Morocco's Green Sukuk Surge: Tapping Islamic Finance to Power Climate Resilience

Morocco's decision to restart sovereign sukuk issuance in 2025, paired with the Islamic Development Bank's (IsDB) recent $1.2 billion green sukuk success, underscores a strategic pivot toward using Sharia-compliant instruments to address climate challenges and attract global ESG capital. With renewable energy targets of 52% of installed capacity by 2030 and 40% of total consumption by 2035, Morocco is positioning itself as a leader in green finance while capitalizing on surging demand for sustainable assets.

Morocco's Strategic Move: Sukuk as a Climate Tool

Morocco's first sovereign sukuk issuance in 2025—a $1 billion Ijara (leasing) instrument—marks a critical step in its financial diversification and climate strategy. The sukuk, approved by the National Sharia Board, will fund participating banks' operations and refinancing, indirectly supporting Morocco's renewable energy ambitions. While the proceeds are not explicitly earmarked for green projects, the issuance aligns with the government's broader goals of expanding participative finance and leveraging international capital for climate initiatives.

The kingdom's renewable energy portfolio already includes landmark projects like the Noor Ouarzazate Solar Complex, the world's largest concentrated solar plant.

With projects like a $10 billion battery/EV manufacturing chain and one million hectares allocated for green hydrogen production, the government has laid the groundwork for future sukuk issuances to directly fund such ventures.

IsDB's $1.2B Sukuk: A Benchmark for Green Finance Resilience

Morocco's timing is fortuitous. IsDB's June 2025 $1.2 billion sukuk issuance—priced at 4.246% amid market volatility—demonstrates robust investor appetite for green instruments. The transaction, upsized from $1 billion due to $1.35 billion in demand, drew 59% of orders from central banks and official institutions, signaling confidence in the issuer's creditworthiness and alignment with sustainability goals.

The IsDB's AAA ratings and focus on projects under its Realigned Strategy (green growth, poverty reduction) are instructive for Morocco. Both institutions share a mandate to channel capital into climate-resilient infrastructure, suggesting that Morocco's next sukuk could similarly attract global investors seeking Sharia-compliant exposure to ESG assets.

Policy Backing: A Framework for Green Investment

Morocco's 2022 Investment Charter and streamlined regulatory reforms further bolster its green sukuk appeal. Key provisions include:
- Sectoral incentives: 5% grants for renewable energy projects.
- Territorial bonuses: 10-15% incentives for investments in underserved regions.
- Strategic project agreements: Customized support for projects exceeding $544 million.

These policies reduce bureaucratic hurdles, as evidenced by the Unified Regional Commission's reduction of approval timelines from 180 to 30 days. Combined with Morocco's membership in the African Continental Free Trade Area (AfCFTA) and its U.S. Free Trade Agreement, the framework positions the kingdom as a gateway for green capital across North Africa and beyond.

The Investment Case: Sukuk as a Climate-Resilient Asset Class

For ESG investors, Morocco's sukuk issuance offers a rare opportunity to access high-growth markets while supporting climate goals. Key advantages include:
1. Sharia compliance: Aligns with the $2.7 trillion Islamic finance industry's demand for ethical instruments.
2. Climate alignment: Proceeds can indirectly or directly fund green hydrogen, solar/wind infrastructure, and smart grids.
3. Market diversification: Morocco's political stability and low sovereign risk (BBB+/Baa2 ratings) contrast with volatile emerging markets.

Risks and Considerations

While the outlook is promising, risks remain. Regulatory inefficiencies and delays in project execution could slow capital deployment. Additionally, Morocco's lack of a formal screening mechanism for critical infrastructure may deter some investors. However, the kingdom's progress in OECD compliance and adherence to BEPS standards mitigates these concerns.

Conclusion: A Timely Opportunity

Morocco's green sukuk strategy is not just a financial maneuver—it's a strategic play to leverage Islamic finance's growth and global ESG momentum. With its strong policy foundations and ambitious renewable targets, the kingdom is poised to attract institutional investors seeking yield in a climate-conscious world. For investors, the sukuk offers a rare blend of Sharia compliance, environmental impact, and geographic diversification—making it a cornerstone of any ESG portfolio in 2025.

Investment Takeaway: Consider allocating to Morocco's upcoming green sukuk issuances, particularly those directly tied to renewable energy projects. Pair with regional peers like UAE or Turkey for sectoral diversification, but prioritize Morocco's unique combination of policy clarity and climate ambition.