Financing a Sustainable Future: High-Level Working Group on Green & Sustainability Sukuk releases its first report
Press Release 24 Oct 2022
- Global Green Sukuk issuance of $4.4 billion in H1 2022
- Indonesia and the GCC are leading jurisdictions for green and sustainability sukuk, together making up 53% of total issuance.
- The report recommends promoting common regional and international standards, developing capacity with issuers, and expanding the wider ecosystem.
Global green and sustainability sukuk issuance totalled $4.4 billion during the first half of 2022, following a record annual issuance of $6.1 billion in 2021, according to data published by the High-Level Working Group (HLWG) on Green and Sustainable Sukuk. HLWG has issued its first report titled “Financing a Sustainable Future“.
The HLWG was launched in November 2021, during COP26, by founding members Islamic Finance Council UK (UKIFC), HM Treasury, Ministry of Finance in the Republic of Indonesia, Islamic Development Bank, LSEG (London Stock Exchange Group), and Global Ethical Finance Initiative (GEFI.)
The report, produced in partnership with UKIFC, GEFI, and LSEG, provides insights on the green and sustainability sukuk market, discusses key recent transactions and regulatory developments, and provides views from key industry stakeholders conducted through discussions of the HLWG and an industry survey. Featuring a roadmap outlining key recommendations to facilitate the development of the green and sustainability sukuk ecosystem globally, key findings include:
- Indonesia and the GCC are the leading jurisdictions for green and sustainability sukuk, together making up 53% of total issuance.
- Sukuk have been the main driver of ESG debt issuance in the GCC, making up 80% of green and sustainability bonds sold by GCC-based issuers during the first half of 2022.
- On average, 82% of annual green and sustainability sukuk have been issued in international markets since 2018, reflecting strong demand from overseas investors.
- On average, green and sustainability sukuk generated order books worth 4.4 times their offering values, compared with 3.3 times for comparably sampled traditional sukuk.
- The report recommends promoting common regional and international standards, developing capacity with issuers, and expanding the wider ecosystem.
Omar Shaikh, Advisory Board Member & Director, Islamic Finance Council UK (UKIFC), commented: “We are pleased the HLWG has filed its first report which finds that despite the increase in the issuance of green and sustainability sukuk, there is scope for greater capacity building across issuers, investors and professional services to scale the market to serve the Islamic world.”
Shrey Kohli, Director, Head of Debt Capital Markets, London Stock Exchange, and Chair of the HLWG on Green and Sustainability Sukuk, said: “The growth of green and sustainability sukuk will enable more countries and companies to access finance in a manner consistent with their faith and values. As sukuk are linked to assets that may be eligible for green and social projects, they will become vital tools to fund the U.N. Sustainable Development Goals and the just transition to Net-Zero, as has been evidenced by transactions by Working Group members such as the Islamic Development Bank and Etihad Airlines.”
“I sincerely thank all members of the HLWG for their expertise and insights. We look forward to working with the market to implement the recommendations as head towards the next two COPs in Egypt and the United Arab Emirates.”
Mustafa Adil, Head of Islamic Finance, Data & Analytics, LSEG, said: “This July marked five years since the first green sukuk was issued, raising $58 million. Green and sustainability sukuk have made great strides during this time, gaining traction across several Islamic capital markets in Southeast Asia, the GCC and Africa, with cumulative total issuance amounting to $21 billion by the first half of 2022.”
“As we approach COP27, it is our aim this report will inform and encourage more countries to adopt green and sustainability sukuk as an innovative approach for financing their SDGs and sustainable development plans.”
LSEG is well placed at the heart of global capital markets to be a strategic enabler of sustainable economic growth. It plays an important role in accelerating the transition to Net Zero and supporting the growth of the green economy. Refinitiv, an LSEG business, provides an Islamic finance database including over 1,500 Islamic financial institutions data covering $4 trillion of Islamic finance assets. The London Stock Exchange’s Sustainable Bond Market (SBM) is home to more than 300 green, social, and sustainability bonds, raising a combined £120 billion. Read the full report here: https://ukifc.com/greensukuk/
– Ends –
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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.
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 experts explain why UK and UAE fintechs could be taking on the world together - Arabian Business
This article originally appeared at https://www.arabianbusiness.com/banking-finance/457790-why-uk-uae-fintechs-could-be-taking-on-the-world-together.
The UK and the UAE fintech markets will see major regional cross-collaboration in the coming years, according to experts.
Fintech – including Islamic fintech - is a growing industry globally. Britain is now home to 27 Islamic fintechs, followed by Malaysia with 19, the UAE with 15, Indonesia with 13, and Saudi Arabia and the US with nine, according to IFN FinTech.
Global investments in Islamic economy-relevant companies totalled $11.8 billion in 2019/20, according to the State of Islamic Economy 2019/2020 report by Dinar Standard.
Islamic fintech attracted 41.8 percent of the investments. This figure reflects corporate-led mergers and acquisitions, venture capital investments in tech start-ups, and private equity investments, the report said.
British fintech boom
The UK’s fintech start-up scene has seen an injection of Islamic-focused firms in recent months, which abide by interest-free Sharia laws and avoid ‘unethical’ investments, such as alcohol and gambling.
My Ahmed, a sharia-compliant e-money platform, was accepted into the Financial Conduct Authority’s regulatory sandbox in July. In the same month, Islamic peer-to-peer lending platform Qardus launched UK services, along with trading platform Minted and sharia-compliant ethical banking alternative, Kestrl.
This year, Islamic banking app Niyah and sharia-complaint digital bank Rizq also launched in the UK.
My Ahmed is a sharia-compliant e-money platform
The UK’s large Muslim population has played a major role in helping to establish London as the focal point of Islamic financial services in the west. About 4.5 percent of the British population is Muslim, according to the 2011 census. More than a million of the UK’s 2.8 million Muslims live in London.
What’s more, Britain’s Muslim population is growing - and getting wealthier. The average monthly income of those born locally, with at least one parent born in Britain, is £1,219, compared with £815 for those who arrived aged six or older, according to the Economist Intelligence Unit.
UK-UAE crossover
Former Lord Mayor Peter Estlin, the global ambassador for the UK’s financial and professional services industry, visited the Gulf in January 2020 to help strengthen fintech trade and investment ties.
Discussing emerging opportunities for collaboration between the region and the UK, he said: “British business and innovation across financial and professional services has much to offer partners in the region, whether it be in currency trading and asset management, or growing areas like fintech and green finance."
Former Lord Mayor Peter Estlin, the global ambassador for the UK’s financial and professional services industry
According to Umer Suleman, board member, UK Islamic Finance Council (IFC), the UK finance market is mature with a strong regulatory landscape and a legacy of innovation. These British strengths offer partnership benefits for the UAE, Suleman said.
“The UK has launched many products and we know how to utilise financial technology,” the UK IFC board member told Arabian Business. “We know finance can go wrong - however, we’ve seen the resolution and evolution of products and services over time.”
“The Gulf has a great appetite for new innovative ideas. UK experts can offer their experience in terms of implementation and help build the region’s products and ecosystems,” said Suleman, adding that the Middle East’s high mobile phone penetration, legacy-free systems and flowing capital are boons for fintech growth.
“The Middle East is very open to using Islamic fintech but the [domestic] innovation isn’t fully there yet as it takes a while for research facilities to grow,” he added.
Gaurav Dhar, a global fintech investor and founder of Dubai-based digital payments firm Marshal, said London has a “huge history” of creating financial products and exporting them globally.
“This experience has flowed through into the digital age,” Dhar told Arabian Business.
Stella Cox CBE, Islamic finance government lobbyist and managing director at financial market intermediary DDCAP Group
Strong fintech dialogue
The Marshal founder said that a strong fintech dialogue has already begun between the UK and Gulf governments.
“It’s important that this conversation continues. There is a lot of opportunity for the exchange of technology, ideas and learning.
"While the UK has more to offer at this stage in terms of technology, the cross-regional fintech relationship is still in the early stages and will continue to grow organically.”
Stella Cox CBE, Islamic finance government lobbyist and managing director at financial market intermediary DDCAP Group, said there is major scope for cross-collaboration in the fintech space as the Gulf states continue to develop their cryptocurrency and digital payments ecosystems.
“The UK Islamic fintech community are creating its own ecosystem at the moment which is quite exciting. There is a lot of opportunities to share intellectual capital [between the UK and the Gulf] and I’m sure we’re eagerly looking at each other’s regulatory sandboxes at the moment,” she told Arabian Business earlier this month.
The potential for crossover and authorisation in one market attracts the attention of other proximate markets, Cox added.
“I see this dynamic extending beyond the Middle East into South East Asia as the Islamic fintechs create their own dynamic.
Muslim students still waiting for government funding plan - BBC News
UKIFC co-founder Omar Shaikh appeared on a BBC News video explaining some of the challenges that Muslim students are facing in accessing Shariah-compliant student finance - watch now.
UKIFC and CMS join forces to drive growth in Islamic finance industry
The Islamic Finance Council UK (‘UKIFC’) and international law firm CMS today announce an innovative partnership to help develop, support and optimise Islamic finance frameworks across the world. The aim is to offer a single, cohesive legal, advisory and capacity building service tailored to help government agencies, regulatory bodies and financial institutions to respond creatively and develop capacity for Islamic finance.
The partnership launches at a time when global Islamic finance assets are expected to rise from $2 trillion in 2015 to $3.5 trillion by 2021 - representing a 12% compound annual growth rate. Islamic banks are likely to be the main driver of this growth, with assets expected to reach $2.7 trillion by 20211.
“With a growing Muslim population, the potential future demand for Islamic finance is huge,” says Shakeel Adli, Head of Islamic Finance at CMS. “By bringing together a unique blend of practitioners who are recognised leaders in the global Islamic finance market, we are able to draw on our collective knowledge and expertise to provide a one-stop shop offering a truly unique and holistic approach to Islamic finance.”
UKIFC and CMS have recognised that the availability and effectiveness of Islamic finance in any given jurisdiction depends on meeting a number of challenges; the two most significant of which are creating robust regulatory frameworks and developing human talent. To effectively engage in Islamic finance, investors, consumers and financial institutions require regulatory clarity. It is also of critical importance that human talent is developed to address the unique challenges which Islamic finance presents.
The UKIFC and CMS partnership will assist jurisdictions to meet these challenges.
“As leaders in our respective fields, we share a commitment to growing the Islamic finance industry,” says Omar Shaikh, Advisory Board Member at UKIFC. “By combining our capabilities, we have created a uniquely comprehensive, best in class Government advisory providing support and guidance for government agencies, regulatory bodies and financial institutions as they look to build their capacity and create enabling legal and regulatory frameworks for Islamic finance.”
The UKIFC was established in 2005 as a specialist advisory and developmental body focused on promoting and enhancing the global Islamic and ethical finance industry. Having contributed substantively to the development of the UK Government’s Islamic finance framework, the UKIFC has been appointed to advise several regulators and government ministries across Africa, Asia and Europe and has developed a proprietary methodology for government policy advisory within a secular context.
CMS meanwhile has extensive experience of successfully delivering Islamic finance regulatory advisory projects in multiple jurisdictions including Kazakhstan and Oman amongst others. Significantly, CMS has a geographic footprint which includes 65 offices spread across 38 jurisdictions. The firm has deep local roots with access to cross-border expertise and strong connections to Governments and associated agency bodies in each of the conventional, Islamic and ethical finance sectors.
“The new partnership between UKIFC and CMS offers a team of passionate and committed Islamic finance experts that genuinely combines legal, finance and capacity building ability that is unlike any other advisory firm,” Omar Shaikh concludes.
1Thomson Reuters State of the Global Islamic Economy 2016/17
IFC & ISRA Thematic Workshop - 26 Oct 2016
Is the Current Model of Shari’ah Governance Fit for Purpose?
The Islamic Finance Council UK (IFC) and the International Shari’ah Research Academy for Islamic Finance (ISRA), in association wih K&L Gates invite you to an event addressing the Shari’ah governance model. The event will include the UK launch of the IFC and ISRA External Shari’ah Audit Report 2016.
Event Themes
The event will cover several key themes including:
- How the current Shari’ah governance model works; its gaps and limitations
- Examining the role of scholars alongside areas of potential conflict and impairment
- The role of external Shari’ah audit
- Regulatory differences in approach – is there a ‘best practice’?
- Is it all about the fatwa? To what level are Islamic bankers individually and personally responsible?
Speakers will include:
- Sheikh Prof. Dr. Mohamed Ali Elgari, Member of ISRA Council of Scholars
- Dr Akram Laldin, Executive Director, ISRA
- The Lord Sheikh, Conservative Muslim Peer
- Jonathan Lawrence, Partner, K&L Gates LLP
- Iqbal Asaria CBE, Associate, Afkar Consulting Ltd
- Dr Marjan Muhammad, Director of Research, ISRA
- Arshadur Rahman, Manager - Shari’ah Compliant Facilities Project, Bank of England
- Sheikh Haytham Tamim, Founder, Shariah Solutions
- Omar Shaikh, Advisory Board Member, IFC
To register for the event click below:
+ View more Islamic Finance related material on K&L Gates HUB