Green Sukuk Climate Financing Arena: A Stakeholder-Centric Framework for ESG (GRI &TCFD) Alignment & SDG Compliance

Submission Type

Paper Presentation

Abstract/Description

Purpose

This study examines the evolving role of Green Sukuk in climate financing through the lens of SDGs, proposing an SDG-compliant stakeholder framework to enhance transparency and market competitiveness. With particular focus on the GRI-TCFD standards, this research aims to analyze the strategic advantages offered by aligning Islamic financial instruments with international ESG guidelines.

Benefits of Research

Quantifying the tangible benefits of Green Sukuk—such as lower issuance costs and higher investor demand—this research also identifies intangible advantages, including increased investor confidence and global credibility for Islamic finance markets. Addressing these components offers insights into how compliance with international standards can improve the financial positioning of Green Sukuk, attract a wider investor base, and solidify the reputations of participating IFIs.

Complexities, Challenges, Threats, & Opportunities

While the Green Sukuk market expands, diverse Shariah interpretations across jurisdictions create complexities, raising compliance costs by 10–15% due to the need for multiple certifications. Despite this, significant opportunities exist to leverage Green Sukuk for impactful climate action and alignment with SDGs, as well as to bridge financing gaps for sustainable projects in emerging markets.

Meta Analysis Findings

Quantitative and qualitative analyses reveal a 20% potential increase in issuance through standardized Shariah compliance and ESG reporting, with Green Sukuk providing returns of 3.5–4.8% annually, competitive with traditional Sukuk. The study highlights the added compliance costs associated with GRI-TCFD, affecting market scalability yet showing potential for a unified framework to attract substantial investments.

Recommendations

To streamline Green Sukuk issuance, regulatory bodies should standardize Shariah compliance criteria, while IFIs and Shariah Boards are encouraged to integrate GRI-TCFD standards for enhanced market acceptance. This framework would benefit investors, corporations, and consumers by fostering trust and broadening access to Shariah-compliant, ESG-friendly investments.

Implications

The findings underscore crucial financial, economic, social, legal, cultural, and regulatory implications of harmonizing Green Sukuk with global ESG frameworks. This alignment promises not only strengthened compliance but also enhanced competitiveness for Islamic finance in the global climate financing arena.

Keywords:

Green Sukuk, Climate Financing, ESG, SDG Compliance, Islamic Finance, GRI, TCFD, Sustainable Finance, Islamic Financial Institution (IFI), Shariah

JEL Classification Codes:

G15, G23, G28, Q01, Q54, O16

Keywords

Green Sukuk, Climate Financing, ESG, SDG Compliance, GRI, TCFD

Location

Movenpick Hotel

Session Chair

Dr. Muhammad Ayub, Professor, Riphah University, Islamabad

Session Moderator

Dr. Shafiullah Jan, Head Center for Excellence in Islamic Finance, Institute of Management Sciences (IMSciences)

Start Date

3-12-2024 4:10 PM

End Date

3-12-2024 5:30 PM

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Dec 3rd, 4:10 PM Dec 3rd, 5:30 PM

Green Sukuk Climate Financing Arena: A Stakeholder-Centric Framework for ESG (GRI &TCFD) Alignment & SDG Compliance

Movenpick Hotel

Purpose

This study examines the evolving role of Green Sukuk in climate financing through the lens of SDGs, proposing an SDG-compliant stakeholder framework to enhance transparency and market competitiveness. With particular focus on the GRI-TCFD standards, this research aims to analyze the strategic advantages offered by aligning Islamic financial instruments with international ESG guidelines.

Benefits of Research

Quantifying the tangible benefits of Green Sukuk—such as lower issuance costs and higher investor demand—this research also identifies intangible advantages, including increased investor confidence and global credibility for Islamic finance markets. Addressing these components offers insights into how compliance with international standards can improve the financial positioning of Green Sukuk, attract a wider investor base, and solidify the reputations of participating IFIs.

Complexities, Challenges, Threats, & Opportunities

While the Green Sukuk market expands, diverse Shariah interpretations across jurisdictions create complexities, raising compliance costs by 10–15% due to the need for multiple certifications. Despite this, significant opportunities exist to leverage Green Sukuk for impactful climate action and alignment with SDGs, as well as to bridge financing gaps for sustainable projects in emerging markets.

Meta Analysis Findings

Quantitative and qualitative analyses reveal a 20% potential increase in issuance through standardized Shariah compliance and ESG reporting, with Green Sukuk providing returns of 3.5–4.8% annually, competitive with traditional Sukuk. The study highlights the added compliance costs associated with GRI-TCFD, affecting market scalability yet showing potential for a unified framework to attract substantial investments.

Recommendations

To streamline Green Sukuk issuance, regulatory bodies should standardize Shariah compliance criteria, while IFIs and Shariah Boards are encouraged to integrate GRI-TCFD standards for enhanced market acceptance. This framework would benefit investors, corporations, and consumers by fostering trust and broadening access to Shariah-compliant, ESG-friendly investments.

Implications

The findings underscore crucial financial, economic, social, legal, cultural, and regulatory implications of harmonizing Green Sukuk with global ESG frameworks. This alignment promises not only strengthened compliance but also enhanced competitiveness for Islamic finance in the global climate financing arena.

Keywords:

Green Sukuk, Climate Financing, ESG, SDG Compliance, Islamic Finance, GRI, TCFD, Sustainable Finance, Islamic Financial Institution (IFI), Shariah

JEL Classification Codes:

G15, G23, G28, Q01, Q54, O16