Mobilising Islamic funds for climate actions: from transparency to traceability

Raeni Raeni, Ian Thomson, Ann-Christine Frandsen

    Research output: Contribution to journalArticlepeer-review

    12 Citations (Scopus)
    46 Downloads (Pure)

    Abstract

    Mobilising sufficient financial resources for low carbon development has led to countries integrating green bonds into their sovereign bond portfolios. However, questions remain over the efficacy and integrity of these financial instruments. Climate bonds impose additional accountability requirements that connect the money raised with actions to reduce atmospheric greenhouse gases. These requirements are given further prominence in financial instruments intended to fund climate change while complying with core Islamic values, such as the green sukuk, a Sharia-compliant alternative to traditional fixed-income investments to fund environmental projects. Climate-related financial instruments require tracking the flow of money through chains of decisions within and between organisations. This research explores how the Indonesian government, as the first sovereign state issuer of green sukuk, attempted to connect money raised from Islamic capital markets to actual reductions in greenhouse gas emissions. This required the creation of new accounting objects that connected financial data with GHG accounting at a granular level. Our analysis demonstrates how the existing accounting systems were repurposed by constructing green sukuk accounting objects that sought to connect equivalent disbursements of money with social and environmental benefits, primarily represented by reduced GHG emissions.

    Original languageEnglish
    Pages (from-to)38-62
    Number of pages25
    JournalSocial and Environmental Accountability Journal
    Volume42
    Issue number1-2
    DOIs
    Publication statusPublished - 22 Apr 2022

    Keywords

    • Transparency
    • Traceability
    • Public accounting system
    • Climate change
    • Sovereign green bonds and sukuk

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