What Does Islamic Finance Say About the Environment?

The industry needs to ask itself hard questions on climate change, says Ethica Institute of Islamic Finance in its latest article ‘A Climate of Change’

Islamic finance now finds itself at a crossroads. On the one hand, it offers a brave new world free of interest and injustice. Yet on the other hand, its often single-minded focus on economic growth seems out of date amid severe climate change.

How does Islamic finance reconcile this anachronism with its promise of a better future?

So asks a recent article from Ethica Institute of Islamic Finance, the Dubai based Islamic finance training and certification institute. In the article ‘A Climate of Change’ Ethica asks that Islamic finance scholars develop Shariah standards for the environment with a detailed, more nuanced, understanding that explains the environmental limits of transactions and products.

Would it be permissible for an investment bank based in London to issue Sukuk to fund a rubber company that further destroys the Sumatran rainforest; or for an Islamic bank in Dubai to finance the creation of a dam in China that floods a fragile ecosystem; and so on? Ethica says that Islamic finance standards do bear upon the general interest of society and, increasingly with the planet’s environment hanging in delicate balance, what happens in one part of the world affects all society.

Ethica’s spokesperson said, “Islamic finance needs to develop environmental Shariah standards. The environment is indeed an Islamic finance issue. As an industry we cannot go on trying to eliminate interest alone from our dealings, pretending that the rest of the transaction is free of harm. Islamic finance has to begin taking a more holistic view of how its products, transactions, and institutions affect the environment.”

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