Islamic finance: A catalyst for global climate resilience
Adnan Zaylani Mohamad Zahid, Deputy Governor of Bank Negara Malaysia, highlighted Islamic finance's potential as a catalyst for global climate resilience at a report launch. He emphasized mobilizing private capital and fostering innovation in OIC countries.
Mobilizing capital for vulnerable nations
OIC countries are highly climate vulnerable, requiring substantial investment averaging 1.4% of GDP, and over 5% for low-income members, far exceeding public resources.
This reality necessitates effective private capital mobilization at speed.
A critical innovation gap exists, with only 3% of global clean and climate technology private equity/venture capital funding (2017-2024) directed to OIC companies, representing just 0.5% of total investment.
Furthermore, developing Takaful as a risk transfer mechanism is essential, but operators often lack the technical expertise, actuarial capacity, and data infrastructure for climate-related products like parametric coverage for droughts or floods.
The Maqasid al-Shariah provides a powerful moral framework, guiding a value-based financial architecture towards a just, climate-resilient future for all.
Malaysia's pioneering initiatives
Malaysia positions climate resilience at the core of its national policy, exemplified by its leadership in green sukuk.
Since 2017, Malaysia has become the largest issuer among OIC regions, with over 47 green and sustainability sukuk totaling USD13.4 billion.
This progress is supported by a comprehensive ecosystem approach, including the Value-Based Intermediation (VBI) initiative.
Recent initiatives include the i-CITA programme, introduced in September last year, which enables Islamic banks to pilot risk-sharing contracts with RM100 million in government matching financing.
Additionally, the Climate Finance Innovation Lab (CFIL) administered by Bank Pembangunan Malaysia pioneers innovative financing structures for climate projects, serving as a platform for market experimentation.
The Greening Value Chain Programme and the Low Carbon Transition Facility also support SMEs, with 2,890 SMEs attending technical training and over 250 measuring GHG emissions.
The Paddy Crop Takaful Scheme has approved RM16.2 million (USD4 million) in compensation for 6,319 affected farmers since March 2025.
Beyond compliance, towards impact
The speech underscores the urgent need for Islamic finance to move beyond mere Shariah compliance to proactive, impactful climate action.
While Malaysia provides a strong blueprint for innovative solutions, scaling these globally requires bolder experimentation, continuous learning from early trials, and resolute commitment.
This transition, rooted in ethical principles, offers a pragmatic and globally relevant pathway to a more resilient and sustainable future.