Managing climate change : role of Islamic finance

Environmental protection and sustainability fits in nicely with the Islamic finance agenda that seeks to enhance the general welfare of society. Organizational goals such as the protection of the planet and the environment, climate management and adaptation clearly conform to the goals of the Sharī‘ah as well as with the UN-mandated Sustainable Development Goals (SDGs). This paper takes the argument further and seeks to demonstrate how Islamic finance can significantly contribute to the global search for climate finance solutions. Islamic social funds can potentially play a significant role in absorbing the incremental costs with clean technologies where subsidies are not forthcoming to absorb the same. For zakāt funds to be used for the purpose, an additional condition needs to be met. The beneficiaries must be poor. The institution of waqf, along with zakāt and ṣadaqah, can certainly play a role in coping with humanitarian crises resulting from climate change. Awqāf, like many foundations may directly engage in the provision of goods and services related to mitigation and adaptation. Awqāf may also be dedicated to research and development and towards increasing consumer awareness and creating stronger support for action to mitigate climate change. Similar to SRI Funds, the Islamic Green Funds and similar to Green Bonds, the Islamic Green Ṣukūk can contribute significantly to the agenda of climate change.