14 November 2024 – Baku – A high-level panel convened by the Islamic Development Bank (IsDB) at the COP29 highlighted the growing potential of Green Sukuk to increase mobilization of climate finance around the world.

The panel titled “Green Sukuk – Accelerating Momentum for Sustainable Finance” was organized as part of a series of high-level events in the IsDB Group Pavilion at the COP29.

The high-level panelists included Faheen Allibhoy, Managing Director and Global Head of Multilateral Banks & Development Institutions at JP Morgan, Michael Bennett, Head of Derivatives, Structured Finance and Capital Markets at the World Bank Treasury, Dr. Ghiath Shabsigh, Secretary General of the Islamic Financial Services Board, and Constance Chalchat, Chief Sustainability Officer of BNP Paribas. Mohsin Sharif, Senior ESG and Investor Relations Specialist from the Treasury Department of IsDB moderated the discussion.

In their interventions, the high-level panelists acknowledged the growing importance of Green Sukuk as an alternate capital market instrument that is being considered by even non-traditional Sukuk issuers, including sovereigns that are putting in place key building blocks to further diversify their sources of funding as well as the investor base. They added that such issuances would then provide a blueprint for others to follow, including emerging market economies to mobilize much-needed climate finance.

The panelists outlined the similarities between traditional bonds and Sukuk (in terms of the issuance process) and called upon issuers and investors to deepen efforts to expand the market, especially through Green Sukuk to drive higher capital flows towards positive climate action. The additional layer of Shariah-compliance in Sukuk provides more comfort to investors regarding the use-of-proceeds which is critical information for investors who focus on ESG-linked issuances. This was reaffirmed earlier this year when IsDB, along with the International Capital Market Association (ICMA) and the London Stock Exchange launched the Guidance for Green, Social and Sustainability Sukuk for stakeholders in the capital markets.

Noting the ongoing market-wide efforts to define what can be classified as green for Green bonds/Sukuk, the panelists highlighted that further streamlining of such taxonomies would be critical for standardization in the capital markets and this would also complement national and regional initiatives that are being pursued to expand the Sukuk market at the same time. They also called for awareness creation activities to be ramped up to build wider technical understanding of Green Sukuk.

The panelists emphasized that climate-focused strategies and frameworks need to be streamlined at the national level as well as institutional/corporate level. This includes aligning them with the globally accepted Green Bond Principles (published by ICMA) and creating strong governance frameworks and standard operating procedures for capturing and then reporting the use-of-proceeds to investors. Undertaking these efforts would be especially critical for IsDB Member Countries that are on the journey to build capabilities and lay a strong foundation to issue Green Sukuk, as it will enhance their access to markets and unlock more capital towards their climate finance targets.

Closing the high-level event, Dr. Zamir Iqbal, Vice President (Finance) and CFO of IsDB, thanked the speakers for sharing their insights with the audience and reiterated the importance of Sukuk, especially Green Sukuk, for expanding resource mobilization for IsDB Member Countries.