Harnessing AI for a sustainable future: An ethical path for Islamic finance

Md. Touhidul Alam Khan, PhD :

In the fast-paced world of technological progress, few innovations have captured the imagination and potential for societal change, quite like Artificial Intelligence.

Its ability to analyze vast amounts of data, identify complex patterns, and automate decision-making processes is transforming industries across the globe. Nowhere is this transformation more urgent-and more promising-than in the pursuit of environmental sustainability and responsible finance.

Within this landscape, Islamic finance stands at a crossroads: it carries the sacred obligation to uphold ethical principles rooted in justice, stewardship, and compassion, while navigating the immense opportunities-and challenges-brought forth by AI.

The promise of this technology lies in its capacity to serve as a powerful tool for advancing green investments, improving resource management, and fostering sustainable development. Yet, it also demands careful, conscientious stewardship to ensure that the environmental costs of AI do not undermine these very goals.

Imagine a world where AI systems help identify sources of pollution with pinpoint accuracy, creating real-time pollution maps across cities and regions. These maps offer invaluable insights, guiding policymakers and industries towards effective measures to reduce harmful emissions, clean up polluted areas, and protect ecosystems.

In Muslim countries, where environmental challenges such as water scarcity and natural disasters are often acute, AI’s predictive power can serve as a lifeline-forecasting floods, wildfires, or droughts before they strike, thus allowing communities to prepare in time and minimize devastation.

In agriculture, AI’s influence becomes even more tangible. Farmers, equipped with smart, data-driven tools, can optimize water use, apply fertilizers more efficiently, and make better-informed decisions about planting and harvesting. The result? Higher crop yields, less waste, and a smaller ecological footprint-an outcome that aligns deeply with Islamic values of compassion and responsibility toward all living beings.

AI also plays a vital role in transforming supply chains, making them more transparent, efficient, and responsive. For Muslim families and communities, this means better access to food, medicines, and essentials, delivered through systems that reduce waste and promote responsible consumption.

The development of clean, renewable energy-using AI to design and optimize solar panels, wind turbines, and smart grids-further exemplifies how technology can help societies wean off fossil fuels and move toward a sustainable, eco-friendly future.

However, as promising as AI is, it comes with its own set of environmental concerns. Developing and maintaining AI infrastructure, powerful data centers, advanced processors, and sophisticated hardware-requires enormous energy resources. These facilities often depend on electricity generated from fossil fuels, contributing to greenhouse gas emissions and climate change.

The process of extracting rare metals used in AI hardware-metals like cobalt, lithium, and neodymium-is resource-intensive and often environmentally damaging, involving habitat destruction and water pollution.

Moreover, the carbon footprint of AI is not only about energy consumption but also about water use. Data centers and hardware manufacturing demand vast quantities of water, a sobering reality for many Muslim communities where water scarcity is an ongoing crisis. As AI systems grow more widespread, their water demands increase, further stressing already strained supplies necessary for agriculture, human consumption, and ecosystems.

Adding to the challenge is the issue of electronic waste. When hardware becomes obsolete, it produces e-waste that can be hazardous if not properly recycled-posing long-term threats to health and the environment. These hidden costs highlight that, despite its potential benefits, AI’s development must be carefully managed to prevent unintended harm.

Islamic financial institutions and policymakers must adopt a comprehensive, conscious strategy. First, efforts should focus on making AI systems more energy-efficient-optimizing algorithms, deploying renewable energy sources for data centers, and designing hardware that minimizes resource consumption.

This not only reduces environmental impact but also aligns with the Islamic ethic of moderation and responsible use of resources. Next, raising awareness and educating stakeholders-whether investors, regulators, or consumers-is essential.

Understanding the profound environmental implications of AI encourages responsible behavior and informs better decision-making. Islamic financial institutions can take a leadership role by promoting transparency, advocating for eco-friendly standards, and encouraging innovations that prioritize sustainability.

Finally, adopting a eco-friendly approach to hardware – favoring recycling, reuse, and sustainable manufacturing practices – can help mitigate the environmental scars of technological progress. By fostering a culture of environmental consciousness, Islamic finance can transform AI from a double-edged sword into a beacon of sustainable development.

The journey toward responsible AI development can draw inspiration from traditional Islamic intellectual thought. Classical studies, such as ‘The Secrets of Eloquence and Proofs of Inimitability,’ emphasize that the true essence of knowledge lies not just in data or facts, but in understanding the meanings and intentions behind them.

This philosophical perspective underscores that artificial intelligence should not only process information but also grasp the deeper purpose and ethical implications of its actions.

As the world grapples with climate change, resource scarcity, and social inequalities, the transformative power of AI offers both hope and responsibility.

For Islamic finance and Muslim societies, this technological revolution presents an extraordinary opportunity to champion sustainability, justice, and ethical innovation. Balancing the benefits of AI with its environmental costs requires a conscious, disciplined approach-one that embodies the principles of Maqasid al-Shariah. It involves investing in green technologies, setting ethical standards, fostering education, and drawing wisdom from Islamic tradition to guide progress responsibly.

The path ahead is clear: harness AI as a tool for good-serving humanity, protecting the environment, and upholding divine mandates. By doing so, Islamic finance can lead the way in demonstrating that technological progress need not come at the expense of the Earth, but can instead become a catalyst for a more just, sustainable, and compassionate future.

(Dr. Md Touhidul Alam Khan is the Managing Director & CEO of NRBC Bank PLC and fellow cost & management accountant from Institute of Cost & Management Accountants of Bangladesh (ICMAB). He is also the first certified sustainability reporting assurer (CSRA) in Bangladesh).