The World Bank has released a report analyzing the role of Islamic finance in sustainable and climate finance markets across member countries of the Organization of Islamic Cooperation (OIC). The report examines trends, instruments, and innovations within OIC nations, using surveys from Islamic finance professionals, halal industry businesses, and interviews with policymakers and private sector participants. Its goal is to identify opportunities and challenges that could help expand the Islamic sustainable finance market, particularly in climate-related funding for mitigation, adaptation, and resilience.
According to the findings, OIC member countries are highly vulnerable to climate change due to their exposure and limited adaptive capacity. Of the 57 OIC members, 54 have ratified the Paris Agreement and 35 have set net-zero targets. However, meeting these goals requires significant investment; the World Bank estimates that over US$1 trillion will be needed by 2050 for climate action in these countries.
The sustainable finance market within the OIC has grown significantly in recent years. Between 2017 and 2024, total sustainable finance raised increased from US$17.8 billion to US$82.3 billion—a compound annual growth rate of 24.4%. Islamic financial instruments accounted for 16% (US$53.9 billion) of this total during that period.
Despite this growth, the market remains at an early stage. From 2017 to 2024, 19 OIC countries issued sustainable bonds while only five issued sustainable sukuk—Islamic financial certificates similar to bonds but compliant with Shariah law. Sustainable sukuk represented 35% of all sustainable bond or sukuk issuances among these nations. While nearly two-thirds of conventional sustainable bonds were labeled as “green,” only about one-third of sustainable sukuk carried this designation. This indicates that sukuk are currently being used for a broad range of sustainability objectives rather than specifically for climate mitigation or adaptation projects.
There is also room for growth in Shariah-compliant syndicated loans: just 8.2% of such loans raised between 2017 and 2024 were compliant with Islamic principles. Given that Islamic banking assets are estimated at US$2.8 trillion, this represents a substantial opportunity for further development.
Efforts by standard-setting bodies—including the Islamic Financial Services Board (IFSB), General Council for Islamic Banks and Financial Institutions (CIBAFI), and Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI)—have focused on creating prudential guidance, governance standards, capacity building initiatives, and policy alignment with international best practices.
To address ongoing challenges in developing a robust climate finance ecosystem within OIC countries—whether through conventional or Islamic channels—the report calls for targeted reforms across three strategic priorities:
"Mainstreaming Islamic climate finance instruments by preparing bankable projects, designing targeted incentives to facilitate green sukuk and sustainability-linked issuances, and harnessing the technical collaboration with MDBs to support market development."
"Accelerating capacity building and technical exchanges among OIC member countries by developing practical knowledge tools and improving data systems for better tracking and reporting."
"Enhancing Islamic climate financial innovation, such as blended finance solutions, by developing innovation platforms and scaling Islamic social finance tools like zakat, waqf, and micro-takaful to support community resilience and measurable climate outcomes."
The report highlights that values-based approaches unique to Islamic finance can contribute meaningfully toward global climate goals if policymakers act decisively in collaboration with regulators, multilateral development banks (MDBs), and other partners.
The Notre Dame Global Adaptation Initiative’s ND-GAIN Index shows that OIC countries generally have higher vulnerability scores compared to global averages while also lagging behind in readiness levels.
Country-level estimates referenced in the report are derived from World Bank Country Climate Development Reports prepared for various OIC member states.
Sustainable financing activities covered include bonds, sukuk issuances, syndicated loans—both conventional and Shariah-compliant—as well as private equity investments and venture capital funding.