In an exemplary opening keynote address and what was possibly a fitting case study, Jameel Ahmad, Deputy Governor, State Bank of Pakistan (SBP), took the audience on Pakistan’s journey to embracing financial inclusion, wherein he spoke about responsible finance and its pre-requisites and cited some informative statistics highlighting Pakistan’s global recognition in embracing financial inclusion. He further expanded on State Bank of Pakistan’s impressive strategic approach towards responsible finance, in particular strengthening the framework for microfinance consumer protection and the national financial literacy programme being rolled out. He also took into account the obstacles that may pose a hindrance in achieving the goal of effective financial inclusion.

In a scintillating plenary session that focused on the importance of putting sustainability at the heart of banking practices, Ugo Biggeri, Chair of the Board of Directors, Banca Etica,said, “It is the need of the hour to bring back meaningfulness and reputation to the financial sector. Ethical finance is also about possessing social and environmental goals, ways to measure them, a sound disclosure policy and investment criteria. Through this way, we can certainly narrow the wide gap that presently exists between finance and the real economy and ultimately bring finance closer to people and the planet.”

Expressing his views during the informative panel session on ESG Screens and risk mitigation, Anthony Hobley, CEO, Carbon Tracker Initiative, said, “We need to see a paradigm shift whereby ESG reporting becomes the norm and is just an integral part of any financial decision. For that to happen, it needs to be seen as critical to the management of financial risk and achieving better returns. This goes to the Holy Grail at Carbon Tracker, how does one translate the environment, climate energy transition risk into quantitative financial risk and opportunity? To achieve this, ESG needs to be much more forward-looking than backward-looking, it must be capable of stress-testing business models against foreseeable risks and transitions and capable of flagging the collapse in valuation we have already seen in US coal European energy utilities.”

Elaborating on the challenges of aligning the financial system with sustainable development, Nurlan Kussainov, CEO, Astana International Financial Centre (AIFC) Authority, said, “Within the current business model in the financial services sector, the speculation and arbitration is always based on asymmetric information. People from low-income groups who have less access to the information end up suffering more. With the financial services sector rapidly embracing technology, there is a strong belief that in the near future there will be a reduction in the current communication gap that the sector presently faces. This will bring a very positive impact on to the development of Islamic and ethical finance across the world, helping it to realize its global value proposition.”

In his closing keynote address, Nigel Kershaw, Chair, The Big Issue, said, “There is a lot of talk about ethical finance and in particular ESG and social impact because it’s talked about primarily by people involved in the financial sector. I believe the democratisation of capital is extremely central to what we do. Quite often, the discussion is top-down supply and product-led and for me, it often misses one of the most important social outcomes that is quite often forgotten – that’s the opportunity for ordinary people to invest and save in creating a better place to live for themselves, their families and the community around them. It’s not about mainstreaming ethical finance, it’s all about bringing the mainstream to us.”

Geff2017 Day 1: ‘The ‘business as usual’ approach is no longer desirable’

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Reflecting on the aftermath of the global financial crisis and highlighting the need of establishing a sustainable financial system, Keith Brown MSP, Cabinet Secretary for the Economy, Jobs & Fair Work, Scottish Government, said, “In the 10 years following the global financial crisis, there has been something of a re-alignment in attitudes among bankers and investment managers and among customers and shareholders. There has been a recognition that ‘business as usual’ is no longer an option and indeed no longer desirable. A recognition that there could, and should, be a practical, economic alternative to established business practices. Interest in establishing an alternative, sustainable, responsible and ethical financial system continues to grow as does interest in developing a more long-term and responsible form of economic development.

“Despite the challenges which continue to exist within the financial sector in Scotland, and across the world, the industry remains in a strong position and it is crucial that we continue to rebuild its proud legacy and reputation. There is a growing demand for the financial sector to look up to its historic roots in saving, in communities and in sustainable investment and support for businesses.Those roots run deep in Scotland.”

Speaking on behalf of the conference’s Strategic Partner and explaining how Scotland poses as a fitting backdrop to host the narrative due to its strong heritage in ethical finance, Omar Shaikh, Advisory Board Member, The Islamic Finance Council UK (UKIFC) said, “Globally, the city is a leading financial hub and within this, Edinburgh is a key location for asset management and banking. With Scotland’s proud heritage in prudent finance through the mutual life companies, origins of the savings bank movement, I believe that Scotland presents a natural place to convene and host this international dialogue which is pertinent now more than ever.”

Adding further to the rapid rise of  Scotland and in particular the Scottish capital as a premier fintech and innovation hub, Frank Ross, The Rt. Hon, Lord Provost & Lord Lieutenant of the City of Edinburgh, in his welcome address, cited, “Edinburgh is not  riding the fintech wave, it is driving it.”

However, while the three segments of ethical finance – Socially responsible investing (SRI), Environmental, Social & Governance (ESG)&Islamic/faith-based finance –  share the same values-based approach, they are separated by boundaries of geography, perception and methodology.

Stressing on the massive opportunity that lies for mainstreaming ethical finance, Lord Sheikh, The Baron Sheikh of Cornhill, said, “A fundamental part of the UK’s economic success strength stems from bilateral trade. This will be more important than ever before as we embark on a new era for our country post-Brexit. In particular, I believe that we must now seek greater economic and trade ties with our friends from across the globe and forge new trading agreements. In this context, the APPG believes that Islamic and ethical finance can offer a gateway to building new relationships and accessing new markets.”

Explaining how it’s imperative to put ethics at the forefront of businesses and speaking on behalf of the forum’s host Partner, Kirsty Britz, Director of Sustainable Banking, Royal Bank of Scotland, said, “We must keep listening to all our stakeholders. We must work together, to help people make ethical choices with their own money the norm, rather than the exception.”

Following the welcome and keynote addresses was the Plenary Session on the interplay between ethics, faith and finance which witnessed leading experts deliberate on how ethics should redeem its integral role within finance, beyond being just a convenient addendum.

The day started with a host of panel sessions gravitating around the key themes affecting the ethical finance industry at large – these issues comprisedSustainable capitalism, incorporating ESG into faith-based investing, scaling up impact investments, two exclusive case studies delving deep into tracking the growth of responsible investments in Japan & Malaysia and a keynote interview on ethics and morality with Prominent Banker and Business Historian Charles Munn.

Convened by Middle East Global Advisors in strategic partnership with the Islamic Finance Council UK (UKIFC), the Forum is presently being held under the patronage of the Scottish Government, supported by the UK government and hosted by the Royal Bank of Scotland (RBS) at its headquarters in Edinburgh. 

Building upon the legacy of the inaugural Forum held in September 2015, the theme for the two-day GEFF 2017 – Ethical Finance: Merging Profit & Purpose– is in line with the Forum’s aspiration to serve as a platform of convergence and collaboration across the responsible finance universe, and to forge a vision for a more inclusive and sustainable financial system.

ALSO READ: ‘Bring back meaningfulness and reputation to the financial sector’

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A tax-exempt bond issued by federally qualified organizations to fund projects that apart from fulfilling financial obligations, possess environmental or climate benefits, green bonds came into prominence in 2007 when they were launched by a few development banks like European Development Bank and World Bank. Since then, however, the appetite for green bonds has grown manifold with the past 4 years proving to be a key period in the rapid development of the market.

While green bonds are most suited for long-term projects, they could also be used an instruments to steer capital for urgent environmental transitions. Preliminary estimates for Green Bond Issuance in 2017 by HSBC, Moody’s & Climate Bonds Initiative are all in excess of USD 100bn signifying the massive opportunity this sector harbours.

Interestingly, the green bond market has grown at an impressive 50% compound growth rate, from close to zero at its inception in 2007 to US$91Bn in 2015. However, this statistic still represents less than 0.1% of the total global market for debt securities. (KPMG, 2016)

While the financial industry-led Green Bond Principles launched in 2014 have triggered market growth, organizations like Climate Bonds Initiative have greatly raised the awareness of the importance of green bonds and helped in developing standards for specific asset classes that would qualify as green bonds.

However, despite the significant opportunities that lie in green financing, the sector faces a number of key obstacles. These include an extremely diversified market making it complicated to develop standards effectively, the mindset of bond issuers whereby they believe that meeting such standards could lead to additional costs and treating the relevant expertise, additional monitoring and reporting needed in such cases as a big burden. (KPMG, 2016)

Another key instrument in green financing is Green Sukuk – Shari’ah compliant investments in renewable energy and other environmental assets which also address the Shari’ah concern for protecting the environment. Proceeds from green sukuk are used to finance construction, to refinance construction debt, or to finance the payment of a government-granted green subsidy.

While there are significant opportunities for Green Sukuk in the solar energy plans of Gulf countries due to the ease of understanding underlying assets and how the return is generated, there is however, a shortage of product. As per the Climate Bonds Initiative, an estimated 25-40% of institutional investors’ assets under management are dedicated to fixed-income debt, including asset-backed securities. The sukuk market is the most suitable to channelize the growing global pool of Shari’ah-compliant capital to fund renewable energy and climate change projects.

In light of the above developments, Global Ethical Finance Forum (GEFF) 2017 will spearhead an exclusive session focusing on how green bonds and sukuk can go mainstream. The session will focus in-depth on decarbonizing portfolios, the recent Paris Climate Change Agreement, the investor pool for green sukuk in OIC & OECD markets, challenges unique to green bonds and sukuk and delve into relevant country-specific case studies. A key issue that will be taken into account are the opportunities for green bond in the solar energy plans of Gulf countries. Key Speakers at the session include Mike Clark, Founder Director, Ario Advisory; Lim Say Cheong, Executive Vice President, Tawreeq Holdings; Lilian Georgopoulou, Fixed Income Manager, London Stock Exchange and Yasser Saud Dahlawi, CEO, Shariyah Review Bureau.

Across two power-packed days, GEFF 2017 will spearhead a series of sessions focusing on the massive opportunity that lies in mainstreaming ethical finance, one that requires concerted efforts to build meaningful dialogue across its three segments: Environmental, Social and Governance (ESG), Socially Responsible Investing (SRI) and Islamic/faith-based finance. The forum aims to drive thought leadership across a wide range of topics including green bonds, financial inclusion, ethical banking, amongst others, with the vision of bringing ethics to the forefront of business.

The forum will take place on 13th and 14th of September at the Royal Bank of Scotland (RBS)’s prestigious Conference Centre in Edinburgh, Scotland.

Middle East Global Advisors, a leading financial intelligence platform spearheading the agenda of sustainable and inclusive finance, will convene the second edition of the much-coveted GEFF in Edinburgh, Scotland. Based on a strategic partnership with Islamic Finance Council UK (UKIFC), the Forum will be held under the patronage of the Scottish Government, supported by the UK Government and will be hosted by the Royal Bank of Scotland (RBS), building upon the legacy of the inaugural Forum held in September 2015.

The theme for GEFF 2017 – “Ethical Finance: Merging Profit & Purpose”, is in line with the Forum’s aspiration to serve as a platform of convergence and collaboration across the responsible finance universe, and to forge a vision for a more inclusive and sustainable financial system.

The post Past 4 years saw rapid development of Green Bonds market appeared first on International Finance.

As per the GSIA 2016, Japan showcased the fastest growth in the sustainable investing market during 2014-2016, with the aggregate sustainable investment market in Japan quantified at $473.6 billion, up from $7.0 billion in 2014. A significant contributor to this was the new information provided by the Japan Sustainable Investment Forum (JSIF) on sustainable investing strategies of large institutional asset owners. Surveys by JSIF revealed corporate engagement and shareholder action to be the most dominant strategy at $289.6 billion, applying to 61 percent of SRI assets.

In February 2014, Japan introduced its very first Stewardship Code. Whilst the principles are voluntary, 201 institutional investors had adopted them as of December 2015. This was then followed by the Corporate Governance Code in June 2015. Both the codes were introduced with a vision to promote and foster engagement between investors and companies, and to open up dialogue in order to encourage companies to improve their return on equity (ROE) and to place greater emphasis on it as a key indicator of profitability and corporate governance.

Interestingly, the world’s largest pension fund, the Japanese Government Pension Investment Fund (GPIF), became a PRI signatory in September 2015 and also established a Stewardship & ESG division, in order to integrate environment, social and governance issues into its investment process effectively.

The changes in Japan’s investment industry can be attributed to a shrinking domestic market Japanese companies are seeing due to the negative demographic trends of a growing aging population which are likely to continue for years to come.

The GSIA 2016 also pointed out that during the period 2014-2016, Malaysia with 30% share in Asia (excluding Japan) is the largest SRI market in the region, as it recognizes Shariah-compliant funds as part of the SRI universe. In 2014, the Securities Commission of Malaysia introduced an SRI framework addressing the dearth of regulations and standards within the Malaysian market, and one that envisioned to serve as a benchmark for developing comprehensive standardised products that appeal to both Islamic finance and SRI markets. It also paved the way for crossovers between the various segments of the responsible finance universe – SRI, ESG and Islamic finance.

In 2006, Bursa Malaysia introduced its Corporate Responsibility framework, followed by Shariah based indices and corporate governance guidelines for listed companies in 2007. This was followed by the launch of the FTSE4Good ASEAN Index in April 2016. The index measures performance of publicly listed companies demonstrating strong ESG performance. These developments signify how Malaysia is focused on mainstreaming ESG integration.

In light of the above developments, Global Ethical Finance Forum (GEFF) 2017 will spearhead two exclusive case studies focusing on tracking the growth of responsible investment in emerging and developed markets. The sessions aim to analyse the cases of Japan and Malaysia, understand what lessons can be gleaned from them and whether their success can be replicated in other emerging and developed markets.

Across two power-packed days, GEFF 2017 will spearhead a series of sessions focusing on the massive opportunity that lies in mainstreaming ethical finance, one that requires concerted efforts to build meaningful dialogue across its three segments: Environmental, Social and Governance (ESG), Socially Responsible Investing (SRI) and Islamic/faith-based finance. The forum aims to drive thought leadership across a wide range of topics including green bonds, financial inclusion, ethical banking, amongst others, with the vision of bringing ethics to the forefront of business.

Middle East Global Advisors, a leading financial intelligence platform spearheading the agenda of sustainable and inclusive finance, will convene the second edition of the much-coveted GEFF in Edinburgh, Scotland. Based on a strategic partnership with Islamic Finance Council UK (UKIFC), the Forum will be held under the patronage of the Scottish government, supported by the UK government and will be hosted by the Royal Bank of Scotland (RBS), building upon the legacy of the inaugural Forum held in September 2015.

The theme for GEFF 2017 – “Ethical Finance: Merging Profit & Purpose”, is in line with the Forum’s aspiration to serve as a platform of convergence and collaboration across the responsible finance universe, and to forge a vision for a more inclusive and sustainable financial system.

The forum will take place on September 13-14 at the Royal Bank of Scotland (RBS)’s prestigious Conference Centre in Edinburgh, Scotland.

ALSO READ:  Scaling up impact investments to take centre stage at GEFF

GEFF to highlight the massive potential Sustainable Capitalism harbours

GEFF 2017: Key focus is merging profit and purpose

The post Analysis of responsible investment in Japan, Malaysia appeared first on International Finance.

The theme for GEFF 2017 – Ethical Finance: Merging Profit & Purpose – is in line with the Forum’s aspiration to serve as a platform of convergence and collaboration across the responsible finance universe, and to forge a vision for a more inclusive and sustainable financial system.

Historically, ethical considerations have played a major role in finance. This dates back to the anti-usury campaign of St. Francis, to Max Weber who expounded on the protestant ethics of capitalism, to the development of Islamic financial institutions based on universal values, to contemporary moral philosophers who seek to highlight the moral limits of financial markets. However, history is also dotted with undeniably unethical practices with notable incidents of infamous American fraudster Bernard Madoff who admitted that the wealth management arm of his business was an elaborate ‘Ponzi Scheme’ to the Global Financial Crisis (GFC) that was the culmination of practices following the growing financialisation of the economy.

According to the latest IMF Global Finance Stability Report, the financial sector is exhibiting signs of a return to the risky behaviour that culminated in the recent financial crisis. Rising populism in the US and Europe can be seen as an expression of the lack of trust and confidence in ‘the establishment’, a sentiment that was echoed in the findings of the 2017 Edelman Trust Barometer in which 53% of the respondents believe that the system is failing them with trust in both the government and business evaporating noticeably.

While the GFC sent ripples of shock and instability throughout the world, the aftermath of the crisis witnessed the resurgence of the ethical facets of finance. It was only a matter of time before which the call for a more inclusive and sustainable economy intensified.

As per the Global Sustainable Investment Review 2016, ethical finance is on track to developing its global value proposition with the global ethical finance industry having reached a significant market size, growing by 11.9% CAGR. In the UK, it is projected to add economic value of approximately worth $17 billion by 2020 while the Islamic assets are set to grow at a rate of 19.7% by 2018 as per a study by EY. The increasing demand for responsible financial services is largely driven by changing public perception and prompted by the effects of the past financial crisis. Such increased interest presents new opportunities for the industry and in order to capitalise on these opportunities and mainstreaming ethical finance requires concerted efforts to build meaningful dialogue across its three segments:

1. Environmental, Social and Governance (ESG)
2. Socially Responsible Investing (SRI)
3. Islamic/faith-based finance

In fact, the single largest ESG research by the University of Hamburg and Deutsche Asset & Wealth Management demonstrated the strong and positive correlation between successful ESG strategy integration and corporate financial performance after assessing literature comprising more than 2,000 studies on the topic with 62.6% of the studies examined reinforcing this key finding.

While the three segments of ethical finance share the same values-based approach, they are separated by boundaries of geography, perception and methodology. There is much work to be done to bear the fruits of these nascent connections and to marry the ethical underpinnings of responsible finance with profit motivations.

GEFF 2017 is premised on this very need and aims to drive thought leadership and spearhead conversations across a wide range of topics including green bonds, financial inclusion, ethical banking, amongst others, with the vision of bringing ethics to the forefront of business.

The forum will take place on 13th and 14th of September at the Royal Bank of Scotland’s prestigious Conference Centre in Edinburgh, Scotland.

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