Dubai Islamic Bank sets new standard with first sustainability-linked Sukuk

Dubai Islamic Bank (DIB) has made quite a notable move in the realm of Islamic sustainable finance with its debut Sustainability-Linked Sukuk – and honestly, it’s a pretty significant milestone. The bank successfully raised USD 1 billion at an annual profit rate of 4.572%. What’s especially interesting about this five-year Sukuk is how it shifts away from the traditional models of sustainable financing, which mainly focused on use-of-proceeds, toward a more advanced approach that ties the funding to the borrower’s achievement of specific environmental, social, and governance (ESG) targets.

This marks a new chapter for DIB, which, as the world’s first Islamic bank, has always been at the forefront of innovation in sustainable finance. Back in February 2025, it published the first-ever Sustainability-Linked Finance Facilities Financing Framework by any Islamic bank around the globe. This framework lays out clear definitions for eligible sustainability-linked finance deals and sets measurable, independently verified Key Performance Indicators (KPIs) aligned with international standards and the UAE’s goal of reaching Net Zero by 2050. The recent Sukuk is actually the first to be issued under this really pioneering framework.

The response to the issuance was remarkable. The order book skyrocketed to USD 2 billion, yes, double the amount offered, and over 80 institutional investors from Europe, Asia, and the Middle East placed their bids. Interestingly enough, the regional split showed the highest Asian participation ever seen in a public Sukuk issued by DIB, accounting for 20%, along with 67% from the Middle East and North Africa (MENA). The investor base was mainly made up of banks and private banks (around 77%), but also included fund managers, insurance companies, pension funds, and sovereign wealth funds. The pricing was tightened to 90 basis points above US Treasuries, which really underscores how strong the demand was in this competitive primary market.

DIB’s CEO, Dr. Adnan Chilwan, emphasized just how important this deal is both strategically and culturally. He shared with Abu Dhabi Magazine that this Sukuk raises the bar for Islamic finance by linking impact to transparent, measurable performance outcomes. “This Sustainability-Linked Sukuk moves us from just intending to do good to actually showing results , and it definitely reinforces our long-term commitment to embedding sustainability into our core,” he explained. The issuance also aligns closely with DIB’s broader mission to incorporate responsible finance and ESG principles into its long-range plans, bolstering its reputation as a leader in sustainable finance not just in the UAE but globally.

This Sukuk was part of DIB’s overall USD 12.5 billion Sukuk program, which is dual-listed on Euronext Dublin and Nasdaq Dubai. Standard Chartered Bank acted as the Sustainability Advisor for the deal. A syndicate of joint lead managers and bookrunners included regional giants like Arqaam Capital, Bank ABC, Emirates NBD Capital, and First Abu Dhabi Bank, along with international players like HSBC and ICBC, among others.

And, just a quick note , this isn’t DIB’s first foray into sustainable Sukuk. In February 2024, they priced their third USD 1 billion issue, which focused on green, social, and ESG projects under their Sustainable Finance Framework. That offering had a profit rate of 5.243% over five years and drew positive interest across the Middle East, Asia, and Europe, reinforcing DIB’s pioneering role in Islamic sustainable finance from early days.

This innovative approach by DIB fits into a larger trend that’s blossoming across the UAE banking sector. Emirates Islamic, another major player, also made waves with its USD 500 million Sustainability-Linked Financing Sukuk in September 2025, that was actually the world’s first of its kind issued by any bank. That deal was also oversubscribed and attracted strong global participation. Its profit rate was narrowly squeezed to 4.540%, highlighting how much demand there is for sustainability-linked Islamic financial products in the region.

Beyond the banks, Nasdaq Dubai continues to be a key hub for Islamic finance in the UAE. Recently, it welcomed listings like a USD 1.2 billion Sukuk by the Islamic Development Bank, which keeps on mobilizing international capital to fund sustainable development projects across its member countries.

All this momentum really reflects the UAE’s broader ambitions under its Net Zero 2050 Initiative and the supportive regulatory environment developing in the region. Industry watchers point out that structures like these, which explicitly link financial outcomes to sustainability performance, are an important innovation. They offer investors a transparent and responsible way to support initiatives aimed at fighting climate change and achieving ESG goals.

DIB’s latest Sukuk proves that Islamic finance is evolving, it’s moving beyond just compliance to include impact and accountability rooted in faith-based principles. And the strong interest from global investors really affirms growing confidence in institutions that prioritize sustainability, transparency, and disciplined execution, qualities that are increasingly important in today’s climate-conscious capital markets.

As the UAE and its leading financial players deepen their commitment to sustainable finance, these developments are likely to push the region toward the forefront of global Islamic sustainable finance innovation. DIB’s issuance not only cements its leadership but also indicates that the market is maturing, where environmental and social goals are now a key part of financial performance and investor appeal.

Source: Noah Wire Services