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.
The adaptability of Islamic Finance (IF) post Covid-19 - AAOIFI
During the recent AAOIFI webinar that took place on the 14th December 2020, much of the discussion was around the adaptability of Islamic Finance (IF) post Covid-19. The COVID-19 pandemic is an event which has provoked unprecedented reflections and shifts within the sector.
Many countries fell into economic depression despite government and central bank support, with supply chains, currencies and SMEs all affected. However, the pandemic also accelerated the set-up of the digitalisation trend - from the creation of blockchain technology platforms where users could mobilise funds in a transparent manner, to online banking, online schools, virtual meetings and more.
A study conducted by some of the participating banks in Turkey revealed that the pandemic presented some strengths where clients were giving priority to Murabaha debt to continue financing their business operations and there were no dealings in any derivatives instruments. It was also an opportunity for widening the distribution channels and increasing the number of customers. On the more challenging side, the contraction in economic activities caused a cash shortage in companies and where participating banks were not able to lend a helping hand. Participating banks had limited number of instruments for consumer credits.
In an Islamic Economic system, the gap between the real and financial sectors is non-existent. While the financial sector can move independently from the real sector (which is what happened during the financial meltdown of 2008, when profits were being made while the real economy shrank). It is evident that reform in IF is needed, and there is a huge opportunity for the industry to re-inject returns into the real economy towards the creation of employment and promoting real businesses. On the other hand, financial innovation relating to the environment such as green financing and sustainable financing is encouraged by the Maqasid Al-Shariah.
In this current climate the role of regulators is more imminent than ever in providing guidance & the necessary educational tools to Islamic Banks (IB) and the industry, especially where many Central Banks have failed to abide by Standards that are pillars to the economy. IFSB for example are working in line with Regulators in an attempt to bring together uniformity and good guidelines in the IB sector. The pandemic is placing enormous strains on corporate cash flows as business operations have temporarily ceased.
Banerjee et al (2020) estimate that 50% of firms in 26 advanced countries do not have enough cash to cover total debt servicing costs over the coming years. Some guidance for governance during the pandemic included:
- Board & executive directors are recommended to implement crisis management plans. Such crisis management plans should cover reporting practices and governance issues.
- Boards are recommended to emphasise stakeholders’ needs and ensure transparent reporting of transactions arising due to the pandemic (moratorium payments).
- Boards are recommended to emphasise ethical considerations while developing strategies to handle the pandemic.
- Sharia boards are advised to develop pro-active measures to ensure sharia compliance.
Some opportunities for IFIs included:
- Social safety net – IFIs need to develop fiscal plans for a sustainable future.
- Islamic Social Finance tools – e.g. Qard Hassan, Sukuk, Waqf, Zakaat are available for IFIs
- Fintech (Mobile banking, Sharia compliant crowdfunding, Islamic micro finance & smart contracts).
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 supports Ethical Finance 2020
UKIFC was proud to be s upporter of Ethical Finance 2020. The annual summit, organised by the Global Ethical Finance Initiative, was held virtually for the first time in 2020 on the new EFx platform. The 4 days of the summit saw leaders from across finance participating in discussion on ethics, responsibility and sustainability in banking, investment, insurance, regulation and more.
Figures at the summit included H.E. Dr Bandar Hajjar, President of the IsDB, Eric Usher, Head of UNEP FI, economist & author John Kay, Rafe Haneef of CIMB, Richard Curtis, filmmaker & campaigner, Alison Rose, CEO of NatWest Group, Hasan Aljabri, CEO of SEDCO Holding Grouo, Samer Abu Aker, CEO of SEDCO Capital, Nigel Topping, the COP26 High-level Climate Action Champion, and Maunel Pulgar-Vidal, President of COP20.
Videos from all of the sessions are available now on YouTube.
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.
Inaugural Islamic Finance and the SDGs taskforce meeting takes place
The inaugural Islamic Finance and the UN Sustainable Development Goals (SDGs) Taskforce meeting took place virtually, in light of the Covid-19 pandemic, bringing together over 40 global Islamic finance leaders. The pioneering meeting, convened by the Islamic Finance Council UK (UKIFC) in partnership with the UK Government, explored the role Islamic finance can play in addressing the $2.5 trillion SDGs funding gap as part of the post-Covid-19 economic recovery.
Islamic Development Bank President Bandar Hajjar welcomed the initiative calling for greater cooperation between the public and private sectors and to use the SDGs to inspire financial innovation.
UKIFC Confirms Support for Ethical Finance 2019
We are delighted to be formally supporting the Ethical Finance 2019 summit; the premier event in Edinburgh advocating finance for positive change. The 2 day gathering of banks, investors, asset owners, regulators and development agencies from across the globe will explore the transition to a sustainable financial system where capital drives positive change.
The summit on October 8 and 9 is being organised by the Global Ethical Finance Initiative and is supported by the Scottish Government. Bodies represented will include the United Nations, Bank of England, Financial Conduct Authority, RBS, Baillie Gifford and HSBC. It is the fourth time the summit has been staged in Edinburgh, and it will be attended by over 400 senior representatives from more than 200 companies and organisations from across the globe.
As part of the Ethical Finance summit UKIFC and Church of Scotland are co-hosting a private round table and dinner with global industry leaders / senior religious guests. The event, which will take place in Edinburgh on Wednesday 9th October 2019, will look at interfaith collaboration and the role of faith based values in modern finance. It will provide a unique opportunity to discuss progress and next steps in relation to the Edinburgh Finance Declaration.
We have a limited number of discount codes (applicable to early bird rates) for Ethical Finance 2019 so please get in touch with info@ukifc.com for details.
- Financing Sustainability: Designing for A Future on Earth
- SDGs and the UN Principles for Responsible Banking
- Worthy of Trust? Law, Ethics and Culture in Financial Institutions
- Accelerating Green Finance
- FinTech for Good
- Data Paradigm Shift – Exploring ESG Data Needs
- Values-Based Investing – an Asset Owner Perspective
- Measuring Impact – Asset Manager Challenges
- Finance for Sustainable Supply Chains
- Innovative Financing Structures and Using Blended Capital
[/grve_list][grve_title title="Confirmed speakers include:"][grve_list]
- Dame Susan Rice, Practitioner Member, Banking Standards Board
- Sir Rodger Gifford, Chair, Green Finance Taskforce
- Sarah Breeden, Executive Director for UK Deposit Takers Supervision, Bank of England
- Saker Nusseibeh, CEO, Hermes Investment Management
- Richad Soundardjee, Chief Executive Officer (Middle East), Societe Generale
- The Most Revd and Rt Hon Justin Welby, Archbishop of Canterbury (Video address)
- Tan Sri Dato Azman Mokhtar, Former MD, Khazanah Nasional Berhad
- David Blunt, Head of Conduct Specialists Department, Supervision – Financial Conduct Authority
- Charles Haresnape, CEO, Gatehouse Bank
[/grve_list]
More speakers are listed on www.ethicalfinance2019.com
UKIFC Deliver an Islamic Finance Course in Edinburgh
The positive convergence of ethical and Islamic finance, coupled with the demand from a wide range of industry stakeholders keen to develop their knowledge and understanding in these overlapping areas, has led the Ethical Finance Hub to launch a unique and flexible executive education summer course offering in Edinburgh, Scotland.
Despite the remarkable recent growth of ethical and Islamic finance there remain few academic or professional courses that provide practically-focused pragmatic training.
The 3 day "Islamic Finance - An Ethical Alternative", an intensive practical Course designed, developed and delivered by the UKIFC, will begin with a comprehensive introduction to Islamic finance, its ethical foundations, core structures, and creation of Islamic banking products. It will then offer practical guidance in creating enabling regulatory frameworks, particularly within a secular context, before exploring the nuances of Shariah compliant asset management. The Course concludes with a session focused on the legal, mechanics and trends within Islamic finance real estate transactions.
The course will take place at Edinburgh Business School, Heriot-Watt University Monday 25th June 2018 - Wednesday 27th June 2018. with the 2 day "Ethical Finance and Investment Paradigm" takes place over the following two days.
For further information and to register please click HERE.
'How Ethical is Islamic Finance' Thematic Workshop set for February 2018
Following the success of the October 2016 event on Shari’a Governance, the Islamic Finance Council UK (UKIFC) and the International Shari’ah Research Academy for Islamic Finance (ISRA) in association with K&L Gates are delighted to provide details of our next Thematic Workshop on 21st February 2018, which will focus on the topic of the relationship between Islamic finance and ethical finance. The workshop, sponsored by DDCAP, the Bahrain EDB and Gatehouse Bank, will convene at 09:30am at K&L Gates One New Change London EC4M 9AF.
The trend of positioning Islamic finance within the broader umbrella of ethical finance has gained momentum in recent years. Following Shari’a principles, it is argued Islamic finance is seen to be intrinsically interwoven with ethical finance values and strategies.
However, this view is not shared across the whole of the financial services industry. Critics of Islamic finance would challenge the notion of Islamic finance being ethical by questioning the creation of synthetic products to overcome textual restrictions with the result that the economic outcome and risk sharing profile is identical or very similar to that of conventional banks.
This conference will review and reflect on a number of key areas to explore the question of “How Ethical is Islamic Finance?”
Speakers include:
- Lord Sheikh, Co-Chair, All-Party Parliamentary Group on Islamic Finance
- Ajmal Bhatty, Board Member UKIFC and CEO, Qatar General Insurance and ReInsurance Co
- Dr Akram Laldin, Executive Director, ISRA
- Alastair King, Chairman, Naisbitt King Asset Management and Alderman of Queenhithe Ward, City of London
- Dr. Ashraf bin Md. Hashim, Senior Researcher / CEO, ISRA Consultancy
- Barry Cosgrave, Islamic Finance Partner, K&L Gates
- Charles Haresnape, CEO, Gatehouse Bank
- Professor Dr. Engku Rabiah Adawiah, International Islamic University Malaysia Institute of Islamic Banking and Finance
- Graham Burnside, Chairman, UKIFC
- Harris Irfan, CEO, Cordoba Capital
- Jonathan Lawrence, Islamic Finance Partner, K&L Gates
- Justin Sykes, Managing Director, Innovest Advisory
- En. Kamarul Ariffin Bin Mohd Jamil, Group CEO, Affin Bank Malaysia
- Martina Macpherson, Partner, Sustineri
- Professor Mehmet Asutay, Director, Durham Centre for Islamic Economics and Finance
- Professor Mohamed Iqbal Asaria CBE, Visiting Lecturer, Cass Business School
- Mushtak Parker, Editor, Economist & Independent Non-Executive Director, CIMB Principal Islamic Asset Management (Ireland) Ltd
- Nyra Mahmood, Managing Director, Simply Sharia Human Capital
- Omar Shaikh, Advisory Board Member, UK Islamic Finance Council
- Peter Lovell MBE, Chief Executive Officer, Financing Sharia Enterprise
- Petr Klimes, Group Marketing Director & Head of Digital, Abu Dhabi Islamic Bank
- Shaykh Essam Ishaq, Shariah Scholar
- Shaykh Ruzwan Mohammed, Co-Founder Solas Foundation and Educational Director, iSyllabus Islamic Studies Program
- Sheikh Badr Al-Hasan, Partner, Dome Advisory and Chairman, InsureHalal.com
- Shelina Janmohamed, Vice President, Ogilvy Noor
- Simon Walker, Head of Retail Sales, Al Rayan Bank
- Stella Cox, Managing Director, DDCAP
- Stuart Hutton, Chief Investment Officer, Simply Ethical
- Tarek El Diwany, Director, Kreatoc Zest
The event will cover several key themes including:
- The Shari’a Scholar Debate - Is Islamic finance following the spirit of the law or just the letter?
- Is Islamic Finance an ethical alternative - what social impact has it made in the past 20 years?
- With $40trn in SRI funds under management, is the Islamic Finance sector branded optimally?
- By focusing on the banking model, has Islamic Finance restricted its ability to provide more ethical and socially responsible solutions?
- Malaysia and UK innovation case studies – value-based intermediation and interfaith shared values framework
To view detailed agenda of the themes for the day click here.
Click here to view highlights from our 2016 event “Is the Current Model of Shari’ah Governance Fit for Purpose?
THIS EVENT IS NOW OVERSUBSCRIBED. IF YOU WOULD LIKE TO BE ADDED TO OUR WAITING LIST PLEASE EMAIL EVENTSLO@KLGATES.COM.
Sponsored by: 
UKIFC's Ethical Finance Round Table explores the role financial institutions can play in meeting UN SDG's
The 14th Edinburgh Ethical Finance Round Table took place on Monday 13th November 2017 for the first time in the offices of Baillie Gifford, who will be hosting the series for the next 2 years. The topic for the meeting was the UN Sustainable Development Goals and the role the financial sector can play in making them a reality.
The first presentation was given by Fran van Dijk, one of the founding partners of One Stone Advisors, who are leading consultants in the field of sustainability, operating principally in the UK, Scandinavia and the Netherlands. Fran reported that the UN Sustainable Development Goals (SDGs) have increasingly become a focus area for their clients in recent times, both seeking to map their own strategy against the SDGs and, in some cases, going beyond that to seek to link and adapt their strategies to make a positive contribution to meeting the goals.
A major challenge in achieving the SDGs by their target date of 2030 will be finance, much of which will have to come from the private sector. However that will bring many opportunities too both in generating revenue from change (estimated at a possible $12 trillion) and in creating jobs (estimated at a possible 380 million). Fran then gave a number of examples of businesses which together or in partnership were actively contributing to progress – these included Triodos Bank, BNP Paribas, which was developing the "Solactive" index, and the World Benchmarking Alliance lead by Aviva, which was seeking to develop a comprehensive SDG benchmark over the next 3 years.
The second presentation was given by Lee Qian of Baillie Gifford, introducing their "Positive Change Fund" in which he played a leading role. The strategy of the Fund is to invest solely in companies making a positive contribution to social or environmental challenge, while continuing to deliver attractive returns. The Fund had only recently been launched and currently stood at a level of £12 million but it was hoped in time this could reach a value of up to $10 billion.
The view underlying the investment strategy was that companies in this category will prosper in the long-term, so this is very much a "patient capital" approach. The management of the Fund operates by way of intensive internal analysis, focusing on the intention, business practices and product impact of the companies in question. The SDGs form a useful framework for measuring the last of these aspects and also provide a means of communicating and reporting on the impact achieved to investors.
The discussion was then opened to the floor.
One question which was raised was whether there was a danger of the SDGs becoming merely a "box ticking" exercise or whether they were actually stimulating new investment. In response, Fran van Dijk agreed that it was essential that the impact of investment should be closely assessed against the SDGs – in her view the forthcoming Aviva benchmark should help in this.
It was noted that as yet the UK was one of the countries which had not yet formulated its policy in relation to SDGs and it appeared that the government was seeking contributors to put together chapters on each of the individual Goals. It was suggested therefore that it might be a suitable project for the EFRT to collaborate on one of the chapters in question.
There was some comment that for certain sectors the SDGs may appear to be framed in too general and high level way. Nevertheless the view of the presenters was that they could still form a very useful starting point for any company's strategy.