5.2 How values-based finance is shaping the sustainable agenda
· 11 min read
This article is part of the Sustainable Finance Guide, a new series by Globalfields in collaboration with illuminem. Together, we provide readers with clear, educational insights into where sustainable finance stands today and how it is evolving to support nature, regeneration, and long-term resilience.
As the conversation on sustainable finance progresses, the attention is shifting from whether capital is aligned with sustainability goals to how and why it is deployed. Addressing climate change and global inequality requires more than technical adjustments to risk models, taxonomies or disclosure frameworks. It demands a re-examination of finance itself [1].
Within this context, ethical and values-based finance emerges not as a substitute for sustainable finance, but as a complementary lens that strengthens its credibility and long-term legitimacy by intentionally grounding it in transparency, accountability and social trust [2].
At a definitional level, sustainable finance and ethical or values-based finance are closely aligned. Both seek to integrate environmental and social considerations into financial decision-making and to move beyond the narrow focus on financial returns. Sustainable finance is commonly framed around the balance between people, planet and profit. Although values-based and ethical finance operate in the same space, there is a subtle yet important shift in emphasis whereby the people and the planet come before profit [3].
This is not a rejection of financial returns, but a conscious and intentional decision about what comes first.
Though sustainable finance has made important strides, it is not immune to its challenges.
In today’s financial landscape, greenwashing is widespread, particularly amongst large banking institutions. Global financial groups compete to signal their sustainability credentials through joining net-zero alliances, publishing commitments, and touting climate and social pledges.
However, mounting evidence suggests that these declarations often lack substance, rarely aligning with actual capital allocation or core business practices. Furthermore, without standardised and clear definitions of sustainability, institutions can define it on their own terms, tailoring criteria to existing strategies and creating space for superficial compliance rather than genuine structural change [4].
Hence, this is where an additional layer of ethical and values-based finance comes to play. It takes the sustainable finance landscape one step further by intentionally embedding transparency, participation, and accountability at the heart of financial operations before the drive for profit maximisation. It ensures that capital genuinely flows where it is environmentally and socially beneficial.
Institutions like Banca Etica exemplify this approach, publicly disclosing all of their financing relationships to allow security over where their funds actually go. These practices make their values visible and contestable, strengthening trust and demonstrating that finance can be utilised for public benefit without compromising viability [5].
At a deeper level, ethical and values-based finance is a purpose and value centric approach which sees finance as a tool in serving both society and the economy. By prioritising people and the planet, and then profit, it highlights what mainstream finance often neglects - the power of finance to be a force for resilience, inclusion and long-term systemic change.
What sets this type of finance apart is that it is deliberately intentional, shaped by values, and inherently subjective. Decisions are guided by strong principles about why, who and what should benefit, rather than purely just a calculation of risk and return. These ideas are already taking shape in the real world, notably through impact investing and the expanding Islamic sustainable finance market.
While this slightly differs from conventional sustainable finance, combining these two approaches can be extraordinarily powerful. When the discipline and scale of sustainable finance is combined with the purpose-driven intentionality of values-based finance, capital can be mobilised to advance a just and resilient transition [6]. (See Article 5.1 for more on the Just Transition)
From this values-led perspective, impact investing turns questions of purpose and intent into tangible investment decisions.
According to the Global Impact Investing Network (GIIN), impact investing refers to investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return [7].
While impact investing sits within the broader spectrum of ESG strategies, it is distinct from mainstream ESG investing. ESG investing typically integrates environmental, social and governance factors into investment decisions, often with the primary goal of improving risk adjusted returns. Contrastingly, impact investing places values before financial value. Social or environmental outcomes take precedence, with financial returns deemed as necessary but not the dominant driver [8]. (See Article 4.3 for more detail on ESG frameworks)
Another distinguishing factor is the intentionality of impact investing. Impact is not a secondary outcome or an indirect by-product of risk management, but it is the primary objective shaping investment decisions from the outset. This intent is reinforced through a commitment to impact measurement and management, ensuring that social and environmental outcomes are tracked, reported and open to scrutiny [9].
In practice, this intentionality is evident through Miriam’s Coffee shop in Vietnam, which demonstrates how impact investing translates purpose into tangible outcomes. Investment from Incofin has enabled Detech to scale programmes delivering measurable social and environmental benefits for women farmers. As a result of this project, stable and fair prices for thousands of smallholder farmers are expected to reach 7,500 by 2025, alongside improved investments in climate-resilient agroforestry and uplifted income. The result is strengthened livelihoods, greater resilience, and long-term value creation across the supply chain [10].
In short, impact is not a by-product of investment decisions, but is the primary rationale. Thus, impact investing embodies the additional layer of ethical and values-based finance to the broader sustainable finance ecosystem. It can further strengthen the ecosystem by reasserting purpose, intentionality, and moral agency within financial markets.
This focus on values naturally bridges to faith-based finance, where moral and ethical principles explicitly guide financial activity. In particular, Islamic finance provides a compelling example of how finance can be structured around environmental stewardship and long-term societal benefit.
At its core, Islamic finance is rooted in the objectives of Islamic law (maqasid al-shariah), which connect financial practice to the protection of life, wealth, intellect, faith, and lineage [11]. Contemporary interpretations extend these principles to the environment, reflecting a holistic understanding of human responsibility as stewards (khulafaa) held accountable for the Earth. From this perspective, the environment is a sacred trust (amaanah) to preserve, and not a commodity to exploit [12].
Key concepts shape this values-led finance. Balance (mizan) emphasises that all creation is intertwined in a delicate equilibrium, and every act of excess, waste or injustice (socially and/or environmentally) carries both ecological and moral weight [13]. The prohibition of wastefulness (israaf) reinforces moderation, mindfulness, and gratitude in the use of resources [14]. Meanwhile, the principle of tayyib guides investments to be not only permissible (halal) but also wholesome, sustainable and socially impactful [15].
From an Islamic perspective, every act of environmental destruction is more than an ecological mistake. It is a moral betrayal of the trust held as stewards of the earth. Islamic finance, therefore, exemplifies a deeply purpose-driven approach to financial decision-making.
The Islamic finance market has grown by an exponential 21% in just one year, reaching a valuation of USD 5.98 trillion in 2024 and is projected to surpass USD 9.7 trillion by 2029 if the growth persists [16]. Shariah-compliant instruments are unlocking innovative pathways to finance renewable energy, climate resilience and sustainable development projects [17].
Among its instruments, green sukuk is emerging as a critical enabler in transitioning to a low carbon economy and advancing the global sustainability financing agenda [18]. It is at the intersection of both Islamic finance and sustainable, ethical finance. These Shariah compliant bonds differ from conventional bonds by actively avoiding interest (riba). (See Article 1.3 for more detail on traditional GSS+ bonds)
The green sukuk market gained popularity following the issuance of the first green sukuk in Malaysia in 2017. In 2024, the global sukuk market surpassed USD 1 trillion, with issuance rising by 11%, demonstrating that ethical and values-based finance is expanding at a rapid scale [19]. Green sukuk now constitutes 10% of the entire sukuk market [20].
Malaysia has established itself as a global leader in Islamic finance, with the world’s largest sukuk market. In 2017, Tadau Energy issued the country’s first green sukuk, raising USD 59 million to finance a solar power plant under Malaysia’s Sustainable and Responsible Investment (SRI) Sukuk framework.
Since then, Malaysia’s green sukuk market has expanded rapidly - by 2019, the total value of Malaysian green sukuk had reached USD 1.25 billion. To date, approved green sukuk issuances total RM 3.7 billion, with RM 2.4 billion already deployed into renewable energy, emissions reduction, resource efficiency, and sustainable infrastructure.
The socio-economic impacts are tangible. These projects are projected to generate approximately 282,000 MWh of renewable electricity annually, reduce carbon emissions by 193,000 tonnes per year - equivalent to powering over 90,000 homes - and create around 3,000 jobs. Further, the projects contribute directly to SDGs 7 (clean energy), 8 (decent work), 11 (sustainable cities), and 13 (climate action), while supporting broader goals on innovation and responsible production.
What sets green sukuk apart is their values-led foundation. Shariah compliance ensures investments are not only financially sound but ethically responsible, embedding environmental stewardship and societal benefit into capital allocation. Malaysia’s experience shows that values-based finance can mobilise significant resources for climate and social impact, offering a powerful model for markets aiming to align capital with purpose, not just profit.
Islamic sustainable finance illustrates the power of embedding ethical and societal objectives directly into financial decision-making. Unlike conventional sustainable finance, which often focuses on risk management, regulatory compliance, or enhancing financial returns, values-led approaches like Islamic finance place purpose and impact at the forefront.
This distinction offers a broader lesson whereby aligning capital with explicit moral and social principles can mobilise resources more effectively, build societal trust, and create long-term resilience.
By prioritising values before financial return, Islamic finance shows how finance can be a vehicle for positive societal and environmental impacts and a tool for profit, reinforcing the idea that a purpose-driven approach strengthens the integrity, credibility, and transformative potential of sustainable finance as a whole.
While faith-based finance draws from a particular ethical or religious tradition, its lessons are universal. Despite the label of Islamic finance, growth in markets beyond Muslim majority countries, such as the UK, demonstrates the broad appeal and potential of values-based finance within the sustainable finance ecosystem.
Similarly, other faith-based finance movements (such as Christian Sustainable Investing [23]) can illustrate how similar frameworks can shape sustainable, responsible and resilient financial ecosystems as a whole. Collective alignment around shared principles, through faith or ethics, can truly mobilise resources for inclusive, long term change.
To conclude, both impact investing and Islamic sustainable finance demonstrates that finance can be more than just a tool for profit. It can also be a deliberate driver for societal and environmental good. By embedding ethical and moral objectives into financial decision-making, these approaches demonstrate how capital can be aligned with purpose, creating measurable positive outcomes while maintaining financial viability.
Placing values and purpose at the heart of investment decisions strengthens transparency, accountability, and trust. It complements technical and regulatory tools, mitigates the risk of greenwashing, and empowers capital to drive a just and resilient transition.
By integrating the sustainable finance ecosystem with the intentionality of values-led approaches, policymakers, investors, and institutions can create a financial system that is profitable and also truly sustainable, equitable, and prepared to address the intertwined challenges of climate change, inequality, and societal well-being.
The views expressed are for informational purposes only and do not constitute financial, legal, or investment advice.
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