Mid Year Update From UKIFC
As we arrive at the mid-point in the year we are sharing this update on our work to promote and enhance the global Islamic and ethical finance industries.
The Islamic Finance Council UK (UKIFC) has been at the forefront of pioneering initiatives, fostering collaborations, and influencing policy to create a more inclusive and sustainable financial ecosystem.
Our efforts span a diverse range of activities, including educational programs, thought leadership, and strategic partnerships, all aimed at integrating ethical principles into mainstream finance. Through our ongoing advocacy and capacity-building endeavours, we strive to bridge the gap between conventional and Islamic finance, ensuring that financial practices adhere to both ethical standards and faith-inspired principles. We are committed to driving innovation and best practices, thereby contributing to a resilient and responsible global financial system.
Islamic Sustainable Finance – Ecosystem Development
- We signed a Memorandum of Cooperation with MIFC on 28 May 2024 in Kuala Lumpur at the Global Forum on Islamic Economics and Finance, under the auspices of the Prime Minister of Malaysia to further the development of the global Islamic finance sector with a focus on sustainability (see picture above).
- Guidance on Green, Social, and Sustainability Sukuk: As Secretariat of the High-Level Working Group on Green Sukuk together with the London Stock Exchange Group, Islamic Development Bank and International Capital Market Association (ICMA), we successfully published guidance for issuers and market participants with practical information on how sukuk may be labelled as green, social or sustainability under the ICMA Green Bond Principles.
- Introduction of the Islamic Sustainable Investing Platform (ISIP): Following our COP28 announcement the ISIP was formally released in Dubai, Istanbul and Kuala Lumpur in May. The ISIP is a listing of independently assessed, validated, and showcased Islamic investment products that are directly aligned to sustainability goals.
UK Market Development
- Alternative Student Finance (ASF): We were commissioned by the UK Government’s Department for Education (DfE) to work together with the Student Loans Company (SLC) to support a discovery process to identify the implementation requirements for ASF. Progress has been made with DfE following positive engagement with Under Secretary of State at the Department for Education, Baroness Barran. The process to operationalise the requirements to successfully deliver ASF we estimate could easily take 18 to 24 months with the timeframe being directly impacted by the introduction of Lifelong Learning Entitlement (LLE) which introduces a major change to student loans in general.
- All-Party Parliamentary Group on Islamic and Ethical Finance Call for Evidence: As Secretariat we led a call for evidence looking at “Financial Inclusion of Muslims in the UK”. Thank you to all those who supported the call. The summary of responses which provides an insight into the challenges and barriers faced by Muslim communities in accessing financial services in the UK are available here. With the pending General Election all APPGs are currently dissolved. We look forward to the APPGIEF being reconstituted following the election results.
Thought Leadership
- Unlocking Islamic Finance for Climate Insight Series: This insights series was launched to unpack the role Islamic finance can play in financing the transition to net zero.
- Green and Sustainable Sukuk Update 2023: Together with the LSEG/Refinitiv team this report was launched highlighting the growth in the market of green and sustainable sukuk
- Post COP28 reflections: Our post COP28 reflections blog post published by FaithInvest highlights the immense opportunity for Islamic finance to support the transition towards a cleaner energy future and enable investment consistent with both climate goals and faith-based values.
Convening and Connecting
- Unlocking Islamic Sustainable Finance Round Table (London): Last month we held an exclusive round table that formed part of the London Climate Action Week programme. The event brought together industry experts to discuss the latest trends and opportunities in sustainable finance within the Islamic finance context.
- Unlocking Islamic Sustainable Finance Round Table (Dubai): In May we held an exclusive round table in Dubai (as pictured above), which brought key stakeholders together to discuss how we can build an enabling environment in the UAE for Islamic sustainable finance.
- Earlier this month we partnered with FaithInvest and over 300 faith leaders at the global Focolare Movement gathering in Rome. With Islamic finance being uniquely the only form of recognised globally regulated faith-based finance, participants were particularly keen to understand what lessons they could take to help align their faith values with their financial transactions.
- Unlocking Islamic Finance Summit at COP28: The UKIFC’s “Unlocking Islamic Finance at COP28”, which formed part of the Path to COP28 campaign (the first, and largest finance-focused campaign for the Dubai Climate Summit), was hosted in partnership with DIFC and was the main (and largest!) event focused on Islamic finance attracting over 200 leaders and practitioners.
- During May we spoke at a number of international events including the GFIEF Summit and World Bank roundtable in Kuala Lumpur, EYDK Summit in Istanbul, and the Focolare Summit in Rome.
Upcoming Events
- Durham Islamic Finance Summer School (DIFSS) 2024: 29 July – 2 August 2024: We are delighted to be joining this year’s DIFSS. Running since 2006, it has established itself as the leading training and leadership programme in Islamic finance. For a 15% discount register through the UKIFC by contacting oyin@ukifc.com
- Unlocking Islamic Sustainable Finance Global Summit: To be hosted in the UAE in Nov/Dec 2024. Please get in touch if you are interested in partnering with us for the event.
We are excited about the rest of the year and the impactful initiatives and events we have planned. Thank you for your continued support and engagement with the Islamic Finance Council UK. Together, we can drive positive change and promote a more sustainable and ethical financial future.
Unlocking Islamic Sustainable Finance Round Table in Dubai
The Unlocking Islamic Sustainable Finance round table took place at the PwC Middle East office in Dubai on Thursday 23rd May 2024.
At the event, the Islamic Sustainable Investing Platform (ISIP) Application Guidelines were released and discussions with the UAE Central Bank were held on the implementation of the Central Bank’s Guiding Principles Regarding Islamic Sustainable Finance released just before COP28.
Participants included senior representatives of financial institutions and market makers such as the Mashreq Bank, Dubai Islamic Bank, S&P Group, Abu Dhabi Islamic Bank, London Stock Exchange Group, National Bank of Fujairah Islamic, Mashreq Bank, Ajman Bank, Dubai Islamic Bank, Emirates Islamic Bank, Standard Chartered Bank, Commercial Bank of Dubai, Abu Dhabi Islamic Bank, Emirates Islamic Bank, HSBC, PRI, and Emirates NBD.
Key discussion points from the session are summarised below:
Overview of Islamic Sustainable Finance
The opening remarks noted the growth of Islamic finance assets and the increasing issuance of green sukuk. Headline figures include:
- Green and sustainable sukuk issuances have surged, crossing $10 billion last year
- Islamic Finance Development report by ICD ELSEC, noted that the Islamic finance market is rapidly growing, with assets predicted to reach $6.7 trillion by 2027
Islamic finance and sustainability are critical areas that present challenges and immense opportunities at their intersection.
Global Ethical Finance Initiative (GEFI) and the Islamic Finance, Council, UK (UKIFC) highlighted their activities at the forefront of developing Islamic sustainable finance and mainstream sustainable finance ecosystems. Through collaborative efforts, they have launched several initiatives, such as the Global Task Force on Islamic Finance and UN Sustainable Development Goals (SDGs) and High-level Working Groups on Green and Sustainable Sukuk. These initiatives, alongside thought leadership, advocacy, and capacity building, aim to promote Islamic sustainable finance on a global scale.
Regulating Islamic Sustainable Finance – UAE Central Bank Approach
Discussions noted that despite being perceived as a natural leader in sustainability, Islamic finance initially did not take the forefront in this area globally. Historically, there was a misconception and a disconnect between the expectations of Islamic finance and the principles of sustainability. While Islamic finance inherently aligns with sustainability through its emphasis on ethical investments and social responsibility, it lacks a structured approach and clear guidelines. Recent developments, including the establishment of guiding principles and taxonomies, aim to bridge this gap. The UAE Central Bank recognised this gap and issued guiding principles in 2023 to encourage Islamic financial institutions to incorporate sustainability into their Sharia decision-making.
The guidelines are designed to prompt action and frame the concept of sustainability within shari’ah by reference to principles of socially responsible and ethical ownership and utilisation of wealth/resources (trusteeship, justice, equity, ihsan and adl). They utilise a framework derived from Sharia injunctions on permissible, recommended, obligatory, discouraged, and prohibited activities to evaluate investments through a sustainability lens.
Implementation considerations discussed include:
- lack of a taxonomy at present
- integrating this new layer into existing Sharia decision making processes without disrupting business flows and guiding the scholars through the process
- banks are exploring how best to develop internal processes and controls to comply with the principles
A financial institution shared its experience of using a two-screen process in implementing the guidelines. There is one Shariah screening process and then a second green or sustainability screening process. It was emphasised that this was not a combined process but rather two separate perspectives, the Islamic and the sustainability. Banks also shared how they internally score their clients and assess how they can help them on that journey toward net zero. Other examples from the banking industry highlighted the role of giving incentives to clients who reduce their water consumption or add renewable energy sources to their operations. Where targets are met discounts are applied on their financing rate.
It was suggested that the Central Bank should allow implementation of the guidelines in phases considering the current system has been operating for over 50 years. Other discussion points included the importance of giving incentives to banks and other ecosystem actors to adopt enhanced sustainability approaches. A point was also raised about further regulation that will guide banks on how to support Shariah scholars in the process of implementing the guidelines.
Introduction of the Islamic Sustainable Investing Platform (ISIP)
The ISIP was initially announced at COP28 and the platform application guidelines formally revealed at the roundtable. ISIP provides a listing of independently assessed, validated and showcased Islamic investment products that are directly aligned to sustainability goals. The platform draws inspiration from the concept of “Tayyib,” (meaning pure, wholesome, and impactful) and aims to encourage the development of Islamic sustainable finance.
Rather than add another burden, the ISIP approach leverages existing market frameworks like the Principles for Responsible Investment (PRI) that major Islamic investors have already adopted. Islamic financial institutions can apply to have their Sharia-compliant products across asset classes like equities, sukuk, real estate, and private equity assessed for sustainability criteria by independent third parties.
Summary
The roundtable facilitated an excellent set of engaging and insightful discussions amongst financial institutions in the UAE to explore how the Central Bank’s Guiding Principles Regarding Islamic Sustainable Finance can be effectively implemented. GEFI/UKIFC plans to host a larger Islamic Sustainable Finance event in Dubai in Q4 2024. Organisations interested in partnering are invited to get in touch.
Shaping a Sustainable Future: UKIFC's Impactful Journey at COP28 and Beyond
The Islamic Finance Council UK (UKIFC) was a strategic partner for the Global Ethical Finance Initiative (GEFI)’s #PATHTOCOP28 Programme – the first and largest finance-focused campaign for COP28.
The programme had seven high–profile events which included the Evening Lectures 'Adam Smith & Ibn Khaldun at #PATHTOCOP28, the COP28 Climate Finance Summit: Financing Survival which Scotland’s First Minister – Humza Yousaf; Unlocking Islamic Finance at COP28, and the SDG Hive.
The Unlocking Islamic Finance Summit was the largest Islamic finance event at COP28. The event which had in attendance global experts and scholars in the industry, delved into discussions on Green and Sustainable Sukuk, transitioning from Halal to Tayyib by enhancing consideration of ESG factors, and the pivotal role of Shariah scholars in promoting sustainability.
The UKIFC has been at the forefront of advancing the intersection of Islamic finance and sustainable development over the years, we are therefore delighted to share some remarkable achievements and announcements that underscore our commitment to shaping a sustainable future through Islamic finance.
- PRE-COP28
Unlocking Islamic Finance Insight Series – LAUNCHED BEFORE COP
The UKIFC has released an Unlocking Islamic Finance Insight Series, a collection of blogs and articles that discuss key issues and opportunities in Islamic finance. This ongoing initiative aims to deepen understanding and awareness of Islamic finance through engaging discussions, webinars, and expert opinions. It includes articles about ESG Frameworks and the Imperative of Inclusivity, Challenges of Islamic Financial Institutions Engaging with Net Zero Frameworks and Other Initiatives, and Green Sukuk for Nature and Biodiversity Conservation: the Next Frontier.
Other Islamic Finance News
We are also happy with the launch of the annual report on the Islamic finance industry, titled “Navigating Uncertainty” by our partner London Stock Exchange Group (LSEG) and the Islamic Corporation for the Development of the Private Sector (ICD) during the 18th AAOIFI-IsDB Annual Islamic Banking and Finance Conference.
The Islamic Finance Development Report 2023 states that the assets of the global Islamic finance sector grew by 11% to US$4.5 trillion in 2022, with 72% of the industry's total assets coming from Islamic banking. It is anticipated that the industry will expand by US$6.7 trillion by 2027, having grown by 163% since 2012.
- BLUE ZONE ANNOUNCEMENT
ICMA, IsDB, and LSEG Partnership for Green Sukuk Guidelines – LAUNCHED IN BLUE ZONE
UKIFC welcomed the collaboration between the High-Level Working Group on Green Sukuk (HLWG) with ICMA through its partners IsDB, and LSEG to produce a Green Sukuk practitioners’ guide which will be in line with the Green Bond Principles. This collaboration aims to support the growth of the green sukuk market, mobilizing climate finance from global capital markets. The guide will enhance investor awareness of the sukuk asset class, furthering our collective efforts toward climate and sustainability goals. The UKIFC continues to support the work of the HLWG as its Secretariat.
- UNLOCKING ISLAMIC FINANCE SUMMIT
Launch of Global Islamic Finance and UN SDGs Taskforce Key Outputs Report – LAUNCHED AT SUMMIT
With the close of the Global Islamic Finance and UN SDGs Taskforce(Taskforce) we released its final report - Global Islamic Finance and UN SDGs Taskforce Key Outputs Report which delves into all the activities and achievements of the Taskforce. It also highlights the integral role Islamic finance plays in contributing to the United Nations Sustainable Development Goals, offering insights and recommendations for a positive global impact.
Through advocacy efforts at major global forums and the production of technical resources, the Taskforce successfully engaged with four working groups, focusing on Disclosures and Reporting, Education and Awareness, Pakistan, and the High-Level Working Group on Green Sukuk (HLWG).
The UKIFC looks forward to working with partners who are eager to take the recommendations from the report forward.
Green Sukuk Updated Report 2023 – LAUNCHED AT SUMMIT
The HLWG remains the only workstream that continues after the successful tenure of the Taskforce. Its commitment to sustainable finance is further emphasized in the Financing a Sustainable Future Green and Sustainability Sukuk Updated Report 2023. This report which is an update to the 2022 report provides a comprehensive analysis of the latest developments and trends in the green sukuk market, showcasing Islamic finance's pivotal role in driving environmentally conscious initiatives. The report shows global green and sustainability sukuk issuances exceeding $10 billion in the first three quarters of 2023 as the instrument gains momentum for financing environmental projects.
According to the report, global Green and Sustainability Sukuk issuance has surpassed $10 billion in the third quarter of 2023 compared to $9.4 billion in 2022. Indonesia, Malaysia, and Saudi Arabia also collectively contributed 77% of the total cumulative issuance by Q3 2023, underscoring the key role played by these nations in driving sustainability within the Islamic finance sector.
Tayyib Secretariat Launch – LAUNCHED AT SUMMIT
This global initiative, unveiled at GEFI's Unlocking Islamic Finance Summit in Dubai, developed following a year-long market assessment by UKIFC and GEFI. The Tayyib approach leverages the Shariah-compliant model of Islamic finance to cultivate an enhanced ESG and sustainability framework. Positioned as a potential best practice approach to responsible investing, the Tayyib Inspired Secretariat, a collaborative effort involving Malaysia, the UAE, and the UK, aims to develop Tayyib-inspired investment principles, foster market expansion, and contribute to the mainstream sustainable finance sector.
Co-managed by UKIFC and ISRA Consulting, with DIFC as the Host Financial Centre and PwC Dubai as the Technical Partner, the Tayyib Secretariat boasts an Advisory Panel representing Shariah scholars, multilateral bodies, and industry developmental stakeholders, along with an Industry Consultation Group to ensure comprehensive support and collaboration.
- UKIFC WIDER ENGAGEMENT AT COP28
Our Director and Advisory Board Member, Omar Shaikh attended three equally important events at COP28. He moderated the Fireside Chat titled “Leveraging Islamic Finance for Sustainability: MENA and ASEAN Perspectives” on 3rd December. The event was held at the Malaysia Pavilion. The theme for the Malaysia Pavilion for COP28 was “Going Beyond: Green Growth, Resilient Community, Liveable Planet”.
Experts on Islamic finance and sustainability gathered to discuss leveraging Islamic finance instruments to promote sustainability initiatives in the MENA and ASEAN regions, exploring the latest trends while considering the unique regulatory environments. Panelists addressed the current Islamic finance landscape and sustainability challenges, shared success stories demonstrating Islamic finance's pivotal sustainability role, and offered solutions to specific regulatory and practical obstacles.
On 4th December, he was a panelist at a UNHCR & Greenpeace Session on “Islamic Social Finance for Climate Action” held at the Faith Pavillon (Blue Zone). The discussion centred on how Islamic social finance might help address crises involving displacement, highlighting the innovative ways that the UNHCR has used zakat, sadaqah, and waqf as sustainable finance solutions.
At the Knowledge Hub on the 5th of December, he was one of the key stakeholders who attended the “Empowering society through financial resilience” event which was hosted by Abu Dhabi Islamic Bank (ADIB), in partnership with the London Stock Exchange Group (LSEG). The gathering brought together influential industry participants to explore market insights and trends with a particular emphasis on the role Islamic finance can play in advancing sustainable development goals (SDGs).
- CONCLUSION
UKIFC's recent achievements stand as a testament to the collective dedication and expertise of our community. The Unlocking Islamic Finance Summit emerged as a significant highlight of COP28, gathering global experts and scholars to explore themes like Green and Sustainable Sukuk, transitioning from Halal to Tayyib with enhanced consideration of ESG factors, and the crucial role of Shariah scholars in promoting sustainability.
The summit also witnessed the launch of the Global Islamic Finance and UN SDGs Taskforce Key Outputs Report and the Tayyib Secretariat, a transformative global initiative. With Islamic finance assets projected to grow 163% by 2027, the UKIFC remains committed to harnessing the industry's immense potential through strategic partnerships and initiatives promoting sustainable development.
Countdown to COP28
The countdown to the 28th UN Climate Change Conference of the Parties (COP28) has begun. As the world gears up to address the cross-cutting themes of finance, technology, innovation, and inclusion, here are key reasons you should keep an eye on COP28:
- Learn about the latest trends:
Islamic finance principles of social responsibility naturally align with sustainability objectives. With COP28 being hosted in Dubai, there will be more of a focus on Islamic Finance than ever before, offering an opportunity to understand how Islamic finance instruments like green sukuk can support climate mitigation and adaptation projects. The Global Ethical Finance Initiative (GEFI) in partnership with the Islamic Finance Council, UK (UKIFC) is putting together the largest Islamic Finance focused event at COP, set to share insights on how Islamic finance offers an ethical model for financing sustainability.
- Ethical Investments:
, aligning well with the goals of COP28. There will be opportunities to explore ethical investments that adhere to both Islamic finance principles and environmental sustainability. Companies like NuQi Wealth which provides opportunities for ethical investment will be at COP.
- Contribute to shaping policy:
With sustainability a growing priority worldwide, policymakers are looking for solutions. COP28 will negotiate policies like emissions reductions, adaptation goals, and climate funding mechanisms. With key policymakers from all over the world attending, participants will have the opportunity to share their perspectives on how Islamic finance can be furthered through policies, regulations, and tax frameworks to drive sustainable development.
- Join the global community:
COP events are global in scope, with participation from governments, businesses, and organizations from around the world which offers the chance for attendees to network and collaborate with international stakeholders who are shaping the future of finance and sustainability.
Islamic banks like Gatehouse Bank, takaful providers, law firms, fintechs, consultants, and other professionals will be in attendance. Also, DDCAP Group, a company that offers the Islamic financial sector ethical, sustainable intermediary services, will be at COP28.
- Innovative Solutions:
The conference is a hub for innovation and solutions. Discover the latest advancements in green technology, climate mitigation, and adaptation strategies.
The UKIFC will be launching the Tayyib Project at the Unlocking Islamic Finance Summit at COP28 on Tuesday, 5th December 2023. This innovative kitemark unites best practices of ESG and Shariah compliant finance, aimed at facilitating the development of sustainable financial products that are both Islamic and conventional finance approved.
The "Unlocking Islamic Finance at COP 28" event is where the intersection of Islamic finance and climate action will take centre stage. Learn more about it here!
#IslamicFinance #COP28 #Sustainability #EthicalFinance
Reflections from the SDG Hive Islamic Finance and ESG Session
In a rapidly evolving world where the concept of sustainability has gained paramount importance, the intersection of Islamic finance (IF) and Environmental, Social, and Governance (ESG) principles has emerged as a topic of great significance. I recently had the privilege of attending a thought-provoking session at the Global Ethical Finance Initiative (GEFI) SDG Hive, where experts like Dr. Hayat Sindi, Tan Sri Azman Mokthar, and Dr. Akram Laldin discussed the integration of IF with SDGs. Here, I'd like to reflect on the key takeaways from this enlightening session titled – “How Islamic finance and its approach can be integrated with the wider ESG movement; what can each discipline learn from the other?”
Understanding Halal and Tayyib: Tan Sri Azman set the stage by elucidating the Islamic concepts of "halal" (permissible) and "tayyib" (pure and wholesome). While "halal" addresses what is allowed, "tayyib" goes further by encompassing the idea of doing no harm. This holistic perspective, deeply rooted in Islamic values, resonates with the principles of responsible and impact investing. It emphasizes the importance of not just complying with religious guidelines but also considering the broader societal and environmental impact of financial decisions.
The Historical Evolution of Islamic Finance: A historical overview by Tan Sri Azman revealed that Islamic finance traces its roots back to the 13th century but gained prominence in the 20th century, particularly in post-colonial economies like Malaysia. Malaysia's journey from a halal-based economy to one with trillions of Islamic assets underscores the substantial growth in this sector. However, it also raises questions about whether this growth adequately addresses issues of substance, sustainability, and inclusivity.
Shariah Principles and Innovation: Dr. Akram elaborated on the core principles of Shariah in financial transactions, emphasizing that innovations are allowed as long as they do not contradict the Quran and Sunnah. This flexibility allows for creative financial solutions. However, the focus shouldn't merely be on whether a transaction is "halal." We must delve deeper and assess its environmental and social impact.
ESG and Shariah Compliance: Dr. Akram highlighted the commonalities between ESG criteria and Shariah principles, noting that both aim to promote ethical and responsible behaviour. While ESG criteria are generally considered compliant with Islamic finance, the challenge lies in implementing them consistently across different jurisdictions. Achieving standardization in this regard remains an ongoing effort.
Language and Inclusivity: A crucial point raised during the Q&A session was about language and inclusivity. Ms Modupe Ladipo noted that using Arabic terminology often excludes people and suggested the use of more inclusive language. Dr. Akram's response emphasized the adaptability of Islamic finance terminologies to local contexts. Rachel A. Aron stressed the importance of outreach programs to promote understanding, understanding the existing framework, and engaging the regulators in those countries was important.
Shared Values and Positive Impact: The discussion also touched on shared values and positive impact. It was intriguing to learn how different faiths are shifting their perspectives on financial matters, moving from a focus on avoiding harm to actively seeking positive impacts. This shift is reflected in various initiatives, including investment in small businesses and the issuance of ESG-compliant bonds by churches.
Project Tayyib: Omar Shaikh highlighted that Project Tayyib was set to launch at COP28. The goal is to launch the first Islamic asset management kitemark, which asset managers can aim for and achieve provided they adhere to ESG investment best practises while remaining Shariah compliant and would cover four asset classes.
Responsible Banking: Andy Homer of Gatehouse Bank spoke about its Woodland account. He explained that for every such account opened, the bank plants a tree in the customer’s name. I found this really interesting especially when he said customers often drove to different locations within the UK to visit their trees.
The SDG Hive session on Islamic Finance and ESG provided valuable insights into the evolving landscape of responsible and sustainable finance. It reinforced for me the tremendous opportunity at the intersection of faith and finance. It underscored the need for Islamic finance to go beyond mere compliance and focus on the broader impact of financial decisions. Additionally, the session highlighted the potential for collaboration and the need for faith voices to be present in sustainability conversations. It is evident that the convergence of Islamic finance and ESG principles holds great promise for creating a more inclusive, sustainable, and ethically responsible financial ecosystem.
Islamic Finance and UN SDGs: A Customer Perspective
Two key publications highlight the nexus between Islamic Finance and the UN Sustainable Development Goals (UN SDGs). In these papers, about 2000 respondents were surveyed from different Islamic financial institutions around the world, including those in Pakistan, Malaysia, the UK, Australia, and Nigeria.
These reports were among the outputs of the Global Islamic Finance and UN SDGs Taskforce, an innovative public-private partnership that examines the potential contribution of the Islamic finance sector to closing this funding gap as well as the potential business opportunities the SDGs offer the sector.
In this blog, we discuss the main highlights of the Islamic Finance and the UN SDGs Retail Banking Customer Perspectives Global Survey 2023 and the Attitudes of banking customers towards the UN SDGs Global Survey 2023.
The first report found the following:
- Ethical Commitment: 96% of respondents emphasized the importance of their financial products aligning with their personal values and ethics emphasizing that customers are committed to ethical banking.
- Demand for SDG Products: A significant 90% of respondents highlighted the importance of their banks offering products that aligned with the UN SDGs, indicating a demand for sustainable financial offerings.
- Poverty Alleviation: Social responsibility proved to be a high priority as 95% of respondents rated reducing poverty to be of high importance.
- Sustainability Encouragement: A notable 71% stated that the alignment of financial products with sustainability would motivate them to use their bank's products more actively, hinting at the potential of sustainable finance to engage customers.
- Premium for Alignment: An impressive 87% of respondents expressed their willingness to pay a premium for UN SDG-aligned products, demonstrating a strong commitment to values-driven banking.
The second survey categorized the 17 SDGs into four core areas: Reducing poverty and hunger, Injustice and equality, Environment and climate change, and Sustainable economic development. These categories were further divided into the Global North and Global South. Global South consisted of banks in Pakistan, Nigeria, and Malaysia while the institutions in Australia and UK made up the Global North.
The key findings include:
- Regional Disparities and Priorities: While the Global North exhibited a higher response rate, it was in the areas of "Injustice and equality" and "Environment and climate change" where significant differences emerged. This suggests that economic SDGs tend to hold greater importance in the Global South, whereas social and environmental issues are relatively more critical in the Global North concerning the SDGs as a whole.
- Alignment with Core SDG Areas: Survey participants overwhelmingly endorsed the alignment of Islamic finance with the four core SDG areas (reducing poverty and hunger, equality, environment, and economic development), with over 90% considering this alignment vital.
- Terminology and Awareness: There were disparities in terms of terminologies. For instance, "Net Zero" displayed significant awareness disparities between the Global North and Global South. “Impact investing" was more recognized in the Global South, while "ethical finance" garnered higher awareness in the Global North. This indicates that respondents in the Global North may possess a somewhat higher awareness of certain trends, especially those related to sustainability.
- Alignment with Core SDG Areas: Survey participants overwhelmingly endorsed the alignment of Islamic finance with the four core SDG areas (reducing poverty and hunger, equality, environment, and economic development), with over 90% considering this alignment vital.
- Seeking Information: Finally, the survey explored how respondents accessed information, with social media and website news emerging as the primary sources in both the Global North and Global South. Facebook was the preferred platform in the Global South, while LinkedIn took precedence in the Global North.
Overall, the surveys revealed respondents across regions showed keenness for aligning financial products with the SDGs once they understood the SDGs, moderate overall awareness of the SDGs, and a substantial willingness to pay for SDG-related financial products.
The SDGs represent an opportunity for Islamic finance institutions to drive sustainability and positive change. By utilising the SDGs in communications with customers about issues of social and responsibility, Islamic finance institutions have an opportunity to increase brand value and customer engagement.
By harnessing financial innovation to expand access to values-driven products, improve financial inclusion, support renewable energy investments, and finance projects alleviating poverty, Islamic banks and financial institutions can fulfill their purpose of bringing shared prosperity in an ethical manner.
Join us this Thursday for a lunchtime chat, 1:30 - 2 pm, where we explore these findings and learn more with Sultan Choudhury OBE.
Project Tayyib: Bridging Values and Finance
The Conference of Parties (COP) is the annual United Nations Climate Change Conference that started running in 1995. The purpose of this conference is to assess the progress made by signatories to the United Nations Framework Convention on Climate Change (UNFCCC). The upcoming COP is COP28 which is scheduled between Thursday, 30th November 2023, and Tuesday, 12th December 2023.
COP28 is poised to become a critical milestone for global cooperation, one with a clear aim of aligning climate action with the availability, affordability, and accessibility of finance. In the lead-up to COP28, the COP Presidency has been notably attentive to an array of financial challenges confronting the Global South. Insights from Dr. Al Jaber's discussions with delegates shed light on issues spanning limited access to climate finance and funding insufficiency to capacity limitations, uncertain revenue streams, and the weight of high transaction costs.
Amidst these challenges, the prominence of Islamic finance within the Global South emerges as a beacon of opportunity. This owes to the harmonious alignment of Islamic principles with ethical and socially conscientious values positioning Islamic finance as a significant catalyst for overcoming these financial hurdles.
Despite the inherent alignment of Islamic principles with ESG values, there remains a disconnect between Islamic financiers' investment practices and ESG investments. This can be attributed to their distinct theological foundations, sector focus, and differences in language. While Islamic finance adheres to Shariah principles, guiding permissible (Halal) and forbidden (Haram) activities, ESG investment encompasses a broader range of sustainability factors beyond those explicitly addressed in Islamic finance. Additionally, differing geographical prevalence and evolving awareness contribute to the gap. This was highlighted in the Islamic Finance and the UN SDGs - Retail banking customer perspectives Global Survey 2023 report. However, at the core of these differences lies the absence of specifically tailored guidance for Islamic finance institutions compared to their conventional financial counterparts, which has magnified what is known as the Halal-Tayyib gap in Islamic finance.
Islamic finance, in its true essence, does not only avoid forbidden activities (Haram) but also actively encourages endeavours that are wholesome, pure, and beneficial for individuals and the environment (Tayyib). This is based on the idea that there are distinct gradations within Fiqh (Islamic Jurisprudence) and the Quran beyond simple compliance of "Halal" or "Haram".
Inspired by the notion of Tayyib, Islamic Finance Council UK (UKIFC) and the Global Ethical Finance Initiative (GEFI) will formally launch Project Tayyib at the COP28 Summit in Dubai this December. The project seeks to introduce a verification kitemark that seamlessly melds established Shariah-compliant practices with considerations of climate resilience, biodiversity preservation, human rights, and other critical ESG factors. Shaped by extensive market analysis, Project Tayyib focuses on four asset classes - capital markets, debt, real estate, and private equity.
The Islamic finance market's impressive global worth, standing at $4 trillion and experiencing consistent year-on-year growth, represents an untapped source of capital that could significantly contribute to funding the transition towards net-zero emissions and the achievement of the UN Sustainable Development Goals.
The scope for unlocking substantial market opportunities through this alignment is also significant. Notably, ESG investing is projected to surge by 84%, surpassing $30 trillion by 2026, in parallel with Islamic finance's anticipated growth to $5.9 trillion. While currently only 5% of sukuk issuances align with green or sustainable criteria, the evident demand for such products is compelling. The UKIFC envisions a potential influx of $30 billion through the green and sukuk (Islamic bonds) market by 2025.
By harmonizing the burgeoning Islamic finance and conventional finance sectors inclusively, Project Tayyib holds the promise of fostering a broader positive societal impact. As the COP28 climate summit approaches in the UAE—a hub for Islamic finance—the prominence of the Tayyib Project grows, poised to mark a significant stride towards effecting transformative change at the convergence of finance and sustainability. The sector’s engagement at COP28 will offer an opportunity for the industry to extend its commitment and bring its unique perspective and sustainable financing models to the global conversations.
Learn more about being a part of the Unlocking Islamic Finance Summit at COP28 here, and explore GEFI's Path to COP28 programme here.
Discover how you can participate in the Unlocking Islamic Finance Summit at COP28 here and visit this link to learn more about GEFI's Path to COP28 programme.
UKIFC to host Global Islamic Finance and the SDGs Series 2022
Global Islamic Finance and the SDGs Series (19, 20, 21 September)
UKIFC in partnership with United Nations, GEFI, Refinitiv and IsDB is organising a virtual global summit on Islamic finance and the SDGs, to coincide with the UN General Assembly 2022 and taking place on 19, 20 and 21 September. Click here to sign up now, or click here to find out more.
'The Future of Green and Sustainable Finance'- UKIFC at Dubai Expo 2020
The UKIFC are thrilled to be delivering a Global Leaders event in partnership with the Global Ethical Finance Initiative, as part of the Scottish Government’s Expo 2020 Dubai Race to Net Zero Day. Taking place in Dubai International Financial Centre, the event will look at future of green and sustainable finance with a particular focus on financing the UN Sustainable Development Goals (SDGs).
Speakers include:
- HE Dr Reza Baqir, Governor, State Bank of Pakistan
- Christian Gueckel, Chief Risk Officer, Head of Research, Sedco Capital
- Ivan McKee, Minister for Business, Trade, Tourism and Enterprise, Scottish Government
- Mustafa Adil, Head of Islamic Finance, Data & Analytics, London Stock Exchange Group
- Graham Burnside, Senior Advisor, GEFI & Chair, UKIFC
- Syed Samar Hasnain, Executive Director, State Bank of Pakistan
- Omar Shaikh, Managing Director, GEFI
Scotland has a unique and strong heritage in ethical finance through the world’s first mutual savings scheme, the world’s first savings bank and indeed the father of modern economics Adam Smith. Smith’s reconciliation between self-interest and innate goodness through his enquiries into moral philosophy and the causes of the wealth of nations created the chassis by which modern markets and economies functions.
With the meteoric rise of ethical/sustainable finance (over $80trn signed up to PRI) once again modern markets face the challenge of reconciling profit and purpose. This event will unpack and explore key thematic in the financial markets in addressing this global trend which aligns with Expo 2020 Dubai’s focus on sustainability and the UN SDGs.
We will also be officially launching our latest report with State Bank of Pakistan (SBP on implementing the SDGs into national economic framework.
There is still time to register to join us here.
'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