UAE Green Sukuk Market

UAE Green Sukuk Market valued at USD 11.8 Bn, driven by sustainable investments and government initiatives, with USD 3 Bn in ESG issuances in early 2025.

The UAE Green Sukuk Market is valued at USD 11.8 billion, based on a five-year historical analysis. This growth is primarily driven by increasing investments in sustainable projects, government initiatives promoting green financing, and a rising awareness of environmental issues among investors. The market has seen a surge in issuances as both public and private sectors seek to align with global sustainability goals, with UAE-based entities issuing around USD 3 billion in ESG sukuk in the first nine months of 2025 alone.

Key players in this market include the UAE, particularly Dubai and Abu Dhabi, which dominate due to their strategic initiatives in renewable energy and sustainable development. The UAE's commitment to diversifying its economy away from oil dependency and its ambitious sustainability targets have positioned it as a leader in the green finance sector within the region, with the country accounting for a significant share of global ESG sukuk issuances alongside Saudi Arabia.

The UAE has developed a comprehensive regulatory framework to support green sukuk, including the UAE Sustainable Finance Framework 2021, issued by the UAE Ministry of Finance. This framework establishes eligibility criteria for green and sustainable projects, mandates external review, and requires annual reporting to ensure transparency and alignment with international standards. Compliance is mandatory for sovereign issuances, and the framework is increasingly adopted by corporates and financial institutions seeking to access international capital markets.

UAE Green Sukuk Market Segmentation

By Type:

The market is segmented into various types, including Renewable Energy Projects, Energy Efficiency Projects, Sustainable Water Management, Waste Management Projects, Sustainable Agriculture, Green Buildings, Clean Transportation Projects, Climate Adaptation & Resilience Projects, and Others. Each of these subsegments plays a crucial role in addressing specific environmental challenges and attracting investments, with renewable energy and green buildings being particularly prominent in recent issuances.

By End-User:

The end-user segmentation includes Government Entities, Corporates, Non-Governmental Organizations, Financial Institutions, and Multilateral Development Banks. Each of these entities plays a significant role in driving demand for green Sukuk, with government entities and corporates leading through policy support, funding initiatives, and direct issuances. Financial institutions are also active, often acting as arrangers or co-issuers in the market.

UAE Green Sukuk Market Competitive Landscape

The UAE Green Sukuk Market is characterized by a dynamic mix of regional and international players. Leading participants such as Abu Dhabi Investment Authority (ADIA), Dubai Investments PJSC, Emirates NBD, First Abu Dhabi Bank (FAB), Abu Dhabi Commercial Bank (ADCB), Dubai Islamic Bank (DIB), Emirates Islamic, Sharjah Islamic Bank, Binghatti Holding, Abu Dhabi National Energy Company (TAQA), Dubai Electricity and Water Authority (DEWA), Masdar (Abu Dhabi Future Energy Company), National Bank of Fujairah, Ajman Bank, Noor Bank contribute to innovation, geographic expansion, and service delivery in this space.

UAE Green Sukuk Market Industry Analysis

Growth Drivers

Increasing Demand for Sustainable Financing:

The UAE's commitment to sustainability is reflected in its Vision 2021, which aims for a 24% reduction in carbon emissions by 2024. This has led to a surge in demand for sustainable financing, with the green finance market projected to reach AED 150 billion in future. The global green bond market, valued at approximately $1 trillion, is also influencing local investments, driving the need for innovative financing solutions like Green Sukuk.

Government Initiatives and Support:

The UAE government has introduced several initiatives to promote green financing, including the UAE Green Agenda 2015-2030, which aims to enhance the country's sustainability efforts. In future, the government plans to allocate AED 10 billion for renewable energy projects, further stimulating the Green Sukuk market. Additionally, the establishment of the Dubai Green Fund, with a target of AED 100 million, supports investments in sustainable projects, enhancing market growth.

Rising Awareness of Environmental Issues:

Public awareness of environmental issues in the UAE has significantly increased, with 75% of residents expressing concern about climate change in a recent survey. This growing consciousness is driving demand for sustainable investment options. The UAE's participation in international climate agreements, such as the Paris Agreement, has also encouraged local investors to seek green financing solutions, further propelling the Green Sukuk market's growth.

Market Challenges

Limited Awareness Among Investors:

Despite the growth potential, many investors in the UAE remain unaware of Green Sukuk and their benefits. A survey indicated that only 35% of institutional investors are familiar with green financing options. This lack of awareness hampers investment flows into sustainable projects, limiting the market's growth. Educational initiatives and outreach programs are essential to bridge this knowledge gap and encourage broader participation in the Green Sukuk market.

Regulatory Uncertainties:

The regulatory landscape for Green Sukuk in the UAE is still evolving, leading to uncertainties that can deter potential investors. The absence of a comprehensive regulatory framework has resulted in inconsistent practices among issuers. In future, the UAE Central Bank is expected to introduce clearer guidelines, but until then, the lack of standardization may hinder the growth of the Green Sukuk market, affecting investor confidence and participation.

UAE Green Sukuk Market Future Outlook

The future of the UAE Green Sukuk market appears promising, driven by increasing government support and a growing emphasis on sustainability. As the UAE aims to diversify its economy away from oil dependency, investments in green projects are expected to rise significantly. In future, the market is likely to see enhanced collaboration between public and private sectors, fostering innovation in green financing. This shift will create a robust ecosystem for sustainable investments, attracting both local and international investors.

Market Opportunities

Expansion of Green Projects:

The UAE's commitment to renewable energy, with plans to generate 50% of its energy from clean sources by 2050, presents significant opportunities for Green Sukuk. This expansion is expected to attract investments exceeding AED 30 billion in green infrastructure projects, enhancing the market's attractiveness to investors seeking sustainable options.

Collaboration with International Green Funds:

The UAE's strategic location and strong financial sector position it as a hub for international green investments. Collaborating with global green funds can facilitate access to additional capital, with estimates suggesting that partnerships could unlock over AED 20 billion in funding for local green projects, further boosting the Green Sukuk market's growth potential.