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Monday, June 17, 2024

Launch Partners

IsDB’s new Sukuk guidance covers gender Sukuk

The IsDB Group’s latest sustainability guidance provides greater clarity on gender-based offerings, which may attract potential Sukuk issuers to incorporate gender equality objectives in their capital-raising exercise.

The new document – Guidance on Green, Social and Sustainability Sukuk – was published jointly by the IsDB, the International Capital Market Association (ICMA) and the London Stock Exchange Group (LSEG).

“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,” ICMA CEO Bryan Pascoe said.

The guide is based heavily on ICMA’s Principles for Sustainable Bonds which includes standards on green, social, sustainability and sustainability-linked bonds. More notably, three themes drive the guidance: transition finance, blue finance and gender finance.

While these themes are not new and are in fact covered by the IsDB’s Sustainable Finance Framework issued in 2018, the bulk of ESG offerings have been skewed toward climate-related projects.

More than half (58%) of the US$13.4 billion ESG Sukuk raised last year were for green projects (58%), followed by sustainability initiatives (a mix of climate and social projects), according to LSEG data. Sukuk purely for social projects only accounted 0.004% of the US$47 billion cumulative issuance as of Q1 2024.

There also haven’t been any blue Sukuk offerings.

The jury is still out on whether this new guidance will encourage institutions to use Sukuk as a means to fund gender projects or to raise their profile as a leader in advancing gender equality or raise financing for marine projects.

But the IsDB, ICMA and LSEG confirmed that they will engage more stakeholders in the coming months, including regulators, Shariah boards, rating agencies and non-profit organizations, to lobby for the guidance to be embedded across different jurisdictions.  

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