
doi: 10.2139/ssrn.6169811
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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