Sukuk Report 2014 Article: The Opportunity for Ethical Sukuk
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Transcript of Sukuk Report 2014 Article: The Opportunity for Ethical Sukuk
1
The Opportunity for Ethical Sukuk
Author: Michael Bennetti, The World Bank.
Source: Thomson Reuters Sukuk Perception &
Forecast
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Islamic finance shares a strong similarity with
ethical investing. Like ethical investors, Shariah-
compliant investors demand that their
investments not only be attractive in economic
terms, but that they meet certain non-financial criteria as well. In the case of Shariah-compliant
investors, these non-financial criteria involve compliance with Islamic law and principles.
Growth of ethical investing
The concept of ethical investing - investors using their money to promote ethical activities and
social good – has deep roots in the doctrine of many religions. Islam, Christianity and Judaism,
for example, all share a focus on the individual’s moral responsibility to use money in a way
that betters one’s community and is consistent with one’s faith. These religious prescriptions
have impacted individual investment decisions for centuries.
Over the past few decades, ethical investing has grown from being just a matter of individuals
exercising their faith to become a comprehensive investment strategy. A large and growing
number of individual and institutional investors, including asset managers, pension funds and
university endowments, now include achieving certain social, environmental or corporate
governance objectives as a part of their money management process. In making investment
decisions, these investors overlay a qualitative analysis of a company’s policies or practices in
the specific area or areas of concern to the investor onto their quantitative analysis of the
company’s financial condition and prospects.
Ethical bond market
The conventional bond market has been used to channel investment to worthy causes for
decades. The World Bank pioneered this use of the bond market when it issued its first bond in
1947. The World Bank, and other supra-national institutions, issue bonds and use the proceeds
of those issues to fund sustainable development projects in developing countries. Only
recently, however, with the growth of the ethical investing movement, have investors sought to
invest in bonds in which the proceeds will be used to promote specific ethical activities. Driven
by this investor demand, the ethical segment of the conventional bond market has begun to
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expand rapidly, with supra-national “theme bonds” (linked to specific development themes
such as women’s empowerment or access to water) and “green bonds” (bonds for which the
proceeds support specified environmental projects or activities) leading the way. Table 1
illustrates the growth trajectory of the green bond segment of the ethical bond market.
TABLE 1
Get the full article by download your complimentary copy of the
sukuk report hosted on Zawya Islamic, to know more about the
opportunity for ethical sukuk.
Thomson Reuters Zawya released enhancements to the Zawya
Sukuk Monitor including features allowing visual data alongside figures signifying the global sukuk market overview, Click here
i Michael Bennett is the Head of Derivatives and Structured Finance in the Treasury Department of the World Bank. The findings, interpretations and conclusions expressed herein are those of the author and do not necessarily reflect the views of the World Bank or its affiliated organizations.