“In this way, Islamic finance could provide an innovative pathway to fulfilling the United Nation’s Sustainable Development Goals. For example, by insisting on investments tied to tangible assets that add economic value, Islamic finance indirectly fosters the UN’s eighth goal of ‘Decent Work and Economic Growth’ and twelfth goal of ‘Responsible Consumption and Production’.”

Islamic finance’s focus on tangible assets also has the potential to support climate action.

Green Islamic corporate bonds that aim to protect the environment have been issued by large international firms for natural resources management and are financing infrastructure projects in Africa, contributing to socially valuable projects across the continent.

“We found Islamic firms have higher environmental, social and corporate governance scores than other firms. As the Islamic finance industry commits to these goals, we are likely to see more frequent issuance of dedicated social finance instruments, such as green bonds,” Associate Professor Akhtar said.

“Our research highlights the potential benefits of bridging religious, ethical, and cultural differences to increase asset diversification benefits. Islamic assets may offer a sanctuary for investors in stormy market conditions.

“It is time for financial markets to embrace Islamic assets and improve equity for all types of investors, particularly those keen to invest in sustainable financial assets.”