Green sukuk impact: stock market reactions and SDG contributions of pioneering issuers

Purpose This study aims to explore the stock market’s reaction to the issuance of the world’s first green sukuk and to investigate its contributions towards achieving Sustainable Development Goals (SDGs). It seeks to determine whether such financial instruments influence investor behaviour and how their impact varies across different SDG-linked sectors. Design/methodology/approach An event study methodology was used to assess stock market reactions to the green sukuk issuance on 27 July 2017, using a data set of 253 observations from the top 100 constituents of the FTSE Shariah All-World Index. Additionally, a qualitative analysis was also conducted to evaluate how companies with significant market responses conform with relevant SDGs. Findings Only 16% of the sampled companies exhibited statistically significant reactions to the green sukuk issuance. Pre-event movements indicate possible information leakage, while post-event adjustments extended up to 10 days, suggesting delayed investor responses. Companies associated with SDG 7 (affordable and clean energy) and SDG 13 (climate action) experienced more positive abnormal returns, particularly in the telecommunications and digital infrastructure sectors. Meanwhile, companies linked to SDG 6 (clean water) and SDG 15 (life on land) experienced more muted or negative responses. The presence of significant pre- and post-event price movements suggests potential information leakage and delayed market adjustment. Research limitations/implications This study focuses on a single issuance and a short-term event window, which may limit the generalizability of results. Future research should analyse multiple green sukuk issuances across diverse markets and explore long-term and behavioural impacts. Practical implications The findings suggest the need for broader sectoral inclusion and standardized frameworks in green sukuk issuance. Policymakers and Islamic finance stakeholders should enhance transparency and promote regulatory incentives to boost investor confidence. Social implications Green sukuk demonstrates symbolic and financial potential to mobilize Islamic finance towards achieving the SDGs, especially when linked with digital and climate-resilient sectors. Expanding their application could help channel capital to more diverse sustainability goals. Originality/value This study provides empirical evidence on stock market responses to green sukuk, offering new insights into its financial and sustainability impact within the Islamic capital market.