This report forms part of a four-part thought leadership series delivered by the Islamic Finance Council UK (UKIFC) in partnership with the International Shari’ah Research Academy for Islamic Finance (ISRA) and the Global Ethical Finance Initiative (GEFI). The series is intended to inspire Islamic financial institutions to embrace the UN Sustainable Development Goals (SDGs) and demonstrate to the world that consideration for people, planet and purpose can sit alongside profit and form the heart of the next generation of Islamic financial products. The UKIFC is committed to supporting the Islamic finance sector’s engagement with the SDGs and has launched a Global Islamic Finance & UN SDGs Taskforce. The UKIFC has unique experience and skills to help organisations through capacity building, business case development, reporting and impact measurement (see Appendix 1).
The first report of the series, “Islamic Finance and the SDGs: Framing the Opportunity,” was published in May 2020, providing an introduction to the SDGs within the context of Islamic finance. Key conclusions included:
• There has been limited participation from the Islamic finance sector in leading UN initiatives (such as Principles for Responsible Investment (PRI), Principles for Responsible Banking (PRB) and Principles for Sustainable Insurance) that support financial institutions seeking to align with the SDGs.
• To achieve SDG targets, Islamic Development Bank member countries will need annual funding of between US$700 billion and US$1 trillion, which represents around 40% of the total global SDG financing gap.
• Commercial opportunities for the Islamic finance sector include tapping into emerging global liquidity pools seeking SDG-aligned products and increasing tactical alignment with development bank funders.
• Alignment with the SDGs supports the tayyib (wholesome) concept, which contends that the focus of Islamic finance products and services should be on the evaluation of wider societal impact rather than an overly legalistic analysis of Shari’ah compliance.
• With assets expected to reach US$3.8 trillion in 2022, through its adeptness at innovative financial structuring, Islamic finance is particularly well placed to create innovative instruments that drive capital towards the SDGs.
This report uses the PRI to underpin an analysis of Islamic asset owners, investment managers and service providers engaged in responsible investing. A future paper will provide a similar analysis focused on Islamic banking using the PRB as the guiding framework for the research. The final report in the series will present views on the SDGs from leading global Shari’ah scholars.
