The total volume of outstanding green, social, and sustainability bonds, also known as ESG bonds, is projected to exceed $70 billion by the end of 2026, experiencing significant growth in emerging markets, according to a recent report from Fitch.
The report indicates that ESG bonds accounted for approximately 40% of all ESG debt issuances in dollar terms in emerging markets in 2025, a rise from 18% in 2024. The adherence to the principles set forth by the International Capital Market Association, as well as dollar-denominated issuances, are expected to broaden investor participation. Although the market remains fragmented, issuances are primarily concentrated in the UAE, Malaysia, and Indonesia.
Bashar Nattour, global head of Islamic finance at Fitch, stated that ESG bonds are expected to maintain their strong momentum into 2026, supported by sustainability mandates, targets for net-zero emissions, new regulatory frameworks, and robust demand, further bolstered by Turkey’s forthcoming hosting of the COP 31 conference.
He added: “While evolving Sharia requirements and ESG standards, geopolitical tensions, and greenwashing remain significant risks, the credit profile is solid: 92% of rated ESG bonds are classified as investment grade, and all issuers have a stable outlook, with no defaults reported.”
Global ESG bond issuances surged by over 60%, reaching $18.5 billion in 2025, led predominantly by Malaysia (28%), the UAE (19%), and Indonesia (9%). By the end of 2025, the total outstanding bonds reached $58 billion, with 66% of them denominated in dollars, marking an increase of nearly 30% from the end of 2024.
The classification of ESG bonds was mainly focused on sustainability and green bonds. Social bonds have begun to emerge, alongside orange bonds and climate-related bonds. Notable developments include Pakistan’s issuance of its first unclassified green sovereign bonds and Oman’s Electricity Transmission Company launching the first ESG bonds in Oman, rated at BB+.
Moreover, Malaysia has provided tax exemptions for sustainable and responsible investment bonds under income tax regulations, while the Qatari central bank has launched a sustainable finance framework. Additionally, the Central Bank of the UAE is in the process of developing a program for sustainable Islamic securities.