New: COP26 'Faith in the SDGs' photobook released
The UKIFC were honoured to be parth of the programme of activities around Faith in the SDGs at COP26 which took place across the 2 weeks of the summit, with a series of public and private meetings. The activities were held in partnership with The Global Ethical Finance Initiative, FaithInvest, Wahed Invest, Gatehouse Bank and the Church of Scotland.
The private meetings took place at Ross Priory, on the beautiful banks of Loch Lomond, near Glasgow.
Islamic Finance & Faith in the SDGs at COP26
For many, a warming climatic system is expected to impact the availability of necessities like freshwater, food security, and energy, while efforts to address climate change, both through adaptation and mitigation, will similarly inform and shape the global development agenda. The links between climate change and sustainable development are strong. Poor and developing countries, particularly least developed countries, will be among those most adversely affected and least able to cope with the anticipated shocks to their social, economic and natural systems.
As national ministers and heads of state convened in Glasgow, Scotland, to accelerate action towards the goals of the Paris Agreement and the UN Framework Convention on Climate Change (UNFCCC), for the 26th UN Climate Change Conference of the Parties (COP26) the Global Ethical Finance Initiative (GEFI) curated a unique programme to focalise this sustainable development challenge through the prism of Islamic finance, a proxy to the global south.
To raise awareness and drive climate action at COP26 GEFI, a non-profit dedicated to enabling finance to deliver positive change and help achieve the UN’s Sustainable Development Goals (SDGs), ran a Path to COP26 campaign. The “Faith in the SDGs” workstream, led by the Islamic Finance Council UK (UKIFC), curated a unique one-day hybrid Islamic finance programme to coincide with the COP26’s finance day (Wednesday 3rd November 2021). Islamic finance experts from across the globe gathered both in-person, at the stunning Ross Priory on the banks of Loch Lomond, and remotely to demonstrate the important role Islamic finance can play in supporting climate action in the global south and beyond.
In the SDGs, UN Member States express their commitment to protect the planet from degradation and take urgent action on climate change. One of the most salient factors that challenge the achievement of the SDGs by 2030 is the shortage of financial resources. Several reports and studies have stated that around US$5-7 trillion dollars are required every year to achieve the SDGs, and with governments and donor agencies unable to meet demand, private sector funding is required.
The natural alignment between the SDGs and Islamic principles together with the size of the industry (currently US $2.5 trillion and expected to reach US $3.8 trillion in 2022[1]) mean that Islamic finance is well placed to create instruments that drive significant capital towards the SDGs and climate action.0 The ambitions of the SDGs are consistent with the objectives of Shariah (maqasid al-Shariah) which aim to bring benefits to mankind and prevent harm as well as ensure sustainability of life on earth. SDG alignment presents a unique opportunity for Islamic financial institutions to showcase the inherent social good and ethical basis of Islamic finance.
One of the key challenges in implementing the Paris Agreement and addressing climate change is the funding required to implement projects that contribute positively to Nationally Determined Contributions (NDCs). Whilst three quarters of countries have adaptation plans in place, financing remains an issue. According to UNEP FI “annual adaptation costs in developing countries are estimated at USD 70 billion” with his figure “expected to reach USD 140-300 billion in 2030 and USD 280-500 billion in 2050”.[2]
Islamic finance is not limited to Muslim countries and has the potential to support the delivery of NDCs. This could be particularly attractive to the 57 Organisation of Islamic Cooperation (OIC) member states which collectively represent over 1.82 billion people (24% of the total world population) and include several low-income countries that are politically or culturally marginalised.
The GEFI / UKIFC Islamic Finance programme at COP26 provided a high profile platform to explore the role Islamic finance can play in attracting the capital needed to achieve the Paris Agreement and deliver the SDGs.
The first session, delivered in partnership with the United Nations (UN) and UN Economic and Social Commission for Western Asia (UNESCWA), discussed how Islamic social financing instruments can collectively promote the principles of social justice, solidarity, brotherhood and mutuality which can serve to help communities respond to and become more resilient to climate change whether related to food and water shortages, displacement as a result of natural disasters, or environmental education amongst other impacts.
Dr. Rola Dashti, Executive Secretary of UNESCWA noted the heavy debt burden in the Arab region, with eight times more debt received than grants for financing climate projects between 2013 and 2019. She highlighted zakat and wakaf assets (which exceed USD$3trillion throughout Muslim countries) as an importance source of grant funding to support innovation in sustainable development. She also provided details of the ESCWA Climate-SDGs Debt Swap / Donor Nexus Initiative which supports the conversion of national debt servicing payments of foreign debt into domestic investment for implementing climate-resilient projects that advance national SDGs. She asked that we all act collectively to utilise Islamic social funds to support the acceleration of the SDGs.
Dr. Al Meraikhi, Humanitarian Envoy to the UN Secretary-General highlighted the launch of International Dialogue on the Role of Islamic Social Financing in Achieving the Sustainable Development Goals between the UN and the Islamic Development Bank (IsDB) and noted that faith-based organisations have a crucial role in addressing the finance gap to achieve the SDGs.
The next session saw the UKIFC, Her Majesty’s Treasury, Ministry of Finance in the Republic of Indonesia Ministry, Islamic Development Bank, London Stock Exchange Group and GEFI jointly announce the launch of 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 followed 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.
The HLWG, led by the founding partners, will bring together expert global stakeholders with the UKIFC and GEFI acting as Secretariat. It 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.
As part of the introduction to the session UKIFC Managing Director Omar Shaikh outlined the natural alignment between the principles of Islamic finance and the role that green sukuk can play in channelling finance towards the climate emergency and the SDGs.
John Glen, Economic Secretary to the Treasury and City Minister then highlighted the UK’s strong credentials in green and Islamic finance and positioned green sukuk as an important route to secure investment for sustainable projects. He noted the vital role that Islamic finance must play in the green agenda. Julia Hoggett, Chief Executive, London Stock Exchange plc later welcomed the HLWG as a significant milestone for the development of Islamic finance and sustainable finance globally and stated that Islamic finance is a key component of sustainable finance. She also stressed the need to scale green sukuk to ensure that access to finance in a manner consistent with faith values.
As a pioneer in the issuance of international green sukuk, Sri Mulyani Indrawati, Minister of Finance, explained the Republic of Indonesia’s commitment to using the HLWG to share experiences and provide valuable precedents at the same time learning and applying best practices approaches. With the world recovering from global pandemic, Sri Mulyani Indrawati said that the HLWG provides the urgent momentum for nations, multilateral institutions and corporates across the world to work together to grow sustainably for future generations.
The Islamic Finance programme concluded with a Global Islamic Finance and SDGs Taskforce meeting. The Taskforce is a unique collaboration between the public and private sectors spearheaded by the UKIFC, HM Treasury, IsDB and assisted by GEFI. It brings together global Islamic finance practitioners to explore the opportunities for OIC member states to develop a collective approach to sustainable finance and funding the SDGs and climate-linked NDCs.
The meeting included:
- An update from Sima Kamil, Deputy Governor of the State Bank of Pakistan who presented on the pioneering work in sustainable banking being undertaken as part of the Pakistan working group.
- A presentation by Gatehouse Bank, Chief Executive Officer Charles Haresnape on a Guidance Note prepared in partnership with UKIFC and GEFI to provide a consistent approach to reporting and disclosure for Islamic banks signed up to the UNEP FI Principles for Responsible Banking.
- An update from UKIFC Advisory Board member Sultan Choudhury on the progress of the largest ever global Islamic finance survey on sustainability.
After two weeks of negotiating, the Glasgow Climate Pact was successful in maintaining the focus on 1.5 degrees Celsius as well as creating a 2-year timetable for agreeing to more ambitious and faster NDCs to provide a lever for more progressive countries to ensure slower countries make the step up. Although the agreement to “phase down” coal power angered some it is notable that this is the first COP agreement that has made a direct reference to phasing down fossil fuels.
The Pact urges developed countries to “fully deliver” the $100bn per year goal through to 2025 as agreed in 2009. It also agrees to double the proportion of climate finance going towards adaptation and, despite a lack of progress, it confirms that a “technical assistance facility” will be introduced to support loss and damage in relation to climate change in developing countries.
Whilst private finance is not a substitute for increased public finance, it will be vital in increasing the scale and reach of climate action and enabling the transition. The programme was a high-profile platform for Islamic finance at COP26 and through the practically focused discussions has demonstrated how Islamic finance can be used effectively by developing countries to support NDC’s by attracting investment, at scale, to projects that, in line with the Paris Agreement, reduce national greenhouse gas emissions.
View all of the videos from our Path to COP26 programme at https://www.efx.global/cop26/.
[1] ICD – Refinitiv, ‘Islamic Finance Development Report 2019: Shifting Dynamics’ https://www.zawya.com/mena/en/ifg-publications/231019121250Z/
[2] United Nations Environment Programme (2021). Adaptation Gap Report 2020, Nairobi.
UKIFC Featured on Radio 4's You and Yours
We were delighted to be featured on BBC Radio 4 ‘s You and Yours last week to discuss Islamic Student Finance in the UK and the need for Sharia-compliant student loans and finance.
You can find a full link to the programme below:
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
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.