The role of sustainable Islamic finance in promoting just transition: Evidence from OIC countries

The discourse surrounding the green transition has attracted significant attention from policymakers and other stakeholders. However, the need to facilitate a transition that ensures social equity and economic inclusion cannot be overemphasized. Hence, achieving a just transition has become a global priority. This study investigates how sustainable Islamic finance instruments contribute to a just transition, a topic that has received little attention in prior research. Panel data from 47 Organization of Islamic Cooperation countries were analyzed using the panel-corrected standard errors technique. The results demonstrate the positive impact of ESG Sukuk and ESG Islamic funds on a just transition. Conversely, Islamic social finance was found to have a negative relationship with a just transition. The results remained consistent across several robustness checks. Overall, the findings highlight the significant role played by sustainable Islamic financial instruments in advancing an equitable and inclusive transition toward a low-carbon economy.

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