Operationalising Green Sukuk within the World Bank environmental and social framework

This paper examines the integration of Green Sukuk—Shariah-compliant sustainable finance instruments—into the World Bank’s Environmental and Social Framework (ESF). Green Sukuk have emerged as innovative vehicles for mobilising capital towards renewable energy, climate adaptation, and sustainable infrastructure, yet they currently lack formal recognition within the ESF. Drawing on doctrinal legal analysis, comparative case studies of Malaysia and Indonesia, and policy evaluation, this study argues that formal ESF recognition would elevate Green Sukuk from voluntary ethical instruments to enforceable tools within the global sustainable finance framework. The analysis identifies key challenges of legal enforceability, regulatory fragmentation, and governance inconsistencies, and proposes a six-pillar strategy encompassing ESF-compatible issuance guidelines, harmonised regulatory approaches, dual Shariah–ESF compliance statements, enhanced impact measurement through digital tools, targeted incentives and capacity building, and multilateral support with risk-sharing mechanisms. Comparative lessons from Malaysia’s corporate-led model and Indonesia’s sovereign issuances demonstrate transferable pathways for aligning Green Sukuk with ESF safeguards. By integrating Islamic finance principles with international sustainability standards, the paper proposes a dual-assurance model that enhances transparency, mitigates greenwashing risks, and expands financial inclusion in Muslim-majority markets. The findings contribute to both Islamic finance and sustainable development scholarship by offering the first systematic framework for embedding Green Sukuk into the ESF, thereby extending their role in advancing the Paris Agreement and Sustainable Development Goals.