Islamic Finance Key To Bridging Sustainability Funding Gaps - Sultan Nazrin

LONDON, Sept 10 (Bernama) -- Islamic finance has the potential to bridge the critical funding gap needed for the transition to a more sustainable and resilient future, said Sultan of Perak, Sultan Nazrin Shah.

Sultan Nazrin Shah, who is also the Royal Patron of Malaysia's Islamic Finance Initiative, said Islamic finance, rooted in ethical practices, fairness, and equitable risk-sharing, provides a framework aligned with sustainability and presents diverse funding options, including blended and social finance.

“It (Islamic finance) is well-positioned to address funding gaps that impede global progress and can serve as a tool for channelling resources where they are needed most," the Perak Ruler said in his keynote address at the Malaysia International Islamic Financial Centre (MIFC)-United Kingdom (UK) Business Forum 2024.

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Citing the latest United Nations (UN) Sustainable Development Goals (SDG) report, he said that the UN estimated that nearly US$4 trillion of annual inflow is needed to achieve the 2030 Agenda for Sustainable Development in developing countries and US$9.2 trillion in annual average spending on physical assets is required to achieve net-zero emissions by 2050.

Established in 2015, the SDGs outline 17 global goals aimed at creating a better, more sustainable and equitable future.

Key objectives include upholding human rights, achieving gender equality, empowering women and girls, eradicating poverty, and ending hunger worldwide.

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According to Sultan Nazrin, critical investments needed to fuel the transition to a sustainable future remain largely unmet, even though there has been a notable development in terms of the commitment of national leaders and efforts to advance the tools to monitor SDG progress.

"These investment needs are further compounded by the spillover effects of COVID-19, as well as ongoing conflicts and the burgeoning climate crisis, all of which have exacerbated existing inequalities and heightened the challenges we face,” he added.

He pointed out that Islamic finance has the potential to help fill global funding gaps that balance long-term value creation with short-term needs while maintaining a commitment to social justice and inclusion.

"This is the very essence of sustainable development. I believe it is incumbent upon players in the industry to direct their efforts towards advancing the global sustainability agenda," His Royal Highness said.

While highlighting Malaysia as a regional leader in Islamic finance with total outstanding Sustainable and Responsible Investment (SRI) sukuk issuances exceeding US$6 billion, Sultan Nazrin was also pleased to to note that the UK is one of the few countries outside the Organisation of Islamic Cooperation to have also issued sovereign sukuk twice.  

The Perak Ruler also emphasised the importance of scaling up innovation and technology to achieve the sustainable agenda, adding that innovation is the cornerstone of progress and can enhance the quality of growth over the long term.

According to His Royal Highness, Islamic finance has the potential to be a trailblazer in the area of innovation and technology, with the Islamic fintech industry being worth US$79 billion in 2021 and projected to grow at a remarkable rate to US$179 billion by 2026.

However, he noted the challenge of optimising talent availability and resources in pursuing innovation, citing the World Economic Forum's finding that growing disparity in digitalisation rates has led to persistent economic divides and missed opportunities for technological advancement.

“Yet, within this challenge lies a remarkable opportunity for developing economies. They can step forward to offer essential services and expertise in various sectors – ranging from engineering and design to healthcare and education. 

“Such collaboration allows for a valuable exchange of knowledge and skills that can help to bridge the innovation divide in ways that foster mutual growth and progress," he said, underscoring the importance of collective, coordinated efforts in pursuing the sustainability agenda.

On the same note, Sultan Nazrin expressed his firm belief that Malaysia and the UK can serve as a model for productive and impactful collaboration. 

"The importance of this relationship will become ever more pronounced, particularly when considering the economic and environmental trajectories of our two nations. The UK presents a compelling example of balancing economic growth with environmental responsibility. 

“The partnership between Malaysia and Britain, meanwhile, has also proved fruitful in the area of driving growth, innovation, sustainable infrastructure and green finance simultaneously,” he said, citing the Malaysia-UK PACT programme which concluded in 2023.

The Malaysia-UK PACT supported and continues to encourage Malaysia’s low-carbon transition, with projects valued at £2.6 million, focusing on low-carbon planning, nature, energy and green finance. 

“So let us now build on the important work we have already done and the strong foundations we have already laid. 

“Let us continue to use our partnership to advance green finance and sustainability, in our own nations and beyond," he added.

-- BERNAMA