The ‘oxygen’ of sustainable investment: ICIEC’s role in catalysing the energy transition and climate finance

The flow of finance is the oxygen of the energy transition, with collaboration and de-risking making developing economies viable destinations for climate-aligned investment.

The global climate crisis requires investment on an unprecedented scale for both mitigation and adaptation. At the centre of this challenge lies the energy transition, shifting from fossil fuels to renewable and clean technologies. Yet in many developing and climate-vulnerable economies, mobilising private capital faces major headwinds due to perceived and real risks.

Among the institutions seeking to address this gap is the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC), the insurance arm of the Islamic Development Bank (IsDB) Group and a committed Berne Union member. Through its Shariah-compliant credit and political risk instruments, ICIEC is working to de-risk investments in renewable energy and climate-resilient infrastructure in its 50 member states. Over the past year, ICIEC has refined its approach to climate finance, introducing new risk-sharing mechanisms. These initiatives aim to make climate projects more bankable by addressing constraints that limit private investment.

Global risk landscape: Scale and barriers

According to the International Energy Agency, annual clean energy investment must reach USD 4.5 trillion by the early 2030s to remain on track for net-zero by 2050. Meanwhile, adaptation finance needs in developing countries could hit USD 340 billion annually by 2030. Public funds alone are not up to meeting this demand.

Yet for private investors, particularly in the markets where ICIEC operates, political and regulatory risks ranging from shifting policy frameworks to permitting delays continue to stall critical projects. Credit risk is another constraint, with concerns about off-taker solvency and sovereign payment reliability undermining project bankability. Currency convertibility and performance risks around newer low-carbon solutions such as green hydrogen and advanced storage add further layers of uncertainty. All of this is compounded by physical climate risks, including severe weather events that directly threaten infrastructure and livelihoods, and by transition risks such as the impacts of stranded assets and market shifts on economies that rely on traditional sectors. These risks deter investors and escalate capital costs, threatening the viability of essential climate projects.

ICIEC’s climate change framework

In 2024, ICIEC launched its comprehensive Climate Change Policy, fully aligned with the Islamic Development Bank Group and Paris Agreement principles and integrating sustainability across operations, products, risk management, capacity-building, and communication.

The policy’s pillars include improving internal operations by reducing ICIEC’s carbon footprint, optimising travel, and digitising workflows; prioritising insurance and reinsurance for renewable energy, circular economy, disaster risk management, and resilient infrastructure; embedding climate risk management across the entire risk framework; building capacity via training and knowledge-sharing; active engagement in the InsuResilience Global Partnership (IGP); and enhancing communication and transparency through Annual Sustainability and Development Effectiveness Reports.

De-risking and innovating in climate investment

ICIEC surpassed its target of dedicating 13% of total insured business to climate-friendly initiatives, reflecting a shift in portfolio composition towards sustainable sectors. As a multilateral insurer focused on development, ICIEC deploys and adapts robust, tailored solutions. Political risk, credit, and project finance insurance represent ICIEC’s core products for addressing investor concerns over expropriation, breach of contract, payment default, and currency inconvertibility, all of which continue to weigh heavily on clean energy projects in emerging markets. Through co-insurance and reinsurance partnerships with ECAs and MDBs, the corporation also extends capacity for larger and more complex transactions.

Recent projects highlight the measurable impact these tools are having. In Egypt, ICIEC’s provision of USD 68 million in equity insurance across four solar plants in the Benban Solar Park, one of the world’s largest photovoltaic complexes, helped attract international investors. The Benban project has enabled hundreds of megawatts of clean power and stimulated local job creation and supply chain development. In Senegal, ICIEC’s EUR 103 million insurance supported the installation of 50,000 off-grid solar-powered streetlamps in rural communities, boosting safety, extending productive hours, fostering rural economic growth, and contributing substantially to Senegal’s climate and energy goals. And in Türkiye, approximately USD 80 million in reinsurance supported the expansion of solar and wind energy, diversifying the national energy mix, improving energy security, and creating sustainable employment.

Circular economy and urban sustainability

Waste management and urban infrastructure are often overlooked in climate finance but vital for reducing emissions and improving quality of life. ICIEC’s cover for the Sharjah Waste-to-Energy plant, the region’s first commercial facility of its kind, helped divert more than 300,000 tonnes of waste from landfill and avoid roughly 460,000 tonnes of CO₂ emissions annually, while advancing Sharjah’s zero-waste target and creating green jobs.

In Saudi Arabia, a Shariah-compliant reinsurance facility of USD 360 million, arranged jointly with Atradius Dutch State Business, enabled global participation in one of the world’s largest urban transit developments. This transformative PPP modernises Riyadh’s transportation, cuts emissions and traffic congestion, and supports KSA Vision 2030’s urban sustainability objectives. Both cases highlight how risk-sharing can catalyse investment in large-scale initiatives with measurable environmental and social returns.

Resilience, water and food security

Across water and agricultural sectors, ICIEC has used political and credit insurance to support adaptation and livelihoods. In Côte d’Ivoire, EUR 107 million in cover facilitated the development of climate-resilient water infrastructure, enhancing health outcomes and agricultural productivity for millions. In Egypt, insurance for strategic desalination and sanitation projects supported adaptation to water scarcity in a changing climate. And in the West Bank, ICIEC partnered with MIGA to provide reinsurance cover for investment in seven date farms, packaging, solar energy, and cold storage. The project is a lifeline for local employment, women’s empowerment, and economic resilience through international export of premium Medjool and Barhi dates – all in a climate-stressed, fragile district.

Driving impact through partnerships and Islamic finance

In 2024, ICIEC inked 138 partnership agreements and deepened its collaboration with the IsDB Group entities, ICD (private sector), ITFC (trade), and major innovators like Masdar and IRENA through the Energy Transition Accelerator Financing programme. These alliances support climate finance mobilisation, technical innovation, and knowledge exchange across member states. The corporation is extending the reach of Islamic finance with Shariah-compliant solutions such as the Green/Sustainability Sukuk Insurance Policy. Green and sustainability-labelled sukuk now represent around 5% of total issuance, and volumes continue to grow as standards mature. The wider Islamic finance sector, valued at over USD 4 trillion, remains an immense but under-utilised source of capital for climate projects.

Scaling through project finance and PPPs

In 2024, ICIEC expanded its risk solutions to cover non-payment risks in project finance and public-private partnerships (PPPs), recognising their growing importance in scaling sustainable infrastructure. By combining public and private capital, PPPs enable risk-sharing and technical collaboration essential for the delivery of energy, water, and transport projects. As transition projects grow in scale and complexity, PPPs are emerging as the preferred model for mobilising foreign direct investment and driving innovation in emerging economies.

Providing the ‘oxygen’ for a sustainable future

Mobilising private capital to address the climate crisis remains one of the defining challenges of the years ahead. With an AA- rating and a developmental mandate focused on the most vulnerable regions, ICIEC is enabling member states to transform climate ambition into bankable, insurable reality. Through collaboration and its evolving de-risking toolkit, ICIEC is helping to build resilient, low-carbon economies; its recent initiatives illustrate how such models can align commercial and developmental objectives, drawing in private investment. These experiences point to the broader potential of partnership-based finance in building a greener, more equitable future.