The Impact of Green Sukuk on Economic Growth and the Environment: An Engaging Empirical Study

Green sukuk, or Islamic green bonds, have become increasingly popular in recent years. These financial instruments not only offer profitable investment opportunities but also contribute to environmental sustainability. This article will discuss the impact of green sukuk on economic growth and the environment, based on the latest empirical research from Universitas Airlangga.

What is Green Sukuk?

Green sukuk is a variant of sukuk, or Islamic bonds, used to finance projects that contribute to environmental preservation, such as renewable energy, energy efficiency, water management, and more. These sukuk align with Shariah principles, which prohibit investments in sectors that harm the environment or involve speculation.

The main advantage of green sukuk is its ability to combine financial goals with social and environmental responsibility. Investors who purchase green sukuk not only gain financial returns but also play a role in supporting sustainable, eco-friendly projects.

Economic Impact of Green Sukuk

Research conducted by Universitas Airlangga shows that green sukuk has a significant positive impact on economic growth. Some key findings from this research include:

1. Increased Sustainable Investment: Green sukuk has attracted the interest of global investors, both individuals and institutions, who are environmentally conscious. The investment gathered from green sukuk is used to finance green infrastructure projects that not only positively impact the environment but also create new jobs and stimulate economic growth in various sectors.
2. Strengthening Economic Stability: Projects financed by green sukuk tend to have lower risks because they focus on sustainable sectors with long-term growth potential. This contributes to stronger economic stability, particularly in developing countries that are often vulnerable to global economic fluctuations.
3. Diversification of Funding Sources: Green sukuk provides a more diverse financing alternative for governments and companies, especially in countries that need substantial funds for infrastructure projects. With green sukuk, funding sources become more varied and do not solely rely on traditional loans or conventional bonds.

Environmental Impact of Green Sukuk

In addition to economic impact, green sukuk also makes a significant contribution to environmental preservation. Here are some positive impacts recorded in the research:

1. Reduction in Carbon Emissions: Projects financed by green sukuk usually focus on reducing carbon emissions, such as building solar power plants, wind farms, or energy efficiency projects. This helps reduce the carbon footprint and mitigate global climate change.
2. Protection of Natural Resources: Many green sukuk projects are related to water management, waste treatment, and biodiversity conservation. With funding from green sukuk, natural resources can be managed better and more sustainably, ultimately protecting local ecosystems.
3. Increasing Environmental Awareness: Green sukuk not only provides direct impact through the projects it finances but also raises environmental awareness among the public and investors. With an increased understanding of the importance of green investment, it is hoped that more funds will be allocated to environmentally-friendly projects in the future.

Why Green Sukuk is Important

In a global context, green sukuk is becoming increasingly important due to the growing challenges of climate change and environmental degradation. Countries around the world, including Indonesia, need to find ways to finance green projects that can help achieve carbon emission targets and sustainable development. Green sukuk offers a solution that not only supports environmental sustainability but also provides tangible economic benefits.

Moreover, green sukuk aligns with the United Nations’ Sustainable Development Goals (SDGs), particularly in terms of climate action, clean energy, and sustainable infrastructure. Therefore, green sukuk has the potential to become a major financial instrument in the global effort to achieve the SDGs by 2030.

Green sukuk is a financial instrument that offers various benefits, both economically and environmentally. Through empirical research conducted by Universitas Airlangga, it has been proven that green sukuk contributes positively to sustainable economic growth and environmental preservation. With its potential, green sukuk is expected to become one of the key pillars in the global effort to address environmental challenges and achieve sustainable development.

Journal : https://scholar.unair.ac.id/en/publications/an-empirical-study-of-the-effects-of-green-sukuk-spur-on-economic