Islamic finance is well suited to helping countries in both the emerging and developed world to move towards a more sustainable future, with technology acting as a key enabler. That was the conclusion of a wide-ranging panel discussion about value-based investing and sustainability at the Global Islamic Finance Forum 2022.
The four panellists were Leong See Meng, Senior Vice President, Strategy and Business, Cagamas Berhad; Dr. Aamir A Rehman, Chair, Innate Capital Partners; Elmie Aman Najas, Chairman, Malaysian Takaful Association and CEO, AIA Public Takaful Bhd and Mohd Ekmal Mohd Zazi, Regional Director, Wholesale Banking, CIMB Islamic Bank.
The panel moderator, Datin Seri Sunita Rajakumar, Chair of Climate Governance Malaysia, said she was delighted that the climate crisis was such an important part of GIFF2022.
She added, “Climate change poses a systemic risk to the financial system. The expectation is that the Islamic finance system, as value-based intermediators, will step up to help facilitate a smooth and just transition.”
Leong said technology is a conduit to deliver the green agenda and achieve sustainability. He gave the example of technology which can enable individual householders to find the right solar energy system for them.
“Using AI as a technology enables me to gain an understanding of the maximum amount I can generate, to offset my utilisation. It would be interesting to see how this particular technology could be used to help banks themselves to reduce their footprint.”
Aamir who joined virtually said fintech is a transformative opportunity for value-based investing, whether that be environmental finance or more broadly ethical investing, including Islamic finance.
He added it has often felt like an uphill struggle for value-based investing, largely because of scale.
“Competing against large financial institutions has been difficult, particularly against banks. Because banking in the traditional sense has required branches and a lot of physical presence, it has been hard for non-banking institutions to thrive. And that has changed radically with fintech.”
One of the main topics discussed was what a greener world would mean to emerging economies compared to developed ones. There was a general consensus that developing countries should set their own strategies to deal with climate change.
Leong said emerging economies should take their own perspectives. “The standards that you see are imposed upon us, developed by the nations themselves which caused the problem in the first place. The first step for developing nations to take to achieve net zero is to formulate guidelines and governance locally, which it enables you to transition smoothly.”
Elmie said emerging economies lagged behind developed economies when it came to technology.
“By virtue of their better developed infrastructure, developed economies have the capacity to move society even faster in adopting technology. To ensure a more equitable future for humanity, there is a case for developed economies to support and finance the technology in emerging economies.”
Ekmal said any financial institution needs to balance doing good with making a profit. “When it comes to sustainability, it isn’t really about the end game, it’s about the journey itself. It has to be done in a manner which is rationale to the bankers, but also to the country itself. It will need to be an orderly transition. When you talk about sustainability, it has to align with not just doing good for the environment, but with the market as well.”
