Islamic Finance and Green Investment in GCC Countries: Empirical Insights into Sustainable Development Using GMM Estimation

This study investigates the potential role of Islamic finance and green investment in promoting sustainable development across Gulf Cooperation Council (GCC) countries. Grounded in the ethical foundations of Shariah—such as risk-sharing, prohibition of environmentally harmful activities, and asset-backed financing—Islamic finance offers a promising alternative framework for funding environmental transformation. The GCC region, comprising Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Bahrain, and Oman, is uniquely positioned for such an inquiry due to its shared characteristics: significant Islamic financial infrastructure, substantial hydrocarbon wealth, and national sustainability strategies aligned with the United Nations Sustainable Development Goals (SDGs). Using panel data from 2005 to 2022, the research will apply a dynamic panel model estimated via the Generalized Method of Moments (GMM), to control for endogeneity and dynamic relationships. Two separate models will examine the effects of Islamic finance and green investment on CO₂ emissions per capita and renewable energy consumption. Control variables will include GDP per capita, trade openness, and institutional quality. The distinctive contribution of this study lies in its regional focus on resource-rich, Islamic finance-intensive economies, and in its integrated approach that bridges ethical finance and green transition. It aims to offer new empirical insights and policy-relevant implications for designing sustainable financial strategies in the Gulf region. JEL Codes: Keywords: Islamic finance, GCC, green investment, sustainability, SDGs, GMM estimation