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Green Sukuk and Climate Finance: Evidence from Indonesia

Authors: Adam Latif; Zaäfri A. Husodo; Nur Dhani Hendranastiti;

Green Sukuk and Climate Finance: Evidence from Indonesia

Abstract

The accelerating climate crisis demands unprecedented levels of sustainable investment, yet global climate-finance flows remain far below what is required to meet the Paris-aligned transition. In Muslim-majority economies, this gap is compounded by the limited suitability of conventional debt instruments under Islamic law. This paper investigates whether green sukuk-Islamic bonds whose proceeds finance environmentally sustainable projects-can serve as an effective bridge between faith-based finance and the global green-capital market. Using Indonesia's sovereign green sukuk program as an institutional laboratory and a novel global dataset of 5,391 sukuk issues from 1990 to 2025, we estimate pooled ordinary leastsquares regressions to quantify the yield differential ("greenium") between ESG-certified and conventional sukuk. The results reveal a statistically and economically significant greenium of roughly 50 basis points globally and 80-150 basis points for Indonesian issuances, implying that ESG certification lowers the cost of capital while mobilizing value-aligned investment.

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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
0
Average
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