Islamic Finance And Climate: A New Agenda

Islamic finance currently represents a USD 5 trillion market, according to the London Stock Exchange Group. Its origins trace back to medieval trade between Europe and Central Asia. Currently, Sharia-compliant finance stands out in the global economic landscape due to its foundation in ethical and sustainable principles, such as the prohibition of excessive interest charges (riba), the requirement for asset-backed transactions, risk-sharing between borrower and lender, and aversion to speculation and excessive risk.

These characteristics have sparked growing interest, as they promote greater transparency and financial stability, making the system less prone to deep economic crises that often impact conventional markets. In recent decades, even countries with Muslim minority populations-such as the United Kingdom, Luxembourg, France, Hong Kong, and Singapore-have successfully developed and implemented legal frameworks for Islamic finance. These frameworks enable the structuring of robust financial operations in credit, private equity, real estate, fintechs, and sovereign bonds. The London Stock Exchange now even features exclusive exchange-traded funds (ETFs) dedicated to Sharia-compliant finance.

The recent expansion of the BRICS+ group, which now includes Muslim-majority countries such as Saudi Arabia, the United Arab Emirates, Egypt, Iran, and, more recently, Indonesia, presents a strategic opportunity for Brazil to strengthen its cooperation agenda in Islamic finance. This initiative is particularly relevant in a time of increasing international instability and trade wars, heightening the need to diversify and strengthen economic partnerships while pursuing a more diverse and resilient trade policy.

In this context, the COP30 in Belém provides an ideal platform to foster discussions on Islamic financial instruments, particularly the so-called green sukuks. These sustainable Islamic bonds, aligned with Sharia principles, can finance strategic projects related to climate transition, renewable energy, sustainable infrastructure, food security, and energy sovereignty. Such initiatives align with the national and international strategic agendas of Gulf and Southeast Asian countries for 2030.

Moreover, establishing a regulatory framework compatible with Islamic finance in Brazil could attract significant financial flows from highly liquid markets such as Saudi Arabia, the UAE, and Qatar. This integration would strengthen Brazil's position as one of the leading exporters of halal products, reinforcing a cycle that has already proven successful in the industrial sector, particularly in meat production. Notably, in 2023, Brazil exported over 2.2 million tonnes of halal chicken meat to more than 30 countries, generating revenues exceeding USD 3.9 billion, according to data from the Brazilian Ministry of Agriculture and Livestock.

By advancing this agenda, Brazil could tap into substantial financial resources earmarked for priority sectors such as sustainable agribusiness, critical infrastructure, strategic minerals, and climate-focused science and innovation. Expanding its range of sustainable financial options would further solidify Brazil's role as a global leader.

This initiative is particularly relevant in the context of Brazil's G20 presidency in 2024, which has put forward a set of reforms aimed at democratizing international financial flows. These proposals seek to enhance financial integration among Global South countries and improve their governance structures.

Although developing a complex system involving credit, insurance, and other sophisticated market mechanisms is a medium- to long-term goal, simplified models can be implemented immediately to introduce the Brazilian market to Sharia-compliant finance. The gradual construction of this regulatory framework would be strategic, allowing for progressive adaptations and providing legal certainty for international investors interested in the Brazilian market.

Therefore, Islamic finance presents a concrete opportunity for Brazil to diversify and strengthen its economy by attracting international investments while reinforcing its global position in the discussion on sustainable economic development and international financial governance.

Translated by Guilherme Miranda

The post Islamic finance and climate: A new agenda appeared first on ANBA News Agency .

MENAFN11042025000213011057ID1109420597