Sunday, January 17, 2010

Islamic financial institutions should become UNEPFI signatories

Michael Gassner, an expert on Islamic finance based in Europe, recently called on Islamic financial institutions to become members of the United Nations Environment Programme’s (UNEP) Financial Initiative. His call was seconded by Dr. Mahmoud El-Gamal, who added that “This is consistent with my earlier call in my book on Islamic Finance that those engaged in Islamic finance should support the earlier UN initiative for financial markets knows as ‘who cares wins’.”

I would like to add my support for this because of the similarities—in theory more so than practice—Islamic finance provides an ethically-based financial model. The gap between rhetoric and reality was described by Dr. El-Gamal: “I have long been a critic of the Islamic finance industry focusing mainly on avoiding prohibitions, but not recognizing that prohibitions are secondary to positive injunctions”. My hope is that Islamic financial institutions become signatories to the UNEPFI as the first step in broadening their focus from avoiding Shari'ah non-compliant activities and adding a focus on promoting sustainable business practices.

The UNEP Financial Initiative is a voluntary initiative that requires signatory financial institutions to incorporate sustainability (the environmental, social and governance impacts of their business) into their business practices. Institutions joining must sign one of two statements (one for financial institutions, one for insurance companies).

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