Climate change and green Sukuk

Climate change threat is multidimensional with systemic environmental, social and economic impacts. Countries of the global south are the ones that are most affected although their contribution in terms of GHG emissions has been minimal. The financial sector is naturally exposed to climate change physical and transition risks through the financing and insurance activities. “Business as usual” is not an option anymore.

In addition to the risk perspective, climate change presents opportunities for participative finance to play an important role in transitioning to a green economy. International climate funds, international standards and blended finance mechanisms are important levers to consider.

In the global south context, embracing climate finance is not without challenges. Indeed, financial institutions have to operate in nascent or inexistant regulatory framework in relation to climate finance, they have to integrate climate change considerations into their governance systems and, finally, they need to build capacity internally and educate the market. Most importantly, financial institutions have to mobilize the energies of internal and external stakeholders around designing and implementing the right strategies.