The QCB strategy, which is in line with the Third Financial Sector Strategic Plan and as part of the Qatar National Vision 2030, suggests creating incentives for financial institutions and capital market participants to issue sustainable products and promoting fintechs with positive environmental or social impact.
“This (the QCB’s announced ESG and sustainability strategy) could facilitate the country’s ongoing efforts in sustainable finance and could support the development of ESG sukuk and bonds,” Fitch said in a report.
Earlier, Saudi Arabia, Malaysia, the UAE, and Oman had also launched ESG frameworks and initiatives.
The QCB strategy, which is in line with the Third Financial Sector Strategic Plan and as part of the Qatar National Vision 2030, suggests creating incentives for financial institutions and capital market participants to issue sustainable products and promoting fintechs with positive environmental or social impact.
It is broadly based on three main pillars with the first pillar focusing on managing climate and ESG risks in the financial sector; the second encouraging capital investments in sustainable finance and the third aiming at incorporating ESG and sustainability practices into the QCB’s internal operations.
In the Islamic finance core markets (GCC countries, Malaysia, Indonesia, Turkiye and Pakistan), ESG sukuk issuance rose 13% year-on-year to $6.3bn at the end of first half (H1) of 2024.
However, in the same markets ESG bonds issuance declined by 34% on an annualised basis to $7.8bn at end of H1-2024, the report said.
Sukuk accounted for about 45% of the total ESG debt mix in the same group of countries (across all currencies) in the review period, it said, adding sukuk had a sizeable share of the hard-currency ESG debt mix in Indonesia (second quarter of 2024: 59%), Malaysia (52%) and Saudi Arabia (48%), with the rest in bonds.
About 69% ($29.7bn) of all outstanding ESG sukuk was in hard currency – mostly US dollars – representing a sizeable share (12.9%) of global outstanding sukuk in H1-2024. The ESG sukuk in the GCC reached $18.5bn outstanding, or 43% of global ESG sukuk.
Fitch said the medium-term growth potential for ESG debt issuance remains promising, fuelled by governments’ increasing commitment to sustainability and issuers’ aims to meet ESG mandates and funding diversification plans.
However, the ESG debt segment is at a much earlier stage of adoption than in developed markets.
“We forecast both lower oil prices and interest rates cuts in the third quarter of 2024, which may contribute to a rise in debt, including ESG sukuk, over Q4-2024–Q1-2025,” Fitch said.
