Responsible Finance Case Study: DDCAP Group™

An SME market influencer in responsible finance

RFI Foundation and DDCAP Group™ release a “SME market influencer” case study and podcast.

Foreword:

DDCAP Group has been called to action by what we see as a clear need amongst financial services sector SMEs to identify an efficient route to the embodiment of sustainable and responsible practice in culture, business and operations. From our own experience and engagement with organisations relevant to the development of overarching principles for sustainable and responsible actions (SRA) by SMEs and the construction of supporting infrastructure, we have seen this need to be most prevalent amongst fellow SMEs operating in specialised market sectors and geographies that are still seeking to raise awareness, form policy and consider legislative and regulatory requirements. There is huge potential for SMEs to contribute to the broader SRA agenda and, collectively, no limit to the impact we might have.

The RFI Foundation was established to promote awareness and research to support convergence in responsible finance. As awareness has increased, we have responded with new initiatives to support Islamic financial institutions as they implement sustainable and responsible actions into their new business as usual. One part of this process to inspire others to follow established examples, is to highlight the process that other RFI members have taken to bring themselves into market leadership positions by reorienting their governance, policies, internal measurement and external disclosures on responsible finance. We are excited to jointly present DDCAP’s experience as a model for others, and a guide that shows the importance of responsible finance for every financial market participant including for SMEs and market intermediaries.

Executive Summary

Introduction:

DDCAP Group™ (DDCAP) is an intermediary in the Islamic financial services industry and, in terms of staff numbers, is best described as an SME. Since our founding in 1998, DDCAP has become a leading provider of asset facilitation services across a diverse range of Sharia’a compliant products and instruments in both the primary and secondary markets, as well as a provider of automated financial system solutions to support those offerings via our proprietary asset facilitation platform, ETHOS AFP™. DDCAP is headquartered in London and comprises DDCAP Limited and our wholly owned subsidiaries DD&Co Limited and DDGI Limited, as well as representative offices in the Dubai International Financial Centre and in Kuala Lumpur.

In tandem with our core offering, DDCAP actively seeks to invest within halal economy businesses with exceptional fintech strategies. For example, DDCAP recently completed our first strategic investment in IslamicMarkets.com, the world’s leading market intelligence provider for the Islamic financial and commercial markets. DDCAP strongly believes that Islamic finance SMEs, and those within the wider halal economy, have the agility and therefore great potential to highlight in their work the need for sustainable and responsible practices across the wider industry and sees such investments as a natural complement to our own SRA programme and industry goals.

DDCAP & Our Commitment to Best Practice

DDCAP has always aimed to be a “first mover” in our space and to lead by example. Through our sustainable and responsible actions (SRA) programme, DDCAP has committed to developing a more sustainable, equitable and prosperous world and supports the view that those in business must adopt strategies to deliver not only financial results but also social and environmental outcomes. Following on from DDCAP’s commitment to Sharia’a standards with the establishment of our own Sharia’a Supervisory Board (SSB) in 2013, and our focus on automation to promote consistency and standardisation across the industry, DDCAP leadership felt the natural next step was working towards the development of best practice standards for sustainability and responsibility.

As an SME and a financial services intermediary, DDCAP may not have the power of a market mover to effect change unilaterally, but we can be an industry influencer that makes an impact through our demonstration of values, expressions of duty of care and considered thought leadership. As an intermediary, DDCAP is in a unique position to influence our industry. Whilst our role is to listen to the demands of the market and act accordingly, our thought leadership can promote awareness through consistent contact with our many clients and counterparties globally across the Islamic banking and finance community.

DDCAP’s Sustainability Path

DDCAP took a gradual path to adopting our SRA agenda whereby initiatives were approved by the highest level of leadership but the message was managed from the bottom up. The Managing Director and executive leadership proposed various individual corporate social responsibility (CSR) and SRA initiatives to the Board of Directors on a case-by-case basis over time. With a portfolio of SRA and CSR successes, the Managing Director presented a broader SRA agenda incorporating existing programmes as well as new initiatives which was subsequently approved by the Board of Directors. This broader SRA agenda included three key points: (1) the appointment of an executive tasked with the initiative (Head of Corporate Responsibility); (2) establishment of an SRA Working Group and (3) the inclusion of an SRA Champion on DDCAP’s SSB. This governance structure, by means of an internal champion and a forum for discussion, served as the catalyst in changing the SRA agenda from a collection of activities to an organised work stream.

The SRA Working Group was originally tasked with continuing the work inspired by the UN Principles for Responsible Investment (PRI) annual reporting process as well as increasing employee engagement with the SRA goals. Soon after its first meeting, the SRA Working Group became the nerve centre for the SRA programme. Having a forum promoted discussion and the discussion led to the development of further policy and procedure. It brought together separate workstreams that had been siloed within the firm and, once consolidated, a momentum built as common concerns were identified and new areas of growth emerged. As the work expanded, it was decided to separate the CSR and employee engagement matters into a CSR Working Group (reporting to the SRA Working Group) and allow the SRA Working Group to focus on more commercial matters.

As an SME, DDCAP had the ability to develop ideas and turn them into company-wide actions within a short time period. In less than two years from the initiative of the Managing Director, under the SRA programme an SRA- focused clause was incorporated into certain client agreements, sustainability screening was integrated more widely across our technology platform, a more robust commodity review process was created and an internal evaluation of DDCAP’s SRA progress began. As the SRA programme developed more momentum and the relevance to DDCAP’s broader commercial focus became clearer, it gained wider buy-in from staff and leadership. At a larger institution, even with committed leadership, it could take, for example, up to 24 months just to work on the planning and internal buy-in to adopt the strategy and far longer to put it into action. As such, SMEs may find that they are in an advantageous position to show the way forward in sustainability and responsibility initiatives, even if they face other challenges.

Lessons Learned

Looking back, what one should do (and what DDCAP did without realising it) is look at your list of internal and external stakeholders and see what impact can be made in each of those areas. In the initial stage of the formal SRA programme, DDCAP was able to begin to engage or increase engagement on SRA matters internally with our own leadership and management, employees, and SSB and externally with our commodity suppliers and other vendors, industry partners and supported charities.

DDCAP’s process provides a repeatable format that could be used by other businesses. As an SME, it is important to look at your unique position in the market and see where you are strategically placed to make an impact. It may take a bit of creative thinking and ingenuity to find the most effective way to create impact. It will not be as straightforward or obvious as it is for larger, less niche entities, but unlike larger entities you do not have to follow a playbook that constrains your ability to make an impact. With this freedom for creativity, you will have the opportunity to create value that may otherwise be hidden, trapped or overlooked within your market.

A bit of advice…

SMEs sit side by side with their internal stakeholders and work closely with external stakeholders and as such an SME needs to consider its actions in light of each stakeholder and try to anticipate reactions, both negative and positive. First see what you can achieve by finding the low hanging fruit, the easy wins that require engagement by only a few key stakeholders and which will empower them to expand the SRA-focused network internally. With those successes and with a growing team, it will be easier to broaden buy-in further and potentially achieve larger projects which in turn should create greater momentum.

Good ideas do not trickle down automatically through an organisation. They require a nudge from above and sometimes agents for change within the organisation need to be identified and supported. Though a relatively small organisation, DDCAP found that a “one-size- fits-all” approach did not work. Therefore, advocates and catalysts for change had to be given some licence to communicate effectively with their peers. And that required finding the right people, those not afraid to stand up but those who also fit within the group. The right people are vital, but not always will you make the right decisions. Let people stand up and shine but do not be afraid to let people step down as well. No one can do everything, but everyone can do something.

It is about doing the right thing when it is not the easiest thing. To get ahead of the curve. To make the decision to do business as it should be done, of adopting what needs to be the “new” normal before it becomes the “new normal”. It is long hours, difficult conversations, emotional decisions. Negotiating conflicts between stakeholder self-doubt.

So, from one SME to another, do not be afraid to be bold and make certain you remember who you are. And what you are good at. That is how you got here, and how you will get to the next stage.

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