Islamic finance is ideally positioned to lead the sustainability agenda. While this is a sentiment many Islamic finance practitioners hold, arguably not much is being implemented on the ground level. The panelists of the ‘Embedding Sustainability in Islamic Financial Institutions’ panel session at the Standard Chartered Global Shariah Majlis 2023 event tackled this issue from a Shariah-centric perspective head on.
The basis of Islamic sustainability
From a Shariah-centric perspective, the discussion on sustainability can often be challenging as many non-sustainable activities are objectively Halal. According to the scholars of the panel, taking a more granular and nuanced consideration to the degrees of the broad umbrella of Halal activities may be the key to Shariah-based sustainability.
While the Haram side of the Halal–Haram equation is binary, there are degrees of permissibility within the Halal side, with some activities being preferred, some neutral and some disliked while still technically within the boundaries of permissibility.
“We have to stick to the rules of Shariah, but to widen our perspective to include the degrees of Halal … This should be embedded, not only in the mandate of the Shariah committee, but also in the work of the Shariah committee to meet the sustainability expectations of society,” Dr Mohamed Ali Elgari, a global Shariah supervisory committee member of Standard Chartered Bank, remarked.
In addition to moving toward an emphasis on what is preferred within the Halal side and avoiding what is disliked while permissible, Dr Mohamed noted that governments also play a unique role in promoting activities for the benefit of society.
While the government cannot make what is Halal Haram and vice versa, it does have a basis to prohibit things based on the Maqasid Shariah if they bring harm to society, as is the case with non-sustainable activities.
The onus of responsibility
As scholars are increasingly tasked with taking sustainability considerations into account when deriving verdicts and recommendations, the question of who bears the brunt of the responsibility for the sustainability standing of an Islamic financial institution’s activities arises. The limitations of a Shariah scholar’s expertise may also be a hindrance in their ability to make sustainability considerations.
“When we [give Shariah rulings], it should be guided by other factors. One of the factors is the sustainability considerations of the industry. It should come from the practitioners in guiding us in giving opinions,” Dr Aznan Hasan, a global Shariah supervisory committee member of Standard Chartered Bank, shared.
In contrast to the industry, Mufti Muhammad Abdul Mubeen, the group head of the Shariah department of Standard Chartered Bank and a Shariah board member of SCB Pakistan and Malaysia, pointed to the management of Islamic financial institutions.
“The management of the bank also, when they have two options, they should prefer the option that is aligned with the Maqasid Shariah and sustainability,” Mufti Muhammad remarked.
Dr Zurina Shafii, a Shariah board member of Standard Chartered Bank Malaysia, concurred, opining that: “[The] board is the party that has the influence and a greatest responsibility to have the oversight on the Maqasid implementation and the VBI [value-based intermediation] implementation within the institution.”
This could take the form of the board of directors establishing a policy on the implementation of Maqasid Shariah within an Islamic financial institution. According to Dr Zurina, one of the Malaysian development banks she works with already has a policy measuring the impact of its activities on national development. The same can be applied for Maqasid Shariah.
The point of reference
While the general compatibility of Islamic finance and sustainable finance has been continuously highlighted, the issues of convergence and referencing non-Islamic-based sustainability objectives have been the topic of heated debate.
“We need to do our own thing … Trying to meet the [goals] set by the UN or following the west including the IMF and the World Bank are destined to fail,” Dr Mohamed warned.
According to Dr Aznan, convergence in itself is not an issue, so long as Islamic finance is staying true to its principles.
“The important thing is how we can use sustainability, not to be a follower but to become a driver, shaker and mover in the industry … We have to approach sustainability not within the purely conventional western framework but within the framework of Maqasid.”