Sovereigns looking at 'green' sukuk issuances: Moody's

Growing demand for Shariah-compliant financial instruments is likely to translate into stronger prospects for green sukuk issuance, primarily by global sovereigns and financial institutions, Moody’s Investors Service said in its recent report.

"Green sukuk and sustainable investing principles overlap, driving good long-term potential despite a slow start. We expect the Islamic finance sector's strong growth over the past 10 years to continue, reflecting that it remains underrepresented in the global financial system," it added.

Corporate issuers brought $47.2 billion of green bonds to market globally in the first quarter of 2019, a 40 percent increase over the first quarter of 2018.

This issuance level is a record for first-quarter green bond issuance, and trails only the fourth quarters of 2017 and 2018 for the largest quarterly issuance to date. Corporates, both financial and non-financial, as well as European issuers, were strong contributors to overall issuance.

First-quarter issuance puts the market roughly in line to hit Moody's 2019 forecast of $200 billion of total green bond issuance, the report said.

The Q1 2019 green bond volume sets first-quarter record, with strong corporate issuance. Corporates were strong contributors to overall issuance, with $15.9 billion of non-financial corporate issuance and $8.1 billion of financial corporate issuance accounting for 34 percent and 17 percent of total volume, respectively.

According to the Global Sustainable Investment Alliance’s recently released 2018 Global Sustainable Investment Review, assets under management using sustainable, responsible and impact (SRI) investing strategies stood at $30.7 trillion globally at the start of 2018, a 68 percent increase from four years earlier.

"Green bonds accounted for 2.5 percent of total first-quarter global bond issuance, up from 1.7 percent in the first quarters of both 2017 and 2018. We expect this trend to persist in the long run as the market continues to mature," the report said.