Climate Crisis & Islamic Finance: Why Inaction Violates the Maqasid and the SDGs

• Post by: wp-islamicfinancereviewcouk
• August 18, 2025
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🌿 “وَلَا تُفْسِدُوا فِي الْأَرْضِ بَعْدَ إِصْلَاحِهَا”

“And do not cause corruption upon the earth after its reformation.”
— Surah Al-A’raf (7:56)

🔥 Introduction: The Economic Wake-Up Call of Climate Change

Climate change is no longer a distant threat — it is a financial, moral, and ecological emergency. According to the United Nations, the world needs over $4.3 trillion annually in climate financing to meet SDG 13 (Climate Action) and related goals like SDG 7 (Clean Energy) and SDG 6 (Clean Water). Yet the current funding gap remains severe, especially in the developing Muslim world.

Islamic finance, grounded in ethics, justice, and sustainability, must now take a leadership role — not just for financial returns, but for faithful stewardship of the planet.

🕌 Qur’an and Sunnah: Environmental Responsibility Is an Islamic Obligation

Islam does not treat the Earth as a disposable asset — rather, it is a trust (أمانة) from Allah ﷻ.

“هُوَ ٱلَّذِى جَعَلَكُمْ خَلَـٰٓئِفَ ٱلْأَرْضِ…”
“It is He who has made you successors upon the earth…”
— Surah Fatir (35:39)

The Prophet Muhammad ﷺ said:

“إِنَّ ٱللهَ جَمِيلٌ يُحِبُّ ٱلْجَمَالَ، نَظِيفٌ يُحِبُّ ٱلنَّظَافَةَ”
“Allah is Beautiful and loves beauty; He is Clean and loves cleanliness.” (Sahih Muslim)

From conserving water to planting trees, the Sunnah promotes minimal harm, maximum benefit, and ecological balance (mīzān) — principles that align directly with UN SDGs and sustainable finance models.

💰 Injustice in the Climate Economy

Failure to act on climate change is not just economically irresponsible — it is an act of zulm (oppression). Those most affected by climate disasters (floods, droughts, food insecurity) are often the least responsible for emissions — especially in South Asia, Africa, and parts of the Middle East.

From an Islamic perspective, this violates:

• Adl (Justice): Equity in resource use and risk exposure

• Maslahah (Public Benefit): Prioritising long-term community welfare

• No harm (La darar wa la dirar): Financial systems must not harm future generations

🌱 What Is Islamic Finance Doing Now?

Islamic finance has started to respond, but change is slow and inconsistent.

✅ Green Sukuk

• Malaysia, Indonesia, UAE, and Saudi Arabia have issued green sukuk to fund clean energy, rail, and waste projects.

• These instruments comply with both Shariah and ESG principles — a unique value proposition.

✅ Faith-Based Philanthropy

• Waqf is being revived to support environmental causes, like reforestation and water access.

• Zakat is being directed to climate-vulnerable communities and disaster resilience.

✅ ESG Screening in Shariah Portfolios

• Some Islamic asset managers are integrating ESG filters into equity investments — avoiding polluters, unethical labor, and unsustainable practices.

Yet these efforts must scale up, standardize, and align explicitly with SDGs to have meaningful global impact.

🧭 What Islamic Finance Must Do Now: A 5-Point Agenda

Here’s how Islamic finance can lead the climate agenda:

1. Integrate SDGs into Shariah Governance

• Encourage scholars and Shariah boards to include SDG metrics in their evaluation processes.

2. Scale Green and Sustainability-Linked Sukuk

• Create sukuk tied to SDG targets — e.g., carbon neutrality, biodiversity, clean transport.

3. Islamic Impact Investing

• Build Shariah-compliant impact funds that generate both financial returns and measurable social/environmental outcomes.

4. Climate Risk Disclosures in Islamic Banks

• Require financial institutions to report carbon exposure, water risks, and biodiversity impact.

5. Education & Collaboration

• Integrate climate finance modules in Islamic banking curricula.

• Collaborate with multilateral climate funds, like the Green Climate Fund (GCF) and Islamic Development Bank (IsDB).

📘 Qur’anic Perspective: Why This Is Urgent

“وَلَا تُبَذِّرْ تَبْذِيرًا * إِنَّ ٱلْمُبَذِّرِينَ كَانُوٓا۟ إِخْوَٰنَ ٱلشَّيَـٰطِينِ ۖ…”
“And do not spend wastefully. Indeed, the wasteful are brothers of the devils.”
— Surah Al-Isra (17:26-27)

Islam strongly condemns waste, excess, and short-sightedness. Climate inaction violates both environmental trust (amanah) and moral accountability (hisab).

🕊️ Conclusion: Time to Align Maqasid, Markets, and the Planet

Climate finance is not an optional CSR activity — it is a Fard Kifayah of our time. It aligns with all five Maqasid al-Shariah: life, intellect, wealth, lineage, and faith. It fulfills the Qur’anic command to avoid corruption and maintain balance.

Islamic finance was built to serve humanity — now is the time to live up to that purpose, with the SDGs as a practical roadmap and the Qur’an as our moral compass.

🔗 Discover more at 👉 www.islamicfinancereview.co.uk

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