Potential of Sukuk for a Green and Resilient Recovery

The Islamic Development Bank (IsDB) is promoting Sukuks (Islamic bonds) as an alternative fixed income instrument to play an important role in a sustainable recovery from the pandemic. They offer fixed income characteristics similar to senior unsecured debt obligations, are certified by governance frameworks that comply with Islamic Law, and can be structured to be “asset-backed”. IsDB is an AAA-rated supranational issuer, touching 20% of the world’s population, and issues Sukuks under a $25bn Medium Term Note Program that is listed on Euronext Dublin, Nasdaq Dubai, and Bursa Malaysia. To date the bank has issued more than $33 billion worth of Sukuk and has established a bankruptcy-remote SPV in Luxembourg to expand the Sukuk footprint in the European economic area. In October 2019 IsDb created a Sustainable Finance Framework to adhere to EU principles and to issue Green Sukuks. The debut Green Sukuk in November 2019 raised €1bn for a range of climate projects from renewable energy to wastewater management. During the COVID-19 outbreak, the IsDB issued the first AAA-rated 5-year Sustainability Sukuk which raised €1.5bn.