The introduction of sustainability-linked sukuk structures provides a new mechanism for impact-focused financing, bridging the gap between traditional Islamic finance and global green mandates.

• $6.3 billion raised via green and social sukuk on the London Stock Exchange alone.
• 54% growth rate in ESG-specific Islamic instruments.
• Deep ethical alignment between Shariah screening and long-term ESG value creation.

What Risks Face Shariah-Compliant Equities and Funds?

While the global sukuk market shows resilience, Shariah-compliant equities face significant concentration risks. US mega-cap technology firms now represent 44% of total market capitalization, making these portfolios highly sensitive to US market cycles. Meanwhile, Islamic funds have grown to $223 billion, but structural asset scarcity remains a hurdle for smaller funds.

• $40 trillion total value for Shariah-compliant equities globally.
• 37% surge in fund value driven by precious metals and equity performance.
• 56% of funds remain under $10 million in size, highlighting scaling challenges.

FF NEWS TAKE:

The global sukuk market hitting the $1 trillion mark is a definitive "needle-mover" for the industry. It proves that Islamic finance is no longer a localized alternative but a vital pillar of global liquidity. The 54% explosion in ESG sukuk is particularly telling; it positions Islamic instruments as the natural home for ethical capital. However, the heavy reliance on US Big Tech for equity performance suggests that true sector diversification is the next great hurdle for Shariah-compliant asset managers.