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'Green sukuk' may support equality in development
Islamic finance and green finance are a natural fit, considering that Islam, the religion behind Islamic finance, emphasizes how humans on earth are born as trustees and stewards (khalifah) and that they must respect nature and all forms of life.
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Emerging from the earth: Mangroves start to grow inside the forest zone on Babo Island in Teluk Bintuni regency, West Papua. (JP/Jerry Adiguna)
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everal of Indonesia’s biggest cities are experiencing adverse impacts of climate change. Yet 24 percent of respondents either refuse to accept the fact that climate change is real, according to a YouGov global public opinion and survey from earlier this year, or simply do not believe that human activity can harm the environment. This state of mind has led slowed down progress in addressing climate change. No wonder an increasing number of news reports express fear of not being able to achieve the sustainable development goals by 2030.
The effects of climate change — such as climbing temperatures, rising sea levels and a range of other negative impacts — will harm the livelihood of people working in agriculture and at the same time puts the fulfillment of basic needs in jeopardy, a World Bank Report of 2018 suggests.
Failing to obtain sustainable income, these people’s livelihoods will be at risk. Addressing these concerns, we have to employ an instrument that does not only deliver, but is also suitable for the targeted population. The word “suitable” refers to various kinds of issues, one of which is religious practice.
As a home to more than 200 million Muslims, Islamic principles guide day-to-day economic and financial decisions made by 87 percent of Indonesians. Violating their belief is equivalent to not acknowledging Pancasila as our ideology. This strong determinant can have a positive impact to how Indonesia addresses climate change and the consequences that come with it.
It did not take long for the government to realize the linkage between Islamic principles and climate change by promoting the world’s first sovereign “green sukuk”, a financial instrument aiming to attract Muslim investors who care about the environment and climate change.
Islamic finance and green finance are a natural fit, considering that Islam, the religion behind Islamic finance, emphasizes how humans on earth are born as trustees and stewards (khalifah) and that they must respect nature and all forms of life.
Recently, the government issued green sukuk worth US$750 million with a five-and-a-half-year maturity period and $1.25 billion worth of regular sukuk with a 10-year tenor. All the money from the green sukuk issuance will be used to finance projects that meet the ecological criteria.
