Required Low-Carbon Investment For OIC Averages 1.4 Pct Of GDP -- BNM Deputy Governor
KUALA LUMPUR, Jan 13 (Bernama) -- The investment required for the Organisation of Islamic Cooperation (OIC) countries to pursue low-carbon strategies averages 1.4 per cent of gross domestic product (GDP) and rises to over 5.0 per cent for low-income members, Bank Negara Malaysia (BNM) Deputy Governor Adnan Zaylani Mohamad Zahid said today.
He said many OIC countries remained among the world’s most climate-vulnerable regions, with high exposure and low adaptive capacity.
“This reality makes one point unmistakably clear -- scaling Islamic finance will hinge on our ability to mobilise private capital effectively and at speed,” he said.
Adnan Zaylani said this in his keynote address at the launch of the joint World Bank-Islamic Development Bank report on Islamic Finance and Climate Agenda: From Green Sukuk Innovation to Greener Halal Value Chain here today.
He said that driving climate action also requires innovation and technological progress, noting that only 3.0 per cent of companies that secured private equity (PE) or venture capital (VC) funding for clean and climate technologies between 2017 and 2024 came from OIC countries, accounting for just 0.5 per cent of total global investment.
“This is a missed opportunity. Growing and facilitating PE and VC markets are essential for nurturing new solutions, such as renewable energy, green manufacturing, nature-based solutions, and climate-smart agriculture.
“Islamic finance must play a larger role in unlocking these innovation ecosystems,” he added.
Adnan Zaylani said that developing takaful as a risk-transfer mechanism to encourage climate-resilient investments is essential, given the gaps observed vis-a-vis conventional insurance tools used for climate finance.
He said many takaful operators lack the technical expertise, actuarial capacity, and data infrastructure needed to design climate-related products such as parametric coverage for droughts, floods, and extreme weather events.
Focusing on Malaysia, Adnan Zaylani said the country has long been at the forefront of mobilising Islamic finance for the climate agenda, starting with the world’s first green sukuk in 2017 that positioned the country as the largest issuer in the OIC region, with over 47 green and sustainability sukuk totalling US$13.4 billion (US$1=RM4.05).
“These advancements are made possible by adopting a comprehensive ecosystem approach, including implementation of value-based intermediation (VBI) initiative and VBI financing and investment impact assessment framework (VBIAF) sectoral guides,” he added.
To date, 18 VBI community of practitioners have channelled more than US$11 billion in Islamic green financing, demonstrating the sector’s ability to shift investment behaviour and mobilise meaningful capital toward climate action.
Adnan Zaylani said BNM is committed to sustaining the momentum and continuing to develop solutions that focus on unlocking efficient mobilisation of public and private capital.
Among initiatives undertaken are the introduction of i-CITA in September last year to enable Islamic banks to pilot risk-sharing contracts, as well as the climate finance innovation lab (CFIL), which is administered by Bank Pembangunan Malaysia.
-- BERNAMA