Tuesday 26 May 2020

Are ESG and Islamic Finance linked? S&P explains

DUBAI, May 28, 2019

While there are similarities between Islamic finance and environmental, social and governance (ESG) factors, the social aspect appears to have been cast somewhat to the back seat, said S&P Global Ratings in a new report.
Key takeaways from the report:

•    Sharia principles (such as the protection of life, profit-and loss-sharing and the need for tangible and identifiable assets to underly transactions) share parallels with ESG objectives and support the substantial green and social infrastructure development needed for the transition to a low carbon economy.

•    Rising green sukuk issuance in the GCC and Southeast Asia is poised for significant future growth as core Islamic finance countries such as Malaysia, the United Arab Emirates, and Saudi Arabia look to shift to greener energy sources.

•    Social factors, however, appear to be less visible than environmental or governance in modern Islamic finance and have not yet been leveraged in a transparent, systematic manner.

•    That said, socially responsible products do exist in Islamic finance, including Qard Hassan, Zakat, and Waqf and signal possible development in this direction. – TradeArabia News Service


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