ISLAMABAD: A joint re­­port from the World Bank and the Islamic Develop­m­­ent Bank (IsDB) has ide­ntified both opportunities and challenges in developing the Islamic sustainable finance market.

The report focuses on cli­mate finance, which en­­compasses funding for climate mitigation, adaptat­i­­­on, and resilience building.

The Islamic finance sec­­tor stands at a pivotal mo­­ment. It is uniquely positioned to drive meaningful progress on global climate goals through va­­­lues-based, inclusive financial solutions. Developing a climate finance ecosystem in the OIC, whether conventional or Islamic, faces common challen­ges, according to the newly-released Islamic Finance and Climate Agenda, join­tly produced by the World Bank and the Islamic Development Bank.

OIC countries face significant obstacles in building effective climate finance ecosystems, especially in Islamic finance, due to institutional weaknesses, fragmented policies, especially in the real sector, that are not well-aligned with the financial sector, and limited market capacity. Now is the time for bold, collaborative leadership to elevate Islamic finance as a catalyst for sustainable, climate-resilient growth, the report emphasised.

The potential for Islamic finance to support the climate agenda and tackle climate change is noteworthy, and promoting ongoing growth and innovation in this area will be key to achieving the OIC collective sustainability goals.

The global Islamic finance industry is valued at nearly $4 trillion and shows growing interest in sustainable and climate financing. This has motivated the WB and the IsDB to produce the report, which analyses the role of Islamic finance in sustainable and climate finance markets.

Published in Dawn, November 18th, 2025