Posted on November, 20 2024

Finance has been at the heart of COP29. And specifically, the urgent need to close the huge climate funding gap.

While public climate finance needs to rise rapidly to accelerate mitigation and adaptation, this alone will never be enough. The world must leverage new sources of commercial and private finance, with structuring approaches like blended finance playing a key role to unlock such finance. Further, efficacy of solutions for the Global South will be enhanced when indigenous and responsive to the socio-economic circumstances and operating environment of these countries.

And that’s what the innovative Global Islamic Finance Program for climate, nature and development (GIFP) - which was showcased at an event in the UAE Pavilion at COP29 - is seeking to do.

The modern Islamic finance industry has thrived since its evolution from the 1970s and amounted to almost US$3.4 trillion globally as of 2023. However, Sustainable Islamic Finance accounts for just a tiny fraction of total Islamic Finance - only US$100 billion (including US$10 billion in Islamic Climate Finance) between 2010 and 2020.

Conventional sustainable finance amounted to US$40 trillion over the same decade – underlining the opportunity that exists for Islamic Finance to significantly scale up investment in sustainability and help close the funding gap for climate-nature-development goals. Especially, given Islamic Finance’s focus on positive impact, equity, human welfare and development.

GIFP brings to fruition the ethos and values of Islamic Finance through a well-designed, practical, global platform.

“Islamic Finance is a natural partner for the sustainability agenda and can help divert capital flows towards human activities with a positive environmental and social impact, and away from those with a negative effect,” said Dr Adnan Aziz, GIFP, Chief Program Officer, during the event. “Yet, no dedicated truly global Islamic initiative for investments in solutions to our climate-nature-development challenges has been developed to ensure inclusivity – until now.”

The GIFP has been developed with this in mind and to seize the opportunities to invest in projects that will build resilience by the catalyzing partner, WWF, and the co-creating partners, including HSBC, Standard Chartered Saadiq Islamic, the Securities Commission of Malaysia, and Simmons & Simmons.

During his keynote speech to open the event, Dr Adil Najam, President of WWF International, highlighted that the significance of Islamic finance goes beyond its financial capacity – it offers a unique perspective grounded in values and purpose. Drawing on examples like waqf, a charitable endowment in Islamic law, he illustrated how traditional Islamic financial principles can be leveraged to benefit people and planet.

“I have been attending climate conferences for decades. At first we were talking about needing millions of dollars, then billions and now trillions: the gap just keeps getting wider with more and more zeroes needed to close the gap,” said Najam. “Islamic Finance can be leveraged to help fill the gap and play a much greater role in driving sustainability and climate resilience.”

Following the opening address, a panel of experts  –  comprising Dr Issa Faye, Director General, Global Practice & Partnerships, IsDB; Fatma Çınar, Deputy Secretary General, TKBB; Omar Shaikh, Managing Director, Global Ethical Finance Initiative; Secil Yildiz, Executive Vice-President, Sustainability & Impact, Development & Investment Bank of Türkiye; and Aaron Vermeulen, WWF Global Finance Lead - discussed the GIFP and the importance of developing bankable projects, including one example on sustainable coffee cultivation in Turkey. Combined with a blended finance approach, Islamic Finance can help address the funding gap while delivering measurable impacts.

The discussion also called attention to the need to create Islamic financial products tailored to the specific needs of the Global South, driven by values and a balanced view of wealth. With Muslim-majority countries accounting for a significant portion of the world’s population, deploying Islamic capital effectively is not just an opportunity but a necessity for achieving equitable and sustainable development as well as accelerating efforts to adapt to climate change and reverse nature loss.

As Dr Issa Faye said, “We need to be innovative in finding new finance solutions. Islamic finance can be one of those innovative vehicles.”

While Fatma Çınar underlined the interest in the GIFP, saying, “Every stakeholder we talked to in Turkey was excited about the program as it offers a very unique opportunity for stakeholders in the Global South."