RFI Roundtable on Responsible Finance – 23rd September 2019

On 23rd September 2019, the RFI Foundation and Dubai Islamic Economy Development Centre (DIEDC) co-organised a half-day roundtable event on responsible and sustainable finance, hosted by Bank Negara Malaysia held at Sasana Kijang, BNM. As explained by Encik Abdul Rasheed Ghaffour, the Deputy Governor of the BNM,  in his officiating speech, the theme “Unlocking full potential of Islamic finance through sustainability” was chosen as the world is faced with an environment where global aspirations are at risk – indebtedness is high, inequality has widened, and the effects of climate change continue to accelerate.

Islamic Finance plays a vital role in fulfilling and potentially going beyond the agenda of sustainability as its inherent values encapsulate three key elements, namely they (i) are impact driven (emphasis on minimisation if not prevention of negative impact and maximising positive value creation to wider stakeholders, namely people and planet), (ii) focus on the real economy (aligning innovation with the needs of productive activities and avoiding element of speculation) and (iii) involve partnership roles (risk-sharing in financial transactions for both financial institutions and business clients or investors as together they screen and monitor transactions for commercial viability and risks).

BNM has in 2017 introduced a new operational model known as Value-Based Intermediation or VBI, with the vision to focus on being more impact-driven, reinforcing the over-arching intent of Sharia’a to promote good and prevent harm. BNM also aims to use VBI moving forward, striving to be relevant to all as a financial intermediation tool that creates positive and sustainable values for broader stakeholders, which additionally are consistent with the long-term value creation for shareholders and aligned with the national targets of sustainable development goals (SDGs). Also, in order to widen and increase outreach to the public, BNM supports financial institutions to tap fintech opportunities to develop financial solutions that can help drive Islamic finance to deliver even greater, wider and deeper positive impact – particularly in realising its promise in risk-sharing and providing support for genuine and productive economic activities.

In the roundtable sessions, panellists were debating and sharing their experiences including issues and challenges in delivering their plans and strategies to meeting the SDGs. They also expressed confidence in their readiness and ability to implement tailor-made and global benchmarked strategies of responsible and sustainable finance to unlock values in their improved and new business models.

It was further agreed that responsible and sustainable finance practices such as environmental, social and governance (ESG) consideration could be used as an important tool to manage investor engagement, which is increasingly focusing on ESG issues, concluded RFI Foundation chief executive officer Blake Goud. He also said the non-profit organisation has been working with its members and will continue to work with other Islamic banks on addressing the ESG risks embedded in their balance sheets.

The roundtable was attended by more than 60 participants representing Islamic banks, key asset owners, environmental, ESG-focused asset management firms, government officials and regulators, including a delegation from the United Arab Emirates. DDCAP was represented by Mr. Roslan Ahmad, the Chief Representative of our Kuala Lumpur office, and he outlined DDCAP’s experience in providing responsible sourcing of commodities for use by Islamic financial institutions, as part of their overall sustainability efforts. He also emphasized full support for Islamic Finance to play key and significant roles in propagating the global SDGs, with VBI as practised in Malaysia as a leading holistic example, going beyond sustainability.

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