The Gulf’s sustainable-debt boom is being led by Islamic finance — and that raises a specific, fascinating question about whether a carbon asset can ever sit underneath a sukuk. The honest answer is: not easily, but an insured one gets closer than anything before it.
Most conversations about carbon and finance start in Europe or North America. This one starts in the Gulf, because that is where sustainable capital is growing fastest, and because the way it is being raised there creates a puzzle worth understanding — one that happens to sit right at the edge of what a carbon asset like LMCX can do.
The boom is real, and it is Islamic
Begin with the market, because the market is not in dispute. In 2025, global sustainable-bond issuance shrank by roughly a fifth. The Middle East went the other way. S&P Global projects regional sustainable-bond issuance of $20 to $25 billion in 2026, and the engine driving it is Islamic finance. Sustainable sukuk — the Islamic equivalent of a bond — accounted for more than 45 percent of the region’s sustainable issuance by value in 2025, up sharply from the year before, with the United Arab Emirates and Saudi Arabia together making up the bulk of it.
For anyone raising or arranging sustainable capital in the region, this is simply where the money is. The open question — the one that keeps arrangers up at night — is what kinds of assets are actually allowed to sit underneath a sukuk and carry an environmental mandate through it. And that is where carbon runs into a wall that a conventional green bond never has to face.
What a sukuk requires that a bond does not
A sukuk is not just a bond written in different language. It has to represent a real ownership stake in something identifiable. That single requirement creates two demands that a conventional bond never has to meet.
The first is tangibility. A sukuk has to be backed by real assets, not just a promise to pay. Market practice — grounded in the standards set by AAOIFI, the main Islamic-finance standards body — generally holds that the tangible-asset content of a tradable sukuk has to be predominant. A commonly cited rule of thumb is that tangible assets should make up at least 51 percent of the portfolio for the certificates to trade freely at market value, with a lower floor of about one-third below which the instrument is treated as mostly financial and generally cannot be traded except at face value. A proposed revision, AAOIFI’s draft Standard 62, would push the market even further toward genuine asset-backing, and it is still under active review — so the rules themselves are moving.
The second demand is certainty. Islamic finance prohibits what is called *gharar* — excessive uncertainty about what a contract actually covers, whether the underlying thing exists, and what it is worth. This is the deeper principle beneath the tangibility rule: what you own and trade has to be identifiable, real, and reliably valued. And this, more than anything, is the requirement most carbon assets fail. It is also, as it happens, precisely the requirement the LMCX structure was built to address.
The honest question about carbon and tangibility
It would be easy — and wrong — to claim that a carbon avoidance token simply passes the Islamic tangibility test. It does not, at least not as a settled matter, and any serious arranger will know it. Even scholars who are sympathetic to carbon markets generally classify credits as intangible — closer to a right or a permission than to a physical object. And avoided-emissions credits, which represent something that did not happen rather than a physical quantity you can point to, sit at the very hardest end of that debate. Whether a carbon credit even counts as tradable property in the first place is genuinely unsettled across the different schools of Islamic thought, there is no AAOIFI consensus, and no green sukuk anywhere has ever used a carbon credit as its underlying asset. An arranger looking at this is doing frontier work, not filling in a familiar template.
What LMCX brings to that frontier is not a claim that the debate is over. It is a much stronger set of facts than a bare credit offers. The token is a legally perfected ownership interest — a specific, controllable digital record over which the holder has exclusive, transferable control under U.S. commercial law — rather than a loose entry on someone else’s ledger. That does not, by itself, settle the tangibility classification. But it gives a Shariah board something concrete to examine: identifiable ownership, exclusive control, and a specific, well-documented underlying event. That is a far more solid starting point than the market has ever had before.
Where the insurance stack does the real work
Here is the key insight. The place where LMCX contributes most is not tangibility — it is certainty. The We2Sure–Lloyd’s structure goes directly at the *gharar* problem, the excessive-uncertainty concern that makes scholars cautious about carbon in the first place.
Think about what causes that uncertainty. Does the underlying reduction actually exist? Could the credit be duplicated or faked? Will it hold its value, or could it be invalidated or reversed with no recourse? The LMCX structure answers each of those. Existence and authenticity are monitored in real time by CarbonActuator’s satellite-and-AI verification. Value and performance are backed by an insurance policy of up to $100 million per wallet, written within the Lloyd’s chain of security, covering fraud, invalidation, reversal, and post-retirement reissuance. Simon Wigzell’s framing of the underlying idea — “converting intangible carbon credits into tangible assets” — is, in Islamic-finance terms, essentially a certainty argument: a case that the underlying can be made certain enough to own and to trade. That is exactly the argument an arranger needs to be able to make to a Shariah board, and it is the argument the insurance stack was built to support.
Sukuk requirement | A bare carbon credit | What LMCX adds |
Identifiable underlying | A ledger entry; ownership often unperfected | A legally perfected ownership interest with exclusive control |
Tangibility classification | Generally treated as intangible; avoidance weakest; unsettled | Does not resolve it, but presents concrete, documented ownership to assess |
Certainty of existence | Vulnerable to duplication and counterfeit | Real-time satellite-and-AI monitoring |
Certainty of value | Exposed to invalidation and reversal with no recourse | Insured to $100M per wallet within the Lloyd’s chain of security |
Precedent | No carbon-backed green sukuk exists yet | A first-mover structuring case, not a settled product |
The frontier framing: no one has yet issued a green sukuk backed by a carbon asset. That is a reason for care in how the case is made to a Shariah board — and an opportunity for the first issuer willing to build the structure properly. LMCX’s contribution is to make the certainty argument credible. The tangibility argument remains a scholarly question to be engaged, not a box to be checked. |
What this means for the region’s issuers
The strategic picture is straightforward, even if the technical one is not. The Gulf is raising sustainable capital through sukuk faster than any other market on earth, and sooner or later it will need underlying assets that can carry environmental mandates through a Shariah-compliant structure. Carbon is an obvious candidate — and an unproven one. What holds it back is not a lack of market appetite. It is the certainty and tangibility questions that Islamic finance rightly insists on answering first.
An insured, custody-controlled, legally perfected carbon asset is the version of that candidate most likely to clear those questions. Not because it ends the centuries-old debate about what counts as ownable property — it does not — but because it finally gives the scholars, the arrangers, and the issuers a concrete, well-documented structure to reason about, instead of a vague ledger entry. The first transaction that clears that bar will not just be a deal. It will set the template for every one that follows. And the structure most likely to get there first is the one that took the certainty problem seriously from the start.
Sources & framework references
- S&P Global via Arab News / CarbonCredits.com, 2026 — MENA sustainable-bond projection ($20–25bn, 2026) and the ~21% decline in global issuance in 2025.
- Sustainable-sukuk share of MENA issuance (>45% by value, 2025) — S&P Global.
- ICMA–IsDB–LSEG Guidance on Green, Social and Sustainability Sukuk, April 2024 — asset-based vs asset-backed; tangibility.
- AAOIFI Shariah standards and draft Standard 62; tangibility thresholds (51% / one-third) — finformed.org; White & Case.
- Global Ethical Finance Initiative roundtable on carbon credits — scholarly debate on carbon credits as property and their intangibility.
- LMCX structure, custody, and insurance terms — Last Mile Production (company documentation).