The United Nations Environment Program Finance Initiative (UNEP FI), the Islamic Development Bank (IsDB), and The General Council for Islamic Banks and Financial Institutions (CIBAFI) joined forces to enhance climate knowledge for the Islamic banking sector.
The report titled “Mobilising Islamic Banking for Climate Action” was launched at the 2nd Middle East and North Africa (MENA) Regional Climate Week, hosted in Riyadh by the Kingdom of Saudi Arabia and the United Nations Framework Convention on Climate Change (UNFCCC).
The MENA region is confronted with more extreme heat and less precipitation with every degree of global temperature rise. Operating in a region that’s highly vulnerable to the physical impacts of climate change, financial institutions in the region are both exposed to high risks but also presented with great investment opportunities in the transition to a low-carbon economy.
As an important part of MENA and the global finance industry, Islamic finance has the potential to be a significant driver of climate finance in the region. In addition to regulatory imperatives and financial rewards, there also are clear moral reasons for incorporating climate action into Islamic banks’ business strategies. However, many Islamic finance institutions remain in the early stages of assessing and mitigating climate risks.
This joint knowledge product provides an overview of the current state of climate action in Islamic finance, and a summary of the Islamic basis for action on climate change. It also includes a clear pathway and recommended actions for Islamic banks and regulators in the region to develop an Islamic finance sector that is both resilient and proactive in the face of a changing climate. Five pillars of action are outlined for banks, namely: (i) Climate leadership; (ii) Strategic climate management; (iii) Climate-related operational integration; (iv) Climate performance and accountability; and (v) Collaboration and exchange on climate resilience.
IsDB played a key role in both the report development and the MENA Week launch event. Dr. Daouda Ndiaye, Manager, Climate Change and Environment Division and Dr. Bradley Hiller, Lead Climate Change Specialist, represented IsDB at the launch event.
Looking forward, the IsDB hopes that the knowledge product will support Islamic banks in the region on their respective climate journeys, whether they are well advanced or just beginning. The IsDB stands ready to support such endeavors and is grateful for its ongoing partnerships in the region, including with UNEP FI and CIBAFI.
IsDB is dedicated to advancing Islamic finance for climate action and has committed to a 35 percent climate finance target by 2025.