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.

Download the report.


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 REPORThttps://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


UKIFC appear on MetroTVNews Indonesia

UKIFC founder Omar Shaikh appeared on Indonesia's MetroTVNews to discuss Islamic finance, and its relationship to sustainable and responsible finance more broadly. Watch now:

https://www.youtube.com/embed/NgjXXR1C6so

UKIFC launch 'Pioneers of Islamic Finance' series on International Women's Day

UKIFC recently launched our brand new 'Pioneers of Islamic Finance' series on International Women's Day, highlighting Stella Cox's contribution to the UK's Islamic finance industry.

Stella sat down with Omar Shaikh of the UKIFC to discuss her experiences as one of the UK’s pioneers in Islamic finance. Stella speaks about her early days at Kleinwort Benson, her friendship with Shariah scholars, her journey founding DDCAP, one of the leading intermediaries in Islamic finance, and what the future holds for Islamic finance in the UK and beyond.

https://www.youtube.com/embed/EY3BlAGiJYM

Islamic finance has a long history, and is gathering momentum as a new generation embrace the power of digital technology. UKIFC has uniquely curated a Pioneers of Islamic Finance series with two key objectives:

  1. Use the wisdom and learning of the pioneers inform the next generation of business models, entrepeneurs and leaders in Islamic finance
  2. Preserve and document the journey of the pioneers and celebrate their contribution to the field

This fascinating series exlores the personal highs and lows and the professional successes and struggles they experienced. We ask what they would have done differently if they could turn back time and what advice they have for the next generation. Find out more at ukifc.com/pioneers

Forthcoming Interviews

The series of interviews is ongoing; contact us at info@ukifc.com if you would like to suggest a Pioneer whose story should be told.


UKIFC is proud to support the Path to COP26 campaign

UKIFC is proud to be a signatory of the Path to COP26 campaign from the Global Ethical Finance Initiative. We are supporting the Faith in the SDGs stream of the campaign, which seeks to bring together, diverse global faith groups to drive change in finance through ethical leadership and stewardship of their endowments, bringing faith to finance, and finance to faith at the crucial Glasgow summit in 2021

Alongside UKIFC, signatories include major financial institutions such as NatWest Group, Baillie Gifford and Aberdeen Standard Investments, professional bodies such as Chartered Banker and CISI, and campaign groups and NGOs including Make My Money Matter and NatureScot.


Muslim students still waiting for government funding plan - BBC News

UKIFC co-founder Omar Shaikh appeared on a BBC News video explaining some of the challenges that Muslim students are facing in accessing Shariah-compliant student finance - watch now.


Omar Shaikh delivers virtual lecture to World Muslim Communities Council

UKIFC Managing Director Omar Shaikh delivered a virtual lecture with the World Muslim Communities Council, on Saturday 5th December 2020. Entitled "Moral Economy and Green Recovery After Covid-19: Islamic Awqaf and Finance", the lecture affirmed that Islamic finance is moral financing and a means to carry out community activities and achieve human happiness. 

He added: “Islamic finance is a financing product that has a clear structure and focuses on alignment and avoids usury, because it is a green economy that achieves recovery with returns, social benefits and blessings in money, as well as it provides solutions to global challenges.”

He explained that in the face of the outbreak of the epidemic, we must seize opportunities for Islamic finance and endowments, as there are several challenges facing financing operations and traditional bank shares such as supply chains. He is stressing that the demand for products for the benefit of societies has led to an increase in profits and reduced costs for banks.

He called for a focus on ethical economics and sustainable banking through investment in markets and Sharia governance, as well as on sustainability goals by contributing to the eradication of poverty and achieving gender equality, by harmonizing Islamic finance. He is calling for rebuilding a new system of Islamic finance based on human welfare and serving the society.

During the lecture, Omar pointed out the experience of the countries of Scotland and the United Arab Emirates in being among the first countries that cared about the happiness of the individual to achieve emotional intelligence.

The World Muslim Communities Council is an international non-governmental organization, headquartered in the UAE capital Abu Dhabi.


Second Islamic Finance & SDG Taskforce meeting takes place

The second Islamic Finance and the UN Sustainable Development Goals (SDGs) Taskforce meeting has taken place virtually bringing together over 50 global Islamic finance leaders. At the meeting, convened by the State Bank of Pakistan (SBP) in partnership with the UK Islamic Finance Council (UKIFC), the SBP announced the launch of a country level working group bringing the leading banks across Pakistan to focus on green finance and the SDGs. Two further working groups, to be driven by Taskforce members, focused on Disclosure and Reporting and Education and Awareness were also announced.

The Taskforce is playing a leading role to encourage the adoption of the SDGs, highlight the green finance opportunity and promote the UN Principles of Responsible Banking within the global Islamic finance sector. This represents a $2.5 trillion global investment opportunity as part of the post-Covid-19 economic recovery. The Islamic Development Bank suggest that between $700m and $1trillion of this is within its member countries presenting an immediate opportunity for Islamic finance institutions.

State Bank of Pakistan Governor, His Excellency Dr. Reza Baqir, announced the launch of a Pakistan country working group that will:

“Explore the inherent strength of Islamic finance to develop a responsible business framework by engaging academia, policy makers and practitioners towards achieving SDGs.”

Leading the Awareness group UKIFC Advisory Board Member and meeting chair, Richard de Belder commented:

“Having identified a knowledge gap this working group will focus on activities that increase awareness, promote understanding and encourage adoption of the SDGs amongst the global Islamic financial and their related primary stakeholders.”

Leading the Disclosure and Reporting working group Gatehouse Bank CEO Charles Haresnape added:

“This working group is a unique opportunity to bring the Islamic banks signed up to the UN Principles of Responsible Banking together to share experiences with a view to developing a more consistent approach to disclosure and report.”

Despite a natural alignment few Islamic financial institutions are engaged with the SDGs. As we enter the decade of delivery the Taskforce has become an important platform to raise awareness of the Global Goals and catalyse practical action amongst Islamic financial institutions.

The meeting, also heard from Dr Hayat Sindi, Senior Advisor to the President, Islamic Development Bank, who spoke about how Islamic financial institutions are demonstrating resilience as world events continue to reshape the landscape of global financial services; how IFI’s can prepare themselves for the opportunities and challenges posed by such a changing economy; and especially with regards to investing in science and innovation so poorer countries can provide an adequate response to the Fourth Industrial Revolution.

NOTES FOR EDITORS

About The Taskforce:

With assets expected to reach US $3.8 trillion in 2022, Islamic finance is one of the fastest growing sectors in the global financial industry. Achieving the 17 Sustainable Development Goals (SDGs) agreed in the UN’s 2030 Agenda for Sustainable Development will take over US$5 trillion per year investment with the current financing gap standing at around $2.5 trillion per year.

The purpose of the taskforce is to explore the role the Islamic finance industry can play in addressing this funding gap and to better understand the commercial opportunities the SDGs present for the sector.

The UN’s SDGs are the blueprint to achieving a better and more sustainable future for all, addressing issues such as climate change, education and equality. Achieving the SDGs requires a coordinated global effort with Governments and private sector, including the financial services sector as a whole. Analysis indicates there is limited engagement by the global Islamic finance sector and this focused taskforce has been established by the UKIFC.


UKIFC announces support of 'Faith In SDGs' and the Path to COP26 campaign

UKIFC is a signatory of the Global Ethical Finance Initiative's Path to COP26 campaign, and is collaborating on the #FaithInSDGs workstream, which forms a part of the campaign. Ahead of the crucial 2021 Glasgow climate summit, the two organisations are seeking to coordinate faith groups, who have the power to invest in transformative change through their holdings.


UKIFC Partnership with Alliance of Religions and Conservation (ARC) Discussed on the BBC

Omar Shaikh (UKIFC) and Martin Palmer (Alliance of Religions and Conservation (ARC)) appeared on BBC Radio Scotland's Sunday Morning with Ricky Ross to discuss a new and innovative partnership between the organisations which aims to promote a major shift in international ethical finance. ARC, UK-based international NGO linking religions with environment initiatives, was founded in 1996 by HRH The Prince Philip and current Secretary General Martin Palmer.

 

The agreement came after a delegation from ARC spent two days in Edinburgh, attending the UKIFC’s 15th Ethical Finance Round Table as well as meeting with representations of the Ethical Finance Hub, Scottish Government, Church of Scotland and others to discuss the possibility of a new faith-consistent investment unit being based out of the Hub in Edinburgh.

ARC has been working with the United Nations Development Programme (UNDP), Organisation for Economic Cooperation and Development (OECD) and faith groups from across the globe to explore the development an international faith-consistent investment alliance which seeks to address the challenges and opportunities posed by the SDGs. The UN recognises that traditional aid channels and funds are not sufficient or sustainable sources of finance to deliver the SDGs. The potential of the faiths, however, is significant.

Every religion has values and teachings that accord (in different ways) with at least some of the visions expressed in the SDGs. Faith investments (pensions, endowments and other portfolios) represent at least 12% of the total global capital market an estimated further 30% owned by people who are active followers of the major religions. Until recently, whilst some faith groups had negative screening policies (eg not investing in armaments or tobacco), almost none had proactive / positive investment policies (of what they would actively invest in to support a better future world in the future eg sustainable energy).

The UKIFC will join ARC’s steering group meeting at the UN office in New York on March 26 2018. The aim of the meeting is to discuss the purpose and structure of the proposed faith-consistent investment alliance and whether and how it might operate from three global centres, which might include the Edinburgh Ethical Finance Hub and possibly a centre in Zug, Switzerland.

ARC will also work with the UKIFC and the Church of Scotland to support the  development of shared values framework, to be launched in autumn 2018, by bringing in other faith groups to ensure the values are widely ratified.