Why Islamic finance could provide an ethical model for funding the green transition

February 21, 2026 - 02:48

The principles of Islamic finance, long anchored in concepts of social justice, shared risk, and a prohibition on excessive speculation, are gaining recognition as a potent ethical framework for funding the global green transition. This model, which insists that investments must benefit society and avoid harm, is increasingly seen as relevant for all investors, not just those of the Muslim faith.

At its core, Islamic finance forbids investment in industries considered harmful and emphasizes tangible, asset-backed financing. This directly aligns with the needs of the renewable energy sector and sustainable infrastructure projects, which are physical and productive. The requirement for risk and reward to be shared between the investor and the entrepreneur promotes longer-term, more stable partnerships, moving away from short-term speculative gains that can undermine sustainability goals.

Furthermore, its foundational tenets of social responsibility and equitable distribution resonate with the broader aims of a just transition. By mandating that investments contribute positively to the community and the environment, it offers a built-in ethical filter. As the world seeks trillions in financing to combat climate change, this centuries-old system provides a compelling, principles-first approach that could help direct capital toward projects that are both financially viable and genuinely sustainable for the planet.