Staff Reporter Karachi
Islamic banks should embrace sustainable finance practices to unlock funding opportunities in green energy, affordable housing and infrastructure projects, Azhar Aslam, head of Islamic banking, Standard Chartered Bank Pakistan said during an interview.
These avenues should be considered a great opportunity by Islamic financial institutions (IFIs), which could better manage environmental and social impacts in a Shariah-compliant way that contributes to sustainable development.
“There are few key initiatives in the country that provide green investment and sustainable financing opportunities such as green energy, as the government aims to increase the share of alternative sources of energy to 20 percent by 2025 and 30 percent by 2030 under the new renewable energy policy,” Aslam said.
Naya Pakistan Housing Scheme and Ravi Riverfront Urban Development Project, and the development of overall infrastructure projects including environmentally friendly economic zones, ports to support trade, highways, sustainable water reservoirs for long-term economic development, can also have potential for the shariah-compliant lenders in sustainable finance, he added.
However, there were some challenges being faced by the stakeholders in adopting socially responsible finance in Pakistan.
Pakistan like any other developing country has limited fiscal budget and its private sector has nominal incentive to fund sustainable projects.
Promoting sustainable financing in the country, therefore, requires a well-designed evidence-based strategy backed by a deep understanding of challenges,” Aslam said.
“There is a need to create awareness about the importance of meeting UN Sustainable Development Goals (SDGs) on war footing in our country to preserve and protect our future generations.”
Highlighting a hindrance in this matter, he pointed to a lack of coordination between various stakeholders involved in SDG space and authentic data to highlight the significance, achievements and future prospects.
Since the inception of Islamic banking (IB) in the country, the focus has been on providing a full suite of interest-free financial products and services to cater the needs of individuals, businesses and sovereign entities.
“To a great extent, this goal has been achieved. Due to increasing awareness of sustainability and impact-based banking at international and local level, we believe the next phase of IB should be value based intermediation (VBI), to make IB a brand beyond profit maximisation and legalism that offers human-centric wholesome value propositions of integrity, inclusivity and sustainability.”
Sustainable finance generally refers to the process of taking due account of environmental, social and governance (ESG) considerations when making investment decisions in the financial sector for the lasting benefit of both clients and society at large.
The Covid-19 pandemic has raised awareness of sustainability issues in many ways. The SCB Sustainability Review Report 2020 stated that over the next three years, 42 percent of investors would consider investing five to 15 percent of their funds in sustainable investment, while nine percent indicated they would like to have 25 percent or more of their funds allocated to this area.
