Shariah finance work
In its work with Al Waseelah, Bedford Row provides potential companies with a proprietary ESG assessment that poses questions about the core of their company and operations. Based on the assessment, firms get a red, yellow or green light; if the company receives a green light only then BRC and Al Waseelah move forward.
Levy gives examples such as a $250 million Sukuk for Bangladeshi conglomerate Deshbandhu Group Ltd – an entity which targets a number of UN Sustainable Development Goals.
“I have been to Bangladesh and have noted DGL’s commitment to society through their commitment to reducing poverty through employment, providing local solutions – building a small scale rice mill to help farmers receive a fair price, women empowerment – including day care centres for their employees, and health programmes,” he said.
Another example is that of Orestes Ethical Equity. This is an actively managed portfolio in the global equities universe focusing on companies that provide solutions to UN SDGs. The portfolio focuses on combining themes of sustainable development, `Greenium’ (green premium) and impact investing, whilst also including a pre-trade screening from a world-leading Shariah expert.
The Sukuk market is large, if not as large as the conventional fixed income market globally. Global Sukuk issuance is expected to range between $145 billion to $150 billion in 2022; global issuance was $147.4 billion in 2021 and $148.4 billion in 2020. Lower and more expensive global liquidity this year, fewer financing needs in the Gulf region, and other factors, are putting a cap on demand, according to the publication, Salaam Gateway.
A number of organisations have issued Green Sukuk bonds, such as the government of Indonesia, which offered such instruments for the global and domestic retail market, raising more than $3.9 billion in one example. Based on its report of September last year, the Islamic Finance Capital Green Sukuk issuance increased from $500 million in 2017 to $3.5 billion in 2019.
A report by the CFA Institute and the Principles for Responsible Investment argued that “Islamic finance and ESG investing are complementary capital-raising and investment approaches with many shared principles, such as being a good steward to society and the environment. With many more similarities than differences, both offer products that serve Muslim and non-Muslim investors alike, and both possess strong practices and policies that each can learn from the other.”
“For example, the report said Islamic finance bans security lending and shorting, which ensures that voting rights remain the responsibility of the shareholder. ESG integration and stewardship practices are more widespread among ESG investing strategies, although they are consistent with the fundamental principles of Shariah,” it said.
Separately, a survey this week by Lombard Odier, the Swiss private bank, found that 72 per cent of 300 high net worth investors in the Middle East said they can generate improved returns through ESG investments. Some 67 per cent of investors said observing Islamic investment principles in their investments is important to them, while only 4 per cent of investors said that they are not interested in Islamic investments.