Green Sukuk for the Shariah Based Banks and Financial Institutions

The Green Climate Fund (GCF) is a new global fund created to support the efforts of developing countries to respond to the challenge of climate change. GCF helps developing countries limit or reduce their greenhouse gas (GHG) emissions and adapt to climate change. It seeks to promote a paradigm shift to low-emission and climate-resilient developments, taking into account the needs of nations that are particularly vulnerable to climate change impacts. It was set up by the 194 countries who are parties to the United Nations Framework Convention on Climate Change (UNFCCC) in 2010, as part of the Convention’s financial mechanism. Bangladesh Bank (Central Bank of Bangladesh), the monetary authority and financial sector regulator of Bangladesh, is recognized as the pioneer among the central banks and financial sector regulators around the globe for establishing ‘Green Banking’ practices and actions in its jurisdiction. In 2014, a refinance window was opened to facilitate investments of Shariah Based Banks and Financial Institutions (Non-Bank). Based upon the experiences of implementing Green Banking Guidelines and operating refinance window for Shariah Based Banks and Financial Institutions (FIs), the necessity has been felt to have a separate framework on Green Banking for these categories of Banks and FIs. In 2017, Private Sector Facility of Green Climate Fund has approached Bangladesh Bank to collaborate on ‘Shariah Based Green Banking Policy Framework’. A strong institutional and policy framework for climate change with a view to identifying transformational investment opportunities, which was one of the major activities of the Bangladesh GCF Country Program, helped Bangladesh Bank to understand the requirements for a climate resilient development.

This Shariah based green banking policy framework will accordingly complement the Bangladesh GCF Country Program by helping the Islamic banks and NBFIs to act as a connection between the public sector regulatory framework and the private sector entities. The main aspect of ‘Shariah Based Green Banking Policy Framework’ is to make a paradigm shift in the policy horizon on green banking for Shariah Based Banks and FIs. This program will conduct evidence-based policy studies on Sustainable Finance (including climate finance, impact investment and socially responsible finance) Framework and Green Banking Guidelines. 

Sustainable Finance Department is seeking to hire a consulting firm to assess the feasibility of Green Sukuk in Bangladesh, and develop guidelines on Green Sukuk for Shariah based Banks and FIs in Bangladesh.

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