The Maldives is getting help from the International Islamic Trade Finance Corporation (ITFC) and Regional Voluntary Carbon Market Company (RVCMC) to meet its US$55 million carbon credit sales target, in a move that will also lend a blue hue to the global Islamic carbon credit market.
Under an MoU between the ITFC and RVCMC, the two Saudi entities will weigh the potential and feasibility of generating blue carbon credits from the Maldives’s mangroves forests and seagrass meadows. They will also help to sell the generated credits to the carbon markets.
“This new collaboration with RVCMC and the Republic of Maldives is significant as it demonstrates the growing interest of our member countries in carbon credit. It also provides an opportunity for the Maldives to achieve its sustainability goals, which will benefit the population and the local economy,” commented Hani Salem Sonbol, CEO of the ITFC.
It has been about a year since the Maldives has set its eyes on the burgeoning carbon credit market, which was valued at US$331.8 billion in 2022, according to Statista, and could be worth US$1.1 trillion by 2050 estimated BloombergNEF.
The Indian Ocean archipelago urgently needs funds to battle the impact of a warming planet which threatens to swallow the islands as sea levels continue to rise. Rising salt levels are also corrupting potable water and the country fears it is running out of drinking water.
Seeking alternative funding sources, the government intends to raise MVR863.5 million (US$55.16 million) this year from selling carbon credits. The plan is to generate this amount of revenue annually until 2026 as part of its 2024—26 medium-term fiscal strategy.
“Discussions with two international financial institutions are underway, and a preliminary assessment indicates the credits can be taken to the market in 2024,” the finance ministry wrote in its fiscal strategy document.
The potential for the Maldives to capitalize its blue natural assets is tremendous. Boasting one of the most diverse marine life and coral reef ecosystems in the world, the idyllic global tourist hotspot is heavily dependent on its ocean, with almost half of the Islamic Republic’s population and at least 70% of its critical infrastructure lie within 100 meters of its shoreline, according to the World Bank.
“The voluntary carbon market scales projects that mitigate the impact of climate change and promote sustainable development, and we see significant potential in developing blue carbon projects in the Maldives,” observed Riham ElGizy, CEO of RVCMC. “By integrating carbon reduction and removal initiatives through the preservation and restoration of coastal habitats into its broader sustainability agenda, we believe that the government of Maldives can achieve lasting positive climate impacts.”
This ITFC-RVCMC Maldivian agreement was vaguely teased by Riham last year in an interview with IFN Sustainable during which he revealed both entities are working with a country to trade carbon credit assets.
RVCMC holds the distinction of being the first voluntary carbon market to have secured a Fatwa (issued by the ITFC) to use carbon credits as underlying assets for Islamic finance transactions. Most carbon credit initiatives in the Islamic finance space – and ESG initiatives for that matter – have revolved around green natural assets; this exercise with the Maldives could open the door for Shariah compliant blue finance.