RFI Foundation Podcast: DDCAP incorporate ESG concerns into industry practices

In March, RFI Foundation featured a podcast interview with Managing Director Stella Cox CBE, who actively promotes the business and ethical case for responsible finance through DDCAP’s RFI Membership and her personal role as an RFI Trustee. 

DDCAP’s approach originally emerged from stakeholders’ expectations around Sharia’a governance and other compliance and sanctions protocols.   As its counterparties became more attuned to environmental and social impact concerns, DDCAP’s approach evolved and these concerns influenced the commodity used in, and the protocols surrounding, the transactions it facilitates.

DDCAP encourages other institutions to become involved in responsible finance through its membership of the RFI Foundation and also as a signatory to the UN Principles for Responsible Investment (PRI).  DDCAP approaches the PRI principles by focusing on incorporating ESG considerations into its own commercial decisions, collaborating with other financial institutions to promote the adoption of these values more widely, and publicly disclosing its own progress in adopting these principles.

In her podcast, Stella noted that one challenge DDCAP has found is with the more standardized reporting approach that PRI requires. When signatory institutions don’t fit the traditional asset manager or asset owner model, they may find the reporting process to be more complex as it doesn’t naturally lend itself to their business activities.  For some emerging markets-focused institutions, and those from under-represented sectors like Islamic finance, they may find it more difficult to report which may lead them to be less likely to engage with the organisation and the process. 

As an RFI Foundation member, Stella explained that there is an opportunity for DDCAP to highlight these concerns and collaborate to promote the adoption of a more flexible approach to reporting and disclosure.  An alternative approach recognising the heterogeneity of the responsible finance industry would naturally stem from an Islamic finance-originated organization like RFI which brings experience in bridging the divergences inherent in Islamic finance, driven by Sharia’a or business considerations, or a combination of the two.

The Islamic finance market continues to evolve to address substance and form requirements from Sharia’a but now also seeks to incorporate an additional focus on ‘impact’ as linked to the Maqasid al Sharia’a (higher objectives of Sharia’a).  Stella disagrees with the prevailing view that Islamic finance is primarily an ‘exclusions-driven’ industry and she emphasised the need for Islamic finance to become more vocal in sharing its unique and positive approach to finance to foster changes to how the wider responsible finance market operates, engages and reports on its activities.

RFI Foundation’s full podcast interview with Stella can be found in the latest episode of the Responsible Finance Podcast at www.rfifoundation.podbean.com

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