New Report: Islamic Finance and the SDGs: Thought Leadership Summary
Islamic Finance and the SDGs: Thought Leadership Summary was launched during COP26 is available to read now now. This report is a short summary of a four-part thought-leadership series on Islamic finance and the Sustainable Development Goals (SDGs) delivered by the Islamic Finance Council UK (UKIFC) in partnership with the International Shari’ah Research Academy for Islamic Finance (ISRA) and the Global Ethical Finance Initiative (GEFI). The series is intended to inspire Islamic finance institutions (IFIs) to embrace the SDGs. This report contains the key findings from each of the four reports.
Click here to download.
New: Guidance Note for Islamic Finance Institutions
We’re delighted to announce that our latest Guidance Note for Islamic Finance Institutions reporting under the UN PRB is available now. The report was launched as part of our in-person events at COP26 in partnership with the Global Ethical Finance Initiative.
This guidance note addresses the specificities of Islamic financing modalities and providing common approaches for Islamic finance institutions (IFIs) to showcase the inherent similarities between Islamic finance principles and the UN Principles for Responsible Banking (PRB) in the PRB Reporting and Self-Assessment Template
Click here to download.
Media Release: HIGH LEVEL WORKING GROUP ON GREEN SUKUK LAUNCHED AT UN CLIMATE SUMMIT
Global finance leaders commit to unlocking US$30+ billion of capital through green and sustainability sukuk by 2025.
Glasgow, Scotland – 3rd Nov, The Islamic Finance Council UK (UKIFC), Her Majesty’s Treasury, Ministry of Finance in the Republic of Indonesia Ministry, Islamic Development Bank, London Stock Exchange Group and the Global Ethical Finance Initiative (GEFI) have come together today as founding partners to launch a High Level Working Group on Green Sukuk (HLWG).
The 3-year initiative will direct investment to reduce greenhouse gas emissions in the world’s regions in most need.
The announcement follows work of the Global Islamic Finance and UN SDGs Taskforce and a recent report “Innovation in Islamic Finance: Green Sukuk for SDGs” commissioned by UNDP Indonesia in which the UKIFC estimated that an additional US$30+ billion of capital towards the SDGs can be raised by 2025 through green and sustainability sukuk. To unlock this finance the HLWG has been launched to coordinate international efforts. The report showed how green and sustainability sukuk can be a viable financial instrument attracting billions of dollars of capital for green projects that support the delivery of the Paris Agreement.
Islamic finance is not limited to Muslim countries and has the potential to support the delivery of the more ambitious Nationally Determined Contributions that will be agreed at COP26. This will be particularly attractive to the Organisation of Islamic Cooperation (OIC) whose 57 member states represent over 1.82 billion people (24% of the total world population) and include a number of low-income countries that are politically or culturally marginalised.
The HWLG will be a focused, high-profile group of global stakeholders that will be led by the founding partners. The UKIFC together with Global Ethical Finance Initiative will act as Secretariat. The HLWG will focus on the following objectives:
- Ensuring green and sustainability sukuk is highlighted at annual COP summits up to and including 2023 to increase awareness of the instrument and proactively encourage the issuance of such sukuk by all market stakeholders (corporates, multilaterals and sovereigns) as a key Islamic financing key tool
- Assist and enhance existing established global standard setting bodies and regulatory initiatives run by the UN, IsDB and others (e.g. PRI, NGFS, Transform, PRB) to encourage better alignment of the Islamic finance industry with the global green and sustainability financial movement.
- Identify and address specific existing challenges for green and sustainability sukuk on the supply and demand side.
The HLWG launch was made today during the UKIFC’s Islamic Finance COP26 Programme that was held on the banks of Loch Lomond in Scotland. GEFI’s Path to COP26 campaign enabled Islamic finance experts from across the globe to come together to demonstrate the important role Islamic finance can play in supporting climate action in the global south and beyond.
ENDS
Quotes
John Glen, Economic Secretary to the Treasury and City Minister
“The UK has strong credentials in green and Islamic finance, and we’re proud to be a founding country partner of the High Level Working Group on Green Sukuk which launched at COP 26 in Glasgow. Green Sukuk offer countries and companies an important route to secure investment for sustainable projects, so it’s important we work globally to kickstart and grow this market.”
Sri Mulyani Indrawati, Minister of Finance, Republic of Indonesia
As a pioneer in the issuance of international Green Sukuk, the Ministry of Finance of Indonesia is honoured to be able to work together with Her Majesty’s Treasury, the UK Islamic Finance Council, the Islamic Development Bank, the London Stock Exchange Group and the Global Ethical Finance Initiative to further develop Green Sukuk market. The initiative aims to promote Green Sukuk as an alternative financing instrument, which combines two principles that are very much aligned, to a wider audience globally, and enabling issuers not to only tap Sukuk investors but also Socially Responsible Investment (SRI) investors across the world. The Republic of Indonesia is a keen promoter of the asset class and committed to further enrich and develop Green Sukuk, as seen by our consistent effort in issuing the instrument annually, and therefore, very excited to participate in this collaboration. We hope to be able to share our experiences and provide valuable precedents to the group, whilst at the same time learn and apply best practices or initiatives for the improvement of Green Sukuk. With the world recovering from global pandemic, it provides a momentum for nations, multilateral institutions, corporates across the world to work together to grow sustainably for future generations. We owe the sustainability and future of this planet to our children. Through better policy management, we could ensure this obligation to ensure a brighter future. This is not a choice. This is about humanity. We have no time to ignore. This is the time for us to have a real collaboration.
Julia Hoggett, Chief Executive, London Stock Exchange plc
“The launch of the High-Level Working Group on Green Sukuk is a significant milestone for the development of Islamic Finance and sustainable finance globally. I am delighted that LSEG is a founding member to help scale green sukuk through our markets and data, allowing companies to access finance in a manner consistent with their faith and values. Green sukuk are strongly linked to assets in the growing green economy, and can help mobilise the capital needed to fund the U.N. Sustainable Development Goals.”
“The Islamic finance industry has a key role to play in prioritising the climate and the broader SDGs going forward. These issues are naturally aligned to the principles of Islamic finance and promoting green sukuk will be a key route that can drive industry growth.”
Omar Shaikh, Board Member, UKIFC
NOTES FOR EDITORS
The Islamic Finance Council UK (UKIFC) is a specialist, not-for-profit, advisory and developmental body focused on promoting and enhancing the global Islamic and ethical finance industry. It has helped six countries develop enabling regulatory frameworks for Islamic finance, enhancing financial inclusion to over 15 million people, established the award-winning Ethical Finance Round Table series running since 2010, launched the world’s first joint venture between Islamic finance and the Church of Scotland, and delivered development sessions to over 500 Islamic scholars across the globe. In 2020 the UKIFC, alongside the British Government’s Treasury department, established the Islamic Finance and Sustainable Development Goals (SGDs) taskforce, which will be anchored in London.
UKIFC – https://ukifc.com/
SDG Taskforce – https://ukifc.com/sdg/
FOR MORE INFORMATION OR TO ARRANGE AN INTERVIEW PLEASE CONTACT:
Chris Tait – chris@ukifc.com / +44(0)7931 103573
'Faith in the SDGs Summit'- Join the UKIFC at COP26
Faith leaders have begun to take an increasingly active role in making the moral case for climate action, with the most notable recent example being the joint declaration between the Pope, the Archbishop of Canterbury and the Ecumenical Patriarch. Across the world, faith groups have always played an important role in embedding values into everyday life. Finance is not different, with faith groups among the earliest pioneers of ethical finance.
At COP26, the finance sector will confront the greatest ethical challenge it has ever faced: financing a Net Zero economy.
At the UKIFC, we believe faith-based finance has a key role in meeting this challenge, from making the moral case against climate action, to ensuring their endowments are invested responsibly.
This summit, delivered in partnership with GEFI, FaithInvest, Wahed Invest and Church of Scotland, will seek to build upon the historical role that faith groups have played in ethical finance by bringing together representatives from a number of faiths traditions. It will explore the religious response to climate change, showcasing some of the initiatives which are successfully translating faith values into financial practice and asking what more can be done by faith groups to successfully finance a transition to Net Zero.
Sign up now at https://www.eventbrite.co.uk/e/faith-in-the-sdgs-summit-tickets-181916797037
REPORT ANNOUNCEMENT: Islamic Finance: Shariah and the SDGs
With COP 26 in Glasgow just six weeks away, we’re delighted to have launched the final report in our 4-part thought leadership series ‘Islamic Finance: Shariah and the SDGs’ written in partnership with Malaysia based International Shari’ah Research Academy for Islamic Finance (ISRA). This latest report is designed to assist and encourage active engagement in support of the UN Sustainable Development Goals (SDGs) by the global Islamic finance sector.
The report highlights the US$5-7 trillion annual funding gap to achieve the SDGs by 2030 which cannot all be obtained from government or donor agencies. With its underlying Shariah principles, Islamic finance is naturally aligned and well positioned to lead the private financial services sector’s efforts towards funding the SDGs.
By providing a detailed analysis the views of Shariah scholars on the alignment of Islamic finance and the SDGs the report explores the current awareness levels and captures views on SDG implementation.
The UKIFC and ISRA have published this report to encourage Islamic finance institutions (IFIs) to embrace the SDGs and demonstrate that consideration for people, planet and purpose can coexist with profit and underpin the next generation of Islamic financial products.The SDGs have a clear development agenda, relevant to the world of Islamic social finance (zakat, ṣadaqah, waqf, etc.), but this report presents a clear challenge to the private Islamic finance sector to build the achievement of the SDGs into their commitments to the fight against climate change.
REPORT FINDINGS :
- The alignment of the SDG agenda and Islamic finance presents a clear opportunity to attract capital from across the global financial system. SDGs provide an opportunity to Islamic Banks and Financial Institutions that should be adopted as part of their business strategies.
- The SDGs are aligned to Maqasid al-Shariah (the objectives of Shariah) with very minor differences in certain aspects of Shariah.
- In pursuing SDGs in socio-economic activities, philanthropic instruments such as waqf, zakat and ṣadaqah will rank supreme due to their potential in instilling cooperation, solidarity and alternative finance.
- The issuance of sustainable sukuk has been part of the Covid-19 response through an alignment with the underlying principles of Islamic finance.
- The emergence of fintech should trigger innovations among the Islamic finance industry players and promote creativity by providing new perspectives and practices in financial transactions.
- Shariah scholars should understand the technical aspects of sophisticated financial instruments and the implementation of fintech in Islamic finance to keep pace with the developments that are taking place in the market. In this regard, Shariah scholars and industry players must work together to produce innovative Shariah-compliant products that fulfil the needs of the society and help in realizing the objectives of SDGs.
REPORT ANNOUNCEMENT: Innovation in Islamic Finance: Green Sukuk for SDGs
New report estimates an additional US$30-50bn can be raised by 2025 through green and sustainability sukuk to deliver the United Nation’s Sustainable Development Goals.
Indonesia – 28th September 2021, United Nations Development Programme (UNDP), in partnership with the Islamic Finance Council UK (UKIFC), has today launched a pioneering report setting out the important role Islamic finance can play in delivering the finance needed across the world’s most vulnerable regions.
The UN Climate Summit (COP26) in Scotland, in less than six weeks’ time, brings together world leaders to hammer out a deal to reduce greenhouse gases and adapt to the impacts of climate change. The report shows how green sukuk bonds can provide a major part of the US$100bn in climate finance needed for developing countries.
UKIFC Managing Director Omar Shaikh presented the report’s findings to over 500 senior finance leaders at the first Islamic Finance and the Sustainable Development Goals Virtual Global Summit that took place today.
Sales of new Green sukuk bonds have grown from US$500m in 2017 to US$3.5bn in 2019. The Republic of Indonesia (ROI), in partnership with the UNDP, issued the world’s first Government green sukuk in March 2018 (raising US$1.25bn) and the world’s first retail green sukuk in November 2019 (raising IDR1.4trn or USD$104.4m).
The report takes a detailed look at the best practice approach to green sukuk taken in ROI and other Islamic finance regions.
REPORT FINDINGS:
- Upfront investment is needed to develop a green framework and independent certification to assure investors that green sukuk bonds are not greenwashing.
- Demand from western global investors for Environmental, Social, and Corporate Governance (ESG) investments gives green sukuk bonds the opportunity to attract major new investors who otherwise would not have considered sukuk bonds for their portfolios.
- Green or sustainability sukuk bonds might lower the cost of raising vital climate finance. Malaysia has seen the largest volume of sukuk issuances supported and facilitated by a number of Government initiatives.
- Indonesia has a very limited corporate sukuk market and has not seen any corporate green sukuk issuances. There is a need to ensure sukuk have a level playing field with no additional burdens in comparison to conventional bonds; in addition, tax incentives could encourage corporate sukuk issuances.
- The opportunity is there for Shariah scholars to positively influence ESG aspects as part of their Shariah review of sukuk issuances.
- A challenge within the Islamic finance industry is the general lack of experience and depth of knowledge in relation to ESG matters. It is recommended organisations such as the Accounting and Auditing Organization for Islamic Financial Institutions take a lead and develop guidance for Shariah scholars.
The principles of Islamic finance are underpinned by the objectives of Islamic law and match many of the aims and objectives of the agenda for sustainable development goals adopted by all United Nations Member States in 2015 to provide a shared blueprint for an urgent call for action by all countries to end poverty, improve health and education, reduce inequality, and spur economic growth – all while tackling climate change and working to preserve our oceans and forests.
The report demonstrates how this unique alignment of the SDGs and Islamic finance provides a clear opportunity for green sukuk bonds to bridge the gap in private sector finance needed to meet countries’ climate targets and accelerate achieving their wider Sustainable Development Goals.
You can access the report in full here.
See also:
https://ukifc.com/sdg/
https://ifikr.isra.my/library/SR/1
Global Islamic Finance and SDGs Summit Launched
The UKIFC in partnership with UN and Islamic Development Bank is organising a virtual global summit on Islamic finance and the SDGs, to coincide with the UN General Assembly.
The summit will:
- Highlight the natural alignment between Islamic finance and the SDGs, based on the Maqasid Al-Shariah (higher goals of Islam);
- Examine some of the challenges for Islamic finance and the SDGs;
- Showcase the practical progress made by Islamic financial institutions on the SDGs, including multilateral organisations, governments, and commercial banks and asset managers; and
- Showcase the role for Islamic social finance in achieving the SDGs.
By focusing on the natural alignment between the Islamic faith and the SDGs, we will seek to drive engagement with and acceptance of the Goals among communities who might otherwise not engage with them. The summit will feature a mixture of high-level discussions about the global trends facing the Islamic finance industry, scholarly debate regarding the Goals, and practical showcases of SDGs in action in Islamic finance.
The Global Islamic Finance and SDGs Taskforce, initiated by the UKIFC, was launched by the UK Government together with IsDB to promote awareness and adoption of the SDGs amongst commercial Islamic financial institutions. This summit is informed by, and builds on, the work of the Taskforce and the UKIFC’s broader activities in promoting the SDGs and its work with GEFI as part of the Faith in Finance Path to COP workstream.
Confirmed Speakers Include:
- Dr Ahmed Al-Meraikhi, Special Adviser to the UN Secretary General
- Tan Sri Azman Mokhtar, Board Member, International Centre for Education in Islamic Finance
- Raja Amir Shah Raja Azwa, CEO, HSBC Amanah Malaysia Berhad
- Stella Cox CBE, Managing Director, DDCAP Group
- Rafe Haneef, CEO - Group Transaction Banking & Group Chief Sustainability Officer, CIMB Group
- Charles Haresnape, CEO, Gatehouse Bank
- Farmida Bi CBE, EMEA Chair, Norton Rose Fulbright
- Dr Akram Laldin, Executive Director, International Shariʽah Research Academy for Islamic Finance
- Arshad Mohamed Ismail, CEO, Bank Pembangunan Malaysia Berhad
- Najmuddin Mohd Lutfi, CEO, BIMB Investment Management Berhad
- Hajara Adeola, CEO, Lotus Capital Limited
- Omar Shaikh, Managing Director, UKIFC
To register your interest for the summit, follow the link to our sign up page.
UKIFC Featured on BBC Radio 4 Money Box
On Saturday 17th July, UKIFC were featured BBC Radio 4's Money Box (around the midday mark) discussing alternative Student Finance, and why Muslim students are not getting equal access to student loans. Whilst halal student finance has been in the pipeline for over eight years, the Department of Education has still yet to deliver on the promise first set out by former UK Prime Minister David Cameron in 2013.
You can watch a short 3 minute clip outlining the need for alternative student finance models below.
UKIFC launch 'Islamic Finance and the SDGs' report
The Islamic Finance Council UK (UKIFC), in partnership with Malaysia based International Shari’ah Research Academy for Islamic Finance (ISRA) and the Global Ethical Finance Initiative (GEFI), has today launched the third report in its 4-part thought leadership series that aims to assist and encourage active engagement in support of the UN Sustainable Development Goals (SDGs) by the global Islamic finance sector.
UKIFC Senior Adviser Sultan Choudhury will formally announce the report, to an audience of over 3,000 financial practitioners, at GEFI’s flagship annual Ethical Finance Summit.
The report provides an analysis of responsible banking in the Islamic finance sector, assessing the level of engagement with the Principles for Responsible Banking (PRB) amongst banks in Organisation of Islamic Cooperation (OIC) member states and analysing the approaches used by 9 Islamic finance signatories. It also features notes from interviews with Al Baraka Banking Group, Bank Pembangunan Malaysia Berhad, CIMB Group, Gatehouse Bank, Gulf International Bank (UK) and Jaiz Bank who have all shown notable leadership in responsible banking.
The PRB, which launched in 2019, is the world’s leading framework for responsible banking and is underpinned by six Principles that help signatory banks to align with the SDGs and the Paris Climate Agreement.
With its underlying Shariah principles, Islamic finance is naturally aligned to responsible banking and is well positioned to lead the financial services sector’s efforts towards achieving the SDGs. However, whilst a small number of organisations are making significant progress the report has highlighted the pressing need to raise awareness, in OIC member states and beyond, of responsible banking and the benefits to be achieved by integrating Shariah compliance with sustainable finance strategies and becoming PRB signatories.
TAKEAWAYS FROM THE REPORT INCLUDE:
- 49 of the 57 OIC member states do not contain any PRB signatory organisations.
- When the PRB was launched in 2019, 14.3% of the founding signatories were based in OIC member states. Now only 10.0% of the 221 PRB worldwide signatories are based within OIC member states despite the OIC member states having a collective population of over 1.82 billion (24% of the total world population).
- Of the 61 countries containing PRB signatory organisations, 13.1% are OIC member states.
- Within the 8 OIC members states that contain PRB signatories there are 22 signatory organisations, located in Africa (50.0%), Europe (27.3%) and Asia (22.7%).
- 38 PRB signatories offer Islamic finance products and services, which equates to 17.2% of all PRB signatories.
- The majority of Islamic finance institutions that are PRB signatories, 27 of the 38 organisations, are based outside OIC member states, across Europe, Asia, Africa, Oceania and the Americas.
- Only 3 of the 38 institutions offering Islamic finance products or services are fully Shariah-compliant, namely Al Baraka Banking Group (Bahrain), Gatehouse Bank (UK) and Jaiz Bank (Nigeria).
- The most popular Islamic product / service offered by non-OIC member states signatories is corporate finance, with 40.7% of signatories offering this. Amongst OIC member states the most popular product / services are personal banking and personal, business and corporate banking, at 27.3%.
PRB signatories are currently underrepresented in OIC member states, suggesting the PRB should increase its activities within OIC member states. Awareness of the PRB in OIC member states could be increased through working groups, targeted awareness and outreach activities. Given the mutual benefits of becoming PRB signatories to both Islamic finance institutions and the responsible banking industry, increasing engagement should be treated as a priority.
PRESS RELEASE: Major report finds only 1% of Principles for Responsible Investment worldwide signatories are based within Organisation of Islamic Cooperation member states
REPORT ANNOUNCEMENT
ISLAMIC FINANCE AND THE PRINCIPLES FOR RESPONSIBLE INVESTMENT
"Only 1% of Principles for Responsible Investment worldwide signatories are based within Organisation of Islamic Cooperation member states.”
UK – 24th March 2021, The Islamic Finance Council UK (UKIFC), in partnership with Malaysia based International Shari’ah Research Academy for Islamic Finance (ISRA), has launched the second report in its 4-part thought leadership series that aims to assist and encourage active engagement in support of the UN Sustainable Development Goals (SDGs) by the global Islamic finance sector.
The report provides a quantitative and qualitative analysis of responsible investing in the Islamic finance sector, assessing the level of engagement with the Principles for Responsible Investment (PRI) amongst financial institutions in Organisation of Islamic Cooperation (OIC) member states and analysing the approaches and terminology used by 12 Islamic finance signatories. It also features detailed case studies on BIMB Investment Management Berhad, DDCAP Group, GIB UK and Sedco Capital who have all shown notable leadership in responsible investing.
The PRI, which launched in 2006, is the world’s leading framework for responsible investment and is underpinned by six voluntary and aspirational investment Principles that support signatories to incorporate Environment, Social and Governance (ESG) issues into their investment practices. This enable signatories to align with the broader sustainable objectives of society – as currently best defined by PRI as the SDGs. The report uses the PRI as a proxy to demonstrate engagement with the broader fast growing global responsible investment and ethical finance market and explores if the Islamic finance sector is successfully engaging in such or missing out on a multi-trillion dollar commercial opportunity.
With its underlying Shari’ah principles, Islamic finance is naturally aligned to, not only support but, lead the financial services sector’s efforts towards achieving the SDGs. However, whilst a small number of organisations are making significant progress the report has highlighted the pressing need to raise awareness, in OIC member states and beyond, of responsible investing and the ‘triple bottom line’ benefits to be achieved by integrating Shariah compliance with ESG strategies.
TAKEAWAYS FROM THE REPORT INCLUDE:
- Of the 83 countries containing PRI signatories only 12 are OIC member states.
- These 12 OIC member states have 37 PRI signatories, comprising 24 investment managers, 4 asset owners and 9 service providers.
- Despite the OIC member states having a collective population of over 1.82 billion (24% of the total world population) only 37 (1%) of the 3,575 PRI worldwide signatories are based within them.
- Between 2008 and 2016 there were 9 PRI signatories based in OIC member states but since 2017 a further 28 new signatories have joined the PRI.
- Responsible investing presents an opportunity for Islamic asset managers to tap into emerging agnostic global liquidity pools seeking SDG-aligned products and increase their assets under responsible management.
- Aligning Shariah compliant and ESG investment strategies supports the tayyib concept enabling Islamic financial institutions to deliver financial returns and societal impact within the established shariah compliance framework. The tayyib thematic within Islamic finance presents one of the biggest growth opportunities for the industry.
With OIC countries amongst those in greatest need of SDG investment more work must be done to raise the profile and increase adoption of the PRI amongst the 57 OIC member states as well as the global Islamic finance investment community. By working together Islamic finance institutions have the opportunity to develop and position Shariah-compliant ESG engagement as a beacon of responsible investment.
ENDS
DOWNLOAD THE REPORT – https://ukifc.com/sdg/
“Islamic finance is naturally aligned with the UN Sustainable Development Goals (SDGs). But the low level of engagement with the Principles for Responsible Investment (PRI) in the OIC region means there is a huge opportunity. Through our Global Islamic Finance and SDGs Taskforce we have the platform to work with PRI and the Islamic finance sector to increase awareness, promote understanding and encourage adoption of the Principles.”
Omar Shaikh, Board Member, UKIFC
“We welcome this important report which aims to build on the nascent development of ESG investment and the SDGs amongst the Islamic finance community. The alignment of people, profit and planet and the drive to achieve a sustainable global financial system is a universal one; we invite asset owners, investment managers and service providers working in Islamic finance to join us at PRI to further this mission.”
Fiona Reynolds, CEO, Principles for Responsible Investment
