Exploring the main determinants of green and sustainable sukuk issuance: a neo-institutional perspective

Purpose This study aims to examine the main factors that influence the issuance of green and sustainable sukuk (GSS). Specifically, it investigates how institutional, environmental, and economic pressures shape GSS issuance across countries that have developed this market. Design/methodology/approach The study uses panel data from all 12 countries that issued GSS during the period 2017–2024. Drawing on neo-institutional theory, it examines five groups of determinants of GSS issuance: institutional quality, which represents coercive pressures; CO2 emissions and urbanization, which represent normative pressures; and foreign direct investment (FDI) and gross domestic product (GDP), which represent mimetic pressures. The empirical analysis employs the two-step System Generalized Method of Moments (System GMM) estimator to account for the dynamic nature of GSS issuance and potential endogeneity. The robustness of the results is further assessed using the Double Machine Learning (DML) approach. Findings The findings show that coercive pressures and some mimetic pressures are more relevant to GSS issuance than normative pressures. Institutional factors, including government effectiveness, regulatory quality, rule of law, and political stability, have positive and statistically significant effects on GSS issuance, which highlights the importance of a strong institutional framework for GSS market development. In contrast, normative pressures, measured by CO2 emissions and urbanization, are not statistically significant. This suggests that environmental and urbanization pressures alone do not directly stimulate GSS issuance. Among the mimetic pressures, FDI has a positive and robust effect on GSS issuance, whereas GDP has a positive but statistically insignificant effect. Practical implications The findings provide important implications for policymakers seeking to develop GSS markets. The results suggest that strong institutional and regulatory conditions are important for supporting GSS issuance. Policymakers should therefore strengthen government effectiveness, regulatory quality, the rule of law, and political stability to create a favorable institutional environment for GSS markets. Policies that attract foreign investment may also support GSS market development. By contrast, environmental pressures, such as CO2 emissions and urbanization, do not appear to be sufficient on their own to stimulate GSS issuance. These findings suggest that environmental objectives should be supported by appropriate institutional and regulatory frameworks. Originality/value The originality of this study lies in its cross-country analysis of the determinants of GSS issuance. To the best of our knowledge, it is one of the few empirical studies to jointly examine institutional quality, CO2 emissions, urbanization, FDI, GDP as potential determinants of GSS issuance within a neo-institutional framework. By integrating these institutional, environmental, and economic factors into a unified framework, the study extends the existing literature and provides new empirical evidence on the factors associated with the development of GSS markets across countries that have issued these instruments.