Wednesday, December 08, 2021 / 12:00 PM
/ Bukola Akinyele-Yisau for WebTV / Header Image Credit: WebTV
Socially Responsible Investment (SRI) exceeds $35trn globally. Dr. Sami Al-Suwailem, Acting Director-General, Islamic Research, and Training Institute, IsDB made this point during the Accounting and Auditing Organization for Islamic Financial Institutions (AAIOIFI) and Islamic Development Bank(IsDB) 16th annual conference held in Bahrain.
Islamic finance in its pure form is devoid of speculation and large uncertainty and its principle is built on trade, entrepreneurship, and risk-sharing. Speakers at the conference noted that ethical finance' is commonly used to describe finance which takes into account not only financial returns but also environmental, social, and governance (ESG) factors.
Dr. Al-Suwailem said COVID-19 made it clear that without solidarity and collective action, the safety and stability of the global economy would come under severe pressure. He noted that cooperation was necessary for achieving optimal outcomes and emphasized that moral and social values were essential for superior economic reform.
According to him, COVID-19 and climate change issues were of the same nature. He insisted that barriers need to be broken as the world ventures into a new era requiring open minds and brave hearts.
He observed that Socially Responsible Investment (SRI) currently exceeds $35trn globally which was more than 10times the Islamic finance industry. According to Al-Suwailem, SRI involves several measures to quantify and determine social responsibility and sustainable investment including ESG ratings. He charged Islamic finance institutions to adopt the ESG framework.
Al-Suwailem noted that there are challenges to ESG rating, and this needs to be addressed. He explained that there was yet to emerge a universal framework on ESG standards. The absence of a universal standard for ESG opens up an opportunity for standard settings by AAIOIFI which would contribute to the convergence of ESG measures for Islamic finance institutions.
He said it would be helpful if AAIOFI, with other institutions and rating agencies develop and adopt the framework for Islamic finance standards and show that they are committed to the prosperity and welfare of their communities.