The General Council for Islamic Banks and Financial Institutions (CIBAFI) submitted its comments to the Islamic Financial Services Board (IFSB) on the Exposure Draft (ED) (GN-11) on the " Guidance Note on Climate-Related Financial Risks for Institutions Offering Islamic Financial Services (Banking Segment)".

Drawing upon expert insights from its diverse membership spanning more than 30 jurisdictions, CIBAFI's review identifies several areas for enhancement in the ED. Key recommendations include:

·         Encouraging RSAs to ensure that IIFS clearly demonstrate how responsibilities for climate-related financial risks are embedded within governance structures, including integration into board committee mandates and structured engagement with Shariah boards.

·         Recommending that IIFS incorporate climate-related objectives into institutional strategies using defined key performance indicators (KPIs) and performance management frameworks to enhance accountability.

·         Supporting the inclusion of internal, measurable climate-related objectives within ICAAPs/ILAAPs, with disclosures—where material—to reinforce transparency and effective capital and liquidity assessments.

·         Recommending more detailed guidance on how IIFS can integrate climate-related risks into their stress testing, ICAAP, and ILAAP frameworks to promote consistency and ensure a level playing field in capital and liquidity adequacy assessments across Islamic banks.

·         Providing more detailed guidance on adapting risk assessment methodologies to the specificities of Islamic contracts, particularly equity-based structures such as musharakah and mudarabah, to ensure alignment with BCBS Principles.

·         Explicitly addressing reputational and liability risks related to climate claims, including potential greenwashing risks, which may also constitute Shariah governance concerns given the ethical commitments of IIFS.

·         Expanding guidance on climate-related disruptions to commodity markets, which are critical to Shariah-compliant liquidity management, by recommending contingency planning measures to support effective implementation of BCBS Principle 10 in the IIFS context.

“These recommendations reflect CIBAFI’s ongoing commitment to supporting the development of forward-looking regulatory frameworks that strengthen the resilience of Islamic financial institutions in the face of emerging risks. By addressing climate-related financial risks in a manner consistent with Islamic principles, the proposed enhancements aim to promote effective risk governance, greater transparency, and long-term sustainability across the Islamic financial services industry,” said CIBAFI in its statement.

The complete detailed comments submitted to IFSB are available on CIBAFI's website: www.cibafi.org.

CIBAFI continues to support the Islamic Financial Services Industry through advocacy, global representation, and various initiatives, including specialised publications and comprehensive professional development programmes.