Green Sukuk Research Articles

Challenges and opportunities of SRI sukuk toward financial system sustainability: a bibliometric and systematic literature review

PurposeThe main objective of this paper is to analyze works of literature on SRI sukuk to highlight the potential for these kinds of instruments in financing more sustainable financial systems (SFSs). The analysis mainly accentuates a dearth of knowledge on the various challenges and opportunities in the realm of SRI.Design/methodology/approachThis paper pioneers the bibliometric and systematic literature review of the development of the SRI sukuk from 2016 (the first available year in the field) to and 2021.FindingsThe study findings highlighted several pertinent SRI issues: the lack of standardization due to the different interpretations of Shariah and green, the lack of retail investors, which inevitably produce a lack of liquidity in the secondary market, thus limiting their growth, its funding allocation’ close resemblance to green financing, and the role of Malaysia and Indonesia as global sustainable financial hubs to stimulate the development of Shariah-compliant sustainable instruments and contribute to the international debate about the building of a global standardized framework related to sustainable investments.Originality/valueThe integration of the environmental principles of a green bond with the Shariah-compliant financial structure of a sukuk, the SRI sukuk, represents a vital crossroad in both sustainable and Islamic finance. Social-impact sukuk and green sukuk is an undervalued instrument that could play an important role in financing a more sustainable economic and financial system, including Islamic investing. This kind of instruments, which is based on a “pay for success” principle in the conventional layout, perfectly fit with the profit-and-lost sharing’s (PLS's) ethicality, the sustainability principles of Islamic finance and the religious principles of Islamic law.

THE ROLE OF GREEN SUKUK IN REALIZING THE SUSTAINABLE DEVELOPMENT GOALS 2030 AGENDA

The purpose of this study is to investigate green sukuk and its influence on the implementation of the Sustainable Development Goals (SDGs), as well as to identify and analyze the factors that have an effect on those activities. This research is carrying out a systematic literature review in order to locate, examine, and analyze any and all relevant research that is currently available in order to provide answers to the research questions. In spite of the fact that it is such a great innovative investment instrument and that it is doing well with getting positive response from the market, green sukuk still face many challenges, and there is still room for improvement to bring up its potentials and maximize its social impact for the most recent SDGs agenda. Green sukuk have developed into Islamic financial instruments that are in demand by the public because of their ethical responsibility towards the environment. Green sukuk provides benefits not only for all stakeholders involved in it but also for the environment. The government, as a regulator, is expected to be able to provide support through various strategic policies to support green sukuk, such as by developing a more substantial legal basis and incentives in the form of tax reductions, as well as strengthening information and literacy to the public about green sukuk.

The Challenges of Green Sukuk Policy Implementation for Achieving Sustainable Environment

In this decade, the entire world realized that a healthy environment is needed for mitigating catastrophic issues created by the nature. Thus, the green bond was introduced in 2007, and the green Sukuk was issued in 2017. Malaysia took the pioneering role for issuing green Sukuk and issued ten green Sukuk within 2020. Furthermore, Indonesia has taken initiative for issuing five green Sukuk in 2018. Besides that, Saudi Arabia issued two green Sukuk and the United Arab Emirates also issued two green Sukuk in 2019. As the green Sukuk was issued in various sectors which created a curiosity to know, what are the policies were created, how did they apply and how do they impact on the environment. Accordingly, the study aims to find out implemented policies to mitigate challenges for issuing all green Sukuk in four nations. So, this study was conducted through case studies on green Sukuk by analysing available data from the green Sukuk issuers, ministries, published literature and others. The study found that green Sukuk issuers were implemented the same policies that applied to issue green bonds and still remain a great challenge. It is because, every nation has a different geographical atmosphere, culture, religion and human behaviours. In addition, the study also found that all of the green Sukuk-issued projects were selected to reduce air pollution. Therefore, further research is needed on policy and project creation according to the nation for controlling other factors, such as; pollution (water, land, and sound), deforestation, and others.

Corporate green Sukuk issuance for sustainable financing in Indonesia

Green Sukuk is a source of financing that supports the SDGs. Climate change, the growth of the Islamic finance industry, and the rise of socially responsible investing could make green Sukuk a vital tool for financing clean energy and sustainable infrastructure projects. Many studies have identified its potential and advantages. However, no companies have issued green corporate Sukuk in Indonesia yet. The purpose of this study is to determine the potential and main problems of issuing corporate green Sukuk in Indonesia, along with possible solutions and strategies. The research method used is the analytic network process (ANP). In this study, respondents are experts in the field of green Sukuk (involved experts were from academia, project actors, and regulators). The results of the study indicate that the first destination that has the potential to be financed with green corporate Sukuk is renewable energy. At the same time, the main problem is the lack of understanding from market participants. In terms of solutions, the incentive provided by the government is the best to encourage the issuance of green corporate Sukuk. Moreover, the first strategy is to issue green corporate Sukuk with ijarah contracts. From the research results, it is hoped that the Indonesian government can be more aggressive in providing incentives to green project actors.

Opportunity for Islamic Finance in Blockchain Solutions for Climate Change: A Case Study of DCarbonX Model

Abstract: The climate change is one of the biggest problems that humanity is facing and there is a dearth of solutions in tackling this grave impediment to the long-term sustainability of our planet. Accountability, greenwashing, traceability, impact assessment and trading of carbon credits are unresolved issues in the ESG sector. The paper aims at identifying the opportunity for Islamic finance by reviewing the novel business model of DCarbonX, a Decentralized Application (DApp) that solves the enumerated problems using NFTs on the blockchain platform through smart contracts. The paper combined the inductive method and descriptive approach to describe the functional architecture of DCarbonX, while elaborating on its salient features and highlighting opportunity in sustainable finance for Islamic finance players. The paper encompasses a study on the applications of DApps in DeFi, Web 3.0 and ESG, among other areas and gives a comparative analysis of blockchain platforms for DApp development. The paper concluded that there is a harmony in the SDGs and the primary goals of Maqasid al-Shariah. The blockchain platforms can be utilized to develop DApps for solving the issues related ESG and climate change. The Islamic finance can seize the untapped opportunity in blockchain based solutions for climate change by launching the DApps in the domains of Capital Market (like green Sukuk), Embedded Finance, Takaful, NFTs, RegTech, and SupTech. Keywords: Blockchain, DApp, DCarbonX, Climate Change, Carbon Market, NFT, Islamic Finance.

Green Sukuk, Environmental Issues and Strategy

The leaders and policymakers realize that our home planet has been endangered by our hands. The industrialization era had a severe impact on climate change; therefore, the infrastructure project should be friendly with the environment. The green Sukuk concept is ideal to help the Sukuk issuances tackle environmental issues as well as reduce Green House Gases (GHG) carbon emission. However, there are so many environmental issues that revolve in Malaysia besides the environmental project should be beneficial the most to the country (environmentally) and the people. This paper attempt to identify the current and unsolved environmental issues in Malaysia; the role of Green Sukuk (financially) to assist the environmentally friendly project; and strategy or initiatives that can be taken by the government to push the green Sukuk issuance to help the government to cope with the environmental issues as well as reduce climate change.

Integrating Green Sukuk and Cash Waqf Linked Sukuk, the Blended Islamic Finance of Fiscal Instrument in Indonesia: A Proposed Model for Fighting Climate Change

Indonesia is the first global and retail sovereign Green Sukuk issuer in the world. Since its first issuance in 2018, Green Sukuk for four years has been issued seven times to finance and/or refinance the projects/programs of Eligible Green Sectors. Then, in order to support the development of social investment and productive waqf, the Government of Indonesia (GoI) also issues Cash Waqf Linked Sukuk (CWLS) by blending Islamic finance and impact investing for the Sustainable Development Goals (SDGs). CWLS is the first blended Islamic finance for the fiscal instrument in Indonesia which integrates Islamic commercial finance and Islamic social finance. In order to tackle climate change, this study promotes the integration between Green Sukuk and CWLS as well as adopting the Esham concept toward Perpetual Green CWLS as a new green financing alternative. This collaboration can be an innovative one in the future as a fiscal funding source to fight climate change which today becomes the development agenda priority in line with the intensified intension of extraordinary weather. Absolutely, climate change has brought a high-cost impact on vulnerable and low-income people. Along with efforts to the SDGs and Paris Agreement targets achievement, a financing gap holds in the route to tackle climate change. Therefore, by using a literature study on the best practice of Green Sukuk and CWLS in publications mainly sourced from the Ministry of Finance (MoF) Republic of Indonesia, this conceptual paper focuses on three issues, namely: (1) Describing Indonesia's sovereign Green Sukuk; (2) Describing the CWLS; (3) Explaining a proposed Perpetual Green CWLS as Islamic green financing alternative.

Green Sukuk Investment: Student's Role And Interest In Realizing A Golden Indonesia 2045

Green sukuk is an environmentally sound investment, this investment was first issued in November 2019 with serial number ST006. Furthermore, green sukuk reopened in November 2020 with serial number ST007. Through the issuance of green sukuk, the government can finance green projects to reduce climate change, such as reducing greenhouse gases. The research method used is a qualitative method. The purpose of this study is to determine the role of green sukuk in realizing Indonesia gold in 2045. The subjects of this study are students who are less aware of the existence of green sukuk and investors who have participated in green sukuk. Through this research, it will be known the role of green sukuk in realizing Indonesia gold in 2045. The results of this research are that not many people know about the presence of green sukuk so it needs to be studied more deeply. Students who have no/little income cannot participate in green sukuk investment. For that students need to plan capital for the next few years to invest. Thus, students as part of society are ready to contribute through green sukuk to realize Golden Indonesia 2045 with all the potential that exists.

Mobilising Islamic Funds for Climate Actions: From Transparency to Traceability

ABSTRACT Mobilising sufficient financial resources for low carbon development has led to countries integrating green bonds into their sovereign bond portfolios. However, questions remain over the efficacy and integrity of these financial instruments. Climate bonds impose additional accountability requirements that connect the money raised with actions to reduce atmospheric greenhouse gases. These requirements are given further prominence in financial instruments intended to fund climate change while complying with core Islamic values, such as the green sukuk, a Sharia-compliant alternative to traditional fixed-income investments to fund environmental projects. Climate-related financial instruments require tracking the flow of money through chains of decisions within and between organisations. This research explores how the Indonesian government, as the first sovereign state issuer of green sukuk, attempted to connect money raised from Islamic capital markets to actual reductions in greenhouse gas emissions. This required the creation of new accounting objects that connected financial data with GHG accounting at a granular level. Our analysis demonstrates how the existing accounting systems were repurposed by constructing green sukuk accounting objects that sought to connect equivalent disbursements of money with social and environmental benefits, primarily represented by reduced GHG emissions.

Islamic Banking Under Vision of Green Finance: The Case of Development, Ecosystem and Prospects

The Central Asia-Pacific Conference of the Pakistan Securities Commission - World Bank Group IOSCO Asia Pacific specifically examined "Bridling Islamic Finance for a Green Future" the capability of Islamic money to help environmental change relief and transformation endeavors, including the utilization of Islamic monetary instruments to fund green exercises, including sustainable power, regular assets and energy proficiency projects. It inspected the political, administrative and institutional components fundamental for the feasible utilization of Islamic means to battle environmental change. Furthermore, the meeting introduced a progression of contextual investigations on the new utilization of green sukuk to back projects in Pakistan and Indonesia, as well as the conceivable replication of these instruments in other endlessly developing business sectors. This report intends to sum up the substance of the conversations examined at the gathering. The innovative methodology no longer works inside the ongoing peculiarity of environmental change. While it has been some time since the world has perceived the significance of tending to environmental change, ongoing environment occasions have featured the requirement for pressing activity. The monetary area assumes a fundamental part given how much monetary assets expected to help environmental change alleviation and variation drives. Given the tension on open spending plans, activating confidential area finances through creative instruments becomes fundamental. There are serious areas of strength for a between Islamic money and green money. The meeting featured the genuine hole between Islamic money and green money, or all the more by and large economical money. One issue that has been featured all through has been the normal fit between Islamic money and green money considering its fundamental standards of shared hazard and manageability, which could demonstrate pivotal to supporting speculations to battle environmental change, which frequently include inventive exercises and advances. Islamic money has encountered fast development, and today absolute Sharia-consistent resources are assessed at around $2 trillion. This offers huge potential to help the environmental change plan. Decrease green financial advancement in endless monetary areas, for example, transport and energy squander. A reasonable message from the meeting was that the greener the economy, the better the environmental change peculiarity will be made do. This prompts the quest for adjusted monetary improvement programs that fit well with the essential standards of Islamic funding, which depends on the idea of Maqasid al-Shariah. Development in structures means a lot to expand the degree of subsidizing for projects that benefit the climate. The UN Commission on Trade and Development (UNSTAD) gauges that by 2030, a yearly speculation of $5 trillion to $7 trillion will be expected to support the 17 Sustainable Development Goals (SDGs) in non-industrial nations. There should be a drawn-out multilateral way to deal with tending to environmental change, and Islamic money can make a critical commitment by offering different funding arrangements and taking advantage of a more extensive financial backer base. Islamic green money requires a steady biological system to become quicker. The green security market has filled dramatically lately, and Islamic money has the chance to profit by this worldwide pattern. There is a misinterpretation that green bonds are more complicated and costly to issue, and this should be remedied. The green security market is an illustration of how the ordinary capital market has moved its concentration to tending to environment worries in monetary and speculation matters. The Islamic capital market section of Follows is reasonable for the distribution of the green sukuk and, all the more as of late, for the sovereign green sukuk. There are a lot of cases on how Sukuk has been utilized to help ensured green tasks. Key perspectives stick out, for example, working with factors with the execution of lines, the arrangements gave, as well as the involvement in the utilization of sukuk. Principles and rules as key structure blocks for Islamic Green Finance. The fundamental structure and environment are possibly significant drivers for defeating Islamic money and green industry. Controllers are looking for a superior comprehension of the key factors that work with the capital market environment for manageable supporting. This incorporates the improvement of manageable resource classes like green securities/sukuks, assets and records. The gathering featured a portion of the structure impedes that could end up being useful to make ready for Islamic green money. This incorporates examining norms and rules, as well as establishing a climate for Islamic green money, for example the job of global foundations and controllers in making the essential environment.

Green Sukuk For Sustainable Development Goals in Indonesia: A Literature Study

Realizing green economy requires extensive considerable funding, especially for renewable energy projects. This problem then encourages stakeholders to create financial instruments that focus on funding projects that are following the Sustainable Development Goals (SDGs). One of the financial instruments developed is green sukuk, an innovative form of environmentally friendly funding. The results showed that the green sector financed by sovereign green sukuk funds was following maqahid shariah in the al-kulliyah al-khamsah frame, namely guarding religion (hifdzu ad din), guarding the soul (hifdzu an Nafs), guarding reason (hifdzu aql), guarding offspring (hifdzu an nasl) and guarding property (hifdzu al Maal). The potential for green sukuk issuance can be seen from the increasing awareness of investors about the importance of environmental conservation. The involvement of influential entities such as the government and the United Nations in the development of green sukuk indicates the potential of this instrument. The challenges of issuing green sukuk include a higher risk profile because it involves high, new, and sophisticated technology. In addition, green sukuk is not a simple transaction because it involves a large number of funds, so that checks and balances are needed and proper monitoring. In order to achieve the Sustainable Development Goals, green sukuk can be used to conserve the environment and natural resources, save energy, promote the use of renewable energy and reduce the impact of greenhouse gas emissions.

Did green debt instruments aid diversification during the COVID-19 pandemic?

Faced with a persistent pandemic, investors are concerned about portfolio diversification. While the literature on COVID-19 has evolved impressively, limited work remains on diversification opportunities. We contribute to the literature by exploring the volatility and co-movement of different sovereign debt instruments, including green sukuk, sukuk, bond and Islamic and conventional equity indices for Indonesia. Our results consistently point towards increased asset co-movement and weak profitability during the pandemic. Interestingly, sukuk and green sukuk have a 14% correlation with stocks, suggesting potential diversification prospects in times of extreme shocks.

Revisiting the role of international climate finance (ICF) towards achieving the nationally determined contribution (NDC) target: A case study of the Indonesian energy sector

Climate change has impacted development progress and increased global inequality. Therefore, all emitters, both developed and developing countries, must implement climate change mitigation and adaptation actions. Indonesia is one of the developing countries that signed the Paris Agreement. In its NDC document, Indonesia has pledged to reduce greenhouse gases emission by 29% using domestic resources (unconditional) and 41% with international support (conditional) from the business as usual (BAU) scenario by 2030. This commitment gives Indonesia the right to take advantage of various types of support, including ICF opportunities offered by the ADB through the non-UNFCCC financial scheme and the Global Green Growth Institute through the UNFCCC financial mechanism. This paper explores to what extent ICF supports the achievement of Indonesia’s Nationally Determined Contribution (NDC) target. The study uses qualitative analysis to provide a general overview of ICF in Indonesia, its climate finance strategies, and the case study of the energy sector. The study finds that ICF in Indonesia continues to develop, albeit with many limitations. Several ICF channels could be utilized more optimally such as, loan and grant instruments. Indonesia cannot rely solely on international support to meet its enormous climate finance needs; it must develop innovative financing through various instruments, such as green sukuk. ICF also plays a role in facilitating the energy transition from coal-based to renewable energy sources and increasing energy efficiency.

Analisis Analisis Peran dan Tantangan Sukuk Hijau Bagi Ketahanan Perubahan Iklim Pada Wilayah Rentan Selama Pandemi Covid-19

Sovereign Sukuk has become a promising instrument for a country to overcome difficulties in financing government projects. Sukuk is a financial instrument for the Islamic capital market with a low level of risk. Green sukuk becomes popular since most of the conventional investment activities ignore the environment aspect. Starting in 2018, Indonesian government has developed a green sukuk scheme as a financing instrument for environmentally friendly projects to reduce the impact of global climate change. This study aims to analyze the role and challenges of green sukuk for climate change resilience in highly vulnerable areas during the Covid-19 crisis. This study is conducted through a qualitative method with a phenomenological approach. Data collections are carried out through literature studies and case studies on some climate projects in highly vulnerable areas in Indonesia. The results show that during the Covid-19 pandemic, green sukuk has contributed an important impact for climate change resilience in highly vulnerable areas. There are some challenges in the development of green sukuk. The lack of awareness of social risks as well as environmental risks have become main challenges. In the future, the decision policy makers should provide greater incentives and a more inclusive legal umbrella for green financing schemes.

The Nexus of Green Sukuk and the Cryptocurrency and Commodity Markets

The Nexus of Green Sukuk and the Cryptocurrency and Commodity Markets

Ecologies of green finance: Green sukuk and development of green Islamic finance in Malaysia

In this paper, we analyse the recent development of green sukuk (often referred to as an Islamic green bond) since its issuance in Malaysia in 2017, and critically evaluate whether it addresses some of the existing contradictions of green finance. Using a financial ecologies approach, we examine Malaysia's configuration of green sukuk as drawing from the existing international green bond regime, partnership with the World Bank, and Malaysia's own experience and expertise in Islamic finance, with the objective of building Kuala Lumpur's competitiveness as a global Islamic financial centre. Through documents analysis and interviews with key market actors in Kuala Lumpur and other financial centres, our findings point to the emergent international adoption of green sukuk. While this achieves Malaysia's state-building objectives, specifically through expanding Malaysia's sukuk market and advancing its status as a frontier of Islamic financial innovations, the potential for improving the current green bond regime has been more doubtful. A key limitation is the incorporation of existing Green Bond Principles, which enables not only green sukuk's international acceptance but also renders it susceptible to greenwashing. By examining the intersection of different ecologies of green and Islamic finance, we reveal the contradictions and limitations of green sukuk in contributing to Malaysian state-building and climate action.

Green sukuk – Malaysia surviving the bumpy road: performance, challenges and reconciled issuance framework

PurposeGreen sukuk is a tool to finance climate change which has garnered considerable attention. However, having only recently come into existence has its own set of challenges for this tool that require immediate identification and government intervention to intensify its growth. This study aims to explore the challenges encountered by green sukuk issuers and the structure of a reconciled green sukuk issuance framework to speed up the market’s growth with the right interventions.Design/methodology/approachThe study engaged a qualitative approach via multiple case study interviews with green sukuk issuers and used expert views for data triangulation to generate the findings. A total of four green sukuk issuers participated in the interviews, and for data triangulation purposes, four expert’s opinions and views were considered. The thematic analysis technique is used to report the findings.FindingsIt was revealed that amongst the challenges encountered in the green sukuk market are shoddy green taxonomy, difficulty in identifying green assets, it is time-consuming and costly, no compelling benefits and exposure to higher-risk profiles.Research limitations/implicationsThis study may be influenced by observer error and observer bias. However, the researchers have taken cautious steps to overcome these issues by following strict case study methodology procedures and triangulating the qualitative research findings with views from green sukuk experts. These interventions increased the rigour and trustworthiness of the results.Originality/valueThis study is amongst the pioneer in Malaysia, exploring challenges in the green sukuk market. The results are relevant to governments, regulators, institutions and central banks to structure the right interventions to counter the challenges. Greater government involvement is required to strengthen the green sukuk market and to spearhead the green agenda.

Indonesian Green Sukuk (Islamic Bond) of climate change: A revisited analysis

Significant demand for Indonesian green sukuk did not automatically relate to the performance after issuance. The performance was not good as expected due to macroeconomic factor. Thus, this paper aims to analyze the performance of second green sukuk performance issuance as well as other green bonds in Indonesia. The research employes the descriptive method based on the price movement of green sukuk with others for benchmarking and correlation analysis. The result is different from the previous research such as Euro currency that does not affect Indonesian USD-based green sukuk. In addition, second Indonesian green sukuk is better than the previous one, and local green bond has a better performance than Indonesia green sukuk.

Green Sukuk and Sustainable Economic Development Goals: Mitigating Climate Change in Indonesia

This paper aims to analyze the role of green Sukuk in the goal of sustainable economic development in Indonesia, more specifically in improving climate change mitigation. The research method used is descriptive qualitative. The study found that several renewable energy sectors can be funded by Green bonds/Sukuk, namely: sustainable management of natural resources, energy efficiency, green tourism, resilience to climate change, green buildings, sustainable transportation, sustainable agriculture, and waste management and waste energy. This study also found projects funded by the issuance of State Sukuk to be in compliance with Islamic regulations and have met the criteria for green infrastructure through the stages of project identification, project feasibility preparation and assessment, issuance of Green Sukuk, project implementation and completion, project monitoring and project evaluation.

Credit Risk in Asset Based Sukuk

Purpose: This study is intended to find the credit risks in Asset based Sukuk. The risk of default of Sukuk is called a credit risk. Various risks regarding the Sukuk have been identified.
 Limitations/Implications: The study focuses on the Sukuk issuances of Pakistan. In the current scenario of Pakistan and the need to finance the Diameer Bahasha Dam and Naya Pakistan Housing Program Sukuk is an attractive option. Pakistan has yet not overcome the energy shortfall, and the environment of Pakistan has been effected by the global changes so for the adoption of cleantech green Sukuk is a most appropriate option.
 Originality/ Value: There has been a significant contribution of Pakistan in the issuance of Sukuk activity and there are Sukuk defaults too. Yet, in Pakistan the research on Sukuk has not been done. So this study shall add to the literature in Pakistan.