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August 16, 2026International Journal of Islamic and Middle Eastern Finance and Management

Islamic finance for climate action: the roles of sukuk, digitalization and sustainable industrialization in OIC countries

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Authors

ZRZia Ur RahmanFAFaisal AlnoriSAShakil Ahmad

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Overview

Panel data analysis demonstrates that Sukuk holdings and sustainable industrialization reduce carbon emissions in 12 OIC countries, highlighting the environmental value of Islamic finance.

Key Points

  • To evaluate the impact of Islamic finance (proxied by Sukuk holdings), digitalization, and sustainable industrialization on consumption-based carbon emissions.
  • Examined annual panel data from 12 emerging Organization of Islamic Cooperation (OIC) countries operating dual banking systems.
  • Estimated long-run parameters using the Driscoll–Kraay standard error method to control for cross-sectional interdependence, heteroscedasticity, and serial correlation.
  • Sukuk holdings and sustainable industrialization significantly decreased consumption-based carbon emissions (CCO2e).
  • Digitalization and per capita income both demonstrated an inverted U-shaped relationship with CCO2e, validating the Environmental Kuznets Curve hypothesis.
  • Energy consumption showed a significant and positive association with CCO2e, contributing directly to higher pollution levels.

Cite This Study

Rahman et al. (2026) studied this question.

synapsesocial.com/papers/6a817ab4f2fb91fc834aeb17https://doi.org/10.1108/imefm-05-2026-0362
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