Bridging Sukuk and Foreign Direct Investment for Renewable Energy: Toward a Justice-Oriented Legal Framework in Developing Islamic Economies
Abstract
This study investigates how sukuk and foreign direct investment (FDI) can be integrated as complementary legal-financial tools to finance renewable energy in Indonesia, Malaysia, and Pakistan. Using a comparative qualitative legal method, it applies maqāṣid al-sharīʿah, institutional economics, and legal pluralism to evaluate alignment between current regulations and Islamic ethical values such as environmental protection (ḥifẓ al-bīʿah), wealth preservation (ḥifẓ al-māl), and justice (ʿadl). Findings indicate that fragmented regulations and weak Shariah governance constrain Islamic green finance. Malaysia shows stronger regulatory integration, while Indonesia and Pakistan face gaps between Islamic law and environmental policy. The study proposes an Islamic Green Governance Model that fuses ESG and Shariah standards to promote legal certainty, ethical investment, and justice-based decarbonization. Islamic finance is reframed not just as a funding mechanism, but as a vehicle for ethical sustainability aligned with Shariah objectives.
Abstrak:
Studi ini mengkaji integrasi sukuk dan investasi asing langsung (FDI) sebagai instrumen hukum-keuangan untuk membiayai energi terbarukan di Indonesia, Malaysia, dan Pakistan. Dengan metode hukum kualitatif-komparatif, pendekatan ini menggunakan maqāṣid al-sharīʿah, ekonomi kelembagaan, dan pluralisme hukum untuk menilai kesesuaian regulasi dengan nilai etika Islam seperti perlindungan lingkungan (ḥifẓ al-bīʿah), harta (ḥifẓ al-māl), dan keadilan (ʿadl). Hasilnya menunjukkan bahwa fragmentasi hukum dan lemahnya tata kelola syariah menghambat pembiayaan hijau Islam. Malaysia memiliki integrasi regulasi yang lebih baik dibandingkan Indonesia dan Pakistan. Studi ini mengusulkan Model Tata Kelola Hijau Islam yang menggabungkan standar ESG dan syariah guna memperkuat kepastian hukum, investasi etis, dan dekarbonisasi yang adil. Keuangan Islam diposisikan bukan sekadar alat pendanaan, tetapi sebagai penggerak transformasi etis dan berkelanjutan sesuai tujuan syariah.
Keywords
References
Ali, A., Ayub, K. S., Sadiq, M. T., Tanveer, M., Naseer, H., & Nadeem, Z. (2023). Potential and prospects of biomass as a source of renewable energy in Pakistan. July, 1–7. https://doi.org/10.3389/fceng.2023.1193806
Araminta, D. V., Qudziyah, Q., & Timur, Y. P. (2022). the Role of Green Sukuk in Realizing the Sustainable Development Goals 2030 Agenda. Jurnal Ekonomi Dan Bisnis Islam (Journal of Islamic Economics and Business), 8(2), 251–266. https://doi.org/10.20473/jebis.v8i2.37531
Chua, S. C., Oh, T. H., & Goh, W. W. (2011). Feed-in tariff outlook in Malaysia. Renewable and Sustainable Energy Reviews, 15(1), 705–712. https://doi.org/https://doi.org/10.1016/j.rser.2010.09.009
Daunton, M. (2010). Rationality and institutions: reflections on Douglass North. Structural Change and Economic Dynamics, 21(2), 147–156. https://doi.org/https://doi.org/10.1016/j.strueco.2009.11.005
Dey, S. R. (2020). Impact of Foreign Direct Investment on Energy Consumption : Empirical Evidence. 21(1), 41–69.
Erwin Susanto. (2024). Indonesia’s Readiness to Utilize Renewable Energy Wind Power Plants As Implementation of Sustainable Development Goals. Journal of Management and Energy Business, 4(1), 68–77. https://doi.org/10.54595/jmeb.v4i1.75
Esparza, I., Candela, Á. O., Huang, L., Yang, Y., & Budiono, C. (2024). Floating PV Systems as an Alternative Power Source : Case Study on Three Representative Islands of Indonesia Floating PV Systems as an Alternative Power Source : Case Study on Three Representative Islands of Indonesia. February. https://doi.org/10.3390/su16031345
Fang, X., Yang, Z., Zhang, Y., & Miao, X. (2024). Foreign direct investment and the structural transition of energy consumption: impact and mechanisms. Humanities and Social Sciences Communications, 11(1). https://doi.org/10.1057/s41599-024-04280-y
Fermeglia, M. (2024). International Investment. Lisbon Public Law Working Paper, 1. https://doi.org/10.2139/ssrn.4714702
Fitrah, R., & Soemitra, A. (2022). Green Sukuk For Sustainable Development Goals in Indonesia: A Literature Study. Jurnal Ilmiah Ekonomi Islam, 8(1), 231. https://doi.org/10.29040/jiei.v8i1.4591
Habib, F. (2023). Islamic Finance and Sustainability: The Need to Reframe Notions of Shariah Compliance, Purpose, and Value. In Z. H. Jumat, S. Hafiz Khateeb, & S. Nazim Ali (Eds.), Islamic Finance, FinTech, and the Road to Sustainability: Reframing the Approach in the Post-Pandemic Era (pp. 15–40). Springer International Publishing. https://doi.org/10.1007/978-3-031-13302-2_2
IEA. (2022). TRACKING SDG7 THE ENERGY PROGRESS REPORT, 2022. https://www.iea.org/reports/tracking-sdg7-the-energy-progress-report-2022
IFDI. (2022). Refinitiv Islamic Finance Development Report 2022. Icd, 80.
Ilham, N. I., Hussin, M. Z., Dahlan, N. Y., & Setiawan, E. A. (2022). Prospects and Challenges of Malaysia’s Distributed Energy Resources in Business Models Towards Zero – Carbon Emission and Energy Security. International Journal of Renewable Energy Development, 11(4), 1089–1100. https://doi.org/10.14710/ijred.2022.45662
International Renewable Energy Agency (IRENA). (2022a). Country Indicators and SDGs: Indonesia. International Renewable Energy Agency, 1–4. https://www.irena.org/IRENADocuments/Statistical_Profiles/Oceania/Australia_Oceania_RE_SP.pdf
International Renewable Energy Agency (IRENA). (2022b). Country Indicators and SDGs: Malaysia. International Renewable Energy Agency, 1–4. https://www.irena.org/IRENADocuments/Statistical_Profiles/Oceania/Australia_Oceania_RE_SP.pdf
International Renewable Energy Agency (IRENA). (2022c). Country Indicators and SDGs: Pakistan. International Renewable Energy Agency, 1–4. https://www.irena.org/IRENADocuments/Statistical_Profiles/Oceania/Australia_Oceania_RE_SP.pdf
Islam, I., Jadin, M. S., Mansur, A. Al, Azwan, N., Kamari, M., Jamal, T., Shahadat, M., Lipu, H., Nurulakla, M., Azlan, M., Sarker, M. R., & Shihavuddin, A. S. M. (2023). Techno-Economic and Carbon Emission Assessment of a Large-Scale Floating Solar PV System for Sustainable Energy Generation in Support of Malaysia ’ s Renewable Energy Roadmap. 1–32. https://doi.org/10.3390/en16104034
Judijanto, L., Jayadi, H., Luh, N., Suryaningsih, S., & Imran, H. Al. (2024). Evaluation of the Effect of Green Energy Policy on Renewable Power Plant Investment in Indonesia. 2(04), 192–198.
Karatepe Kaya, M. (2024). AN ANALYSIS ON THE USE OF SUKUK AS A FINANCIAL INSTRUMENT FOR SUSTAINABLE GOALS: A STUDY ON GREEN SUKUK. Akdeniz Üniversitesi Hukuk Fakültesi Dergisi, 14(1), 443–472. https://doi.org/10.54704/akdhfd.1441899
Keshminder, J. S., Abdullah, M. S., & Mardi, M. (2022). Green sukuk – Malaysia surviving the bumpy road: performance, challenges and reconciled issuance framework. Qualitative Research in Financial Markets, 14(1), 76–94. https://doi.org/10.1108/QRFM-04-2021-0049
Khan, N. S., Ali, S., Kazmi, A., Anwar, M., Ur, S., & Mughal, R. (2024). Enhancing Renewable Energy Integration in Developing Countries : A Policy-Oriented Analysis of Net Metering in Pakistan Amid Economic Challenges. https://doi.org/10.3390/su16146034
Latief, A., & Hendrika, R. (2023). Indonesia. In Regulatory Support for Off-Grid Renewable Electricity (1st ed.). Routledge eBooks. https://doi.org/10.4324/9781003178088-13
Liu, Felicia H M, & Lai, Karen P Y. (2021). Ecologies of green finance: Green sukuk and development of green Islamic finance in Malaysia. Environment and Planning A: Economy and Space, 53(8), 1896–1914. https://doi.org/10.1177/0308518X211038349
Mahmud, A. (2023). The impact of Islamic financial development on renewable energy production in Islamic countries. 5(1), 54–68. https://doi.org/https://doi.org/10.20885/AJIM.vol5.iss1.art4
Mat Rahim, S. R., & Mohamad, Z. Z. (2018). Green Sukuk for Financing Renewable Energy Projects. Turkish Journal of Islamic Economics, 5(2), 129–144. https://doi.org/10.26414/m031
Naqash, M. T. (2024). Geothermal and wind energy : Sustainable solutions for Pakistan ’ s energy economics. 17. https://doi.org/10.2516/stet/2024016
Pasaribu, A., & Purnomo, P. agung. (2023). FOREIGN INVESTMENT POLICY IN RENEWABLE ENERGY POST JOB CREATION LAW. Jurnal Supremasi: Jurnal Ilmiah Ilmu Hukum, 13(2), 29–37. https://doi.org/10.35457/supremasi.v13i2.2428
Przesławska, G. (2019). Significance of uncertainty in explaining institutional change in Douglass C. North’s approach. Ekonomia i Prawo, 18(3), 331. https://doi.org/10.12775/eip.2019.023
Rahmawanti, H. H., & Meliala, A. J. (2024). Legal Policy Impact on Indonesia’s Geothermal Industry Development: FDI Cooperation and NDC. Journal of Law, Politic and Humanities, 4(4), 481–494. https://doi.org/10.38035/jlph.v4i4.387
Ramadhan, I. A., & Wirdyanigsih. (2020). Green Sukuk Issuance as an Investment Instrument for Sustainable Development. 413(Icolgis 2019), 95–98. https://doi.org/10.2991/assehr.k.200306.189
Rastam Shahrom, Z., & Sherin Kunhibava. (2023). Sustainable Finance: A study On Malaysia’s Regulatory Framework On Sustainable Banking And Its Implementation By Selected Islamic Banks In Malaysia In Support Of Sustainable Development Goals. The Journal of Muamalat and Islamic Finance Research, 20(2), 152–178. https://doi.org/10.33102/jmifr.520
Sarfaraz Nehal. (2023). Green Sukuk – A Viable Global Financing option for Climatic and Environmental Revolution ( A Practical Instrument for the Development of Sustainable Energy Projects in Pakistan). Karachi Islamicus, 3(1). http://www.karachiislamicus.com/index.php/ki/article/view/36
Septi, T., & Santoso, C. (2023). Development of Ocean Renewable Energy Model in Indonesia to Support Eco-Friendly Energy. XLVIII(June), 13–15. https://doi.org/10.5194/isprs-archives-XLVIII-M-3-2023-1-2023
So, C. H. F., Chin, C. M. M., & Sakundarini, N. (2024). Technical, Environmental, and Economical Assessment of Photovoltaics Technologies in Malaysia BT - Advances in Intelligent Manufacturing and Robotics (A. Tan, F. Zhu, H. Jiang, K. Mostafa, E. H. Yap, L. Chen, L. J. A. Olule, & H. Myung (eds.); pp. 235–250). Springer Nature Singapore. https://doi.org/10.1007/978-981-99-8498-5_18
Supriyadi, A. P., Fidhayanti, D., & Ramadhita. (2023). GREEN SUKUK IN INDONESIA: Unraveling Legal Frameworks for Sustainable Islamic Bonds. El-Mashlahah, 13(2), 151–180. https://doi.org/10.23971/el-mashlahah.v13i2.7372
Suriani, S., Masbar, R., Agustina, M., & Khairul, A. D. (2024). Do Global Green Sukuk affect on Climate Change ? Evidence in Issuing Countries. 14(16), 98–107. https://doi.org/10.32479/ijeep.14987
Telatar, O. M., & Adimli, T. (2024). Impact of Foreign Direct Investment on Renewable Energy Consumption: Findings from Bootstrap ARDL with a Fourier Function. International Journal of Energy Economics and Policy, 14(5), 301–310. https://doi.org/10.32479/ijeep.16901
Turner, B. S., & Possamai, A. (2015). Introduction: Legal Pluralism and Shari’a. In A. Possamai, J. T. Richardson, & B. S. Turner (Eds.), The Sociology of Shari’a: Case Studies from around the World (pp. 1–13). Springer International Publishing. https://doi.org/10.1007/978-3-319-09605-6_1
Udemba, E. N., & Philip, L. D. (2022). Policy insight from renewable energy, foreign direct investment (FDI), and urbanization towards climate goal: insight from Indonesia. Environmental Science and Pollution Research, 29(36), 54492–54506. https://doi.org/10.1007/s11356-022-19599-9
DOI: 10.15408/aiq.v17i1.44764
Refbacks
- There are currently no refbacks.
