Discover a World of Opportunities

This week the Institute of Directors (IoD) and the Scottish Business Network (SBN) will be hosting Scottish International Week. An amazing forum to learn and interact with some of Scotland’s leading businessmen and women with a track-record of success in new markets such as the Europe, North America, Middle East, and China.

The forum will be held throughout the week, starting today Monday 9th to Friday 13th at the IoD headquarters in Charlotte Square, Edinburgh. All sessions are free to attend but registration is recommended as seating may be limited.

I have the honour of speaking on Thursday afternoon at 3:30 pm, discussing not only my experiences in Canada but also the enormous opportunities for Scottish companies to reach the emerging Islamic markets in the Middle East and Asia.

Coincidentally, Edinburgh hosted the Global Ethical Finance Forum last month which I had an opportunity to attend and explore opportunities for collaboration with businesses and investors from the region.

I’ve shared my article below for your reference and encourage you not to miss a great opportunity at the Scottish International Week to learn from, connect to, and network with Scotland’s global leaders.

Islamic finance takes centre stage in Scotland

This article was first published in Islamic Finance news Volume 14 Issue 39 dated the 27th September 2017.

Over 300 business and finance leaders gathered in Edinburgh to attend the 2nd Global Ethical Finance Forum (GEFF) on the 13th and 14th September at the RBS Conference Center. The theme of the event was ‘Merging profit with purpose’.

Kirsty Britz, the director of sustainability at the Royal Bank of Scotland, opened the forum with a welcoming address that would set the stage for the two-day conference. “We must encourage ethical choices as a norm rather than the exception.” Key speakers at the GEFF this year included Keith Brown, the cabinet secretary for economy, jobs and fair work in the Scottish government; Nurlan Kussainov, CEO of Astana International Financial Center (AIFC) Authority; Jameel Ahmad, the deputy governor of the State Bank of Pakistan, and many more.

During the various panel sessions and keynote speeches, the forum covered the interplay between ethics, faith and finance. There were discussions on impact investing, sustainable development and green bonds, as well as an innovation showcase near the end of the forum which highlighted the latest innovative tools in ethical finance. Discussions on socially responsible and impact investing brought out the challenges facing asset managers with Anthony Hobley, CEO at Carbon Tracker, stressing: “We need to see a paradigm shift whereby ESG [environmental, social and governance] reporting becomes the norm and is just an integral part of any financial decision. For that to happen, it needs to be seen as critical to the management of financial risk and [to] achieve better returns.

This goes to the Holy Grail at Carbon Tracker, how does one translate the environment, climate energy and transition risk into quantitative financial risk and opportunity? To achieve this, ESG needs to be much more forward-looking than backwards-looking. It must be capable of stress-testing business models against foreseeable risks and transitions and capable of flagging the collapse in valuation we have already seen in US coal European energy utilities.”

As an example, green bonds came into prominence in 2007 when they were launched by a few development banks including the World Bank. Ten years later, the tax-exempt bonds continue to be suited to long-term projects. Preliminary estimates for green bond issuance in 2017 by HSBC, Moody’s Investors Service and Climate Bonds Initiative are all in excess of US$100 billion and demonstrate the massive opportunity for the ‘ethical’ bond sector. A green Sukuk facility, a Shariah-compliant version of the green bond, can provide much-needed investment in renewable energy and other environmental projects to finance regional development projects in the Middle East.

Discussing the inherent issues facing the financial services sector, Kussainov addressed the underlying challenges facing the industry. “Within the current business model in the financial services sector, speculation and arbitration are always based on asymmetric information. People from low-income groups who have less access to the information end up suffering more.

With the financial services sector rapidly embracing technology, there is a strong belief that in the near future there will be a reduction in the current communication gap that the sector presently faces. This will bring a very positive impact on to the development of Islamic and ethical finance across the world, helping it to realize its global value proposition.” David Parker, the executive director of Financial Services at the Bahrain Economic Development Board (ECDB) who also attended the forum, was confident the relationship between Islamic and ethical finance will become stronger. “We (ECDB) have been trying to develop [the] Islamic fi nance initiative around innovation and fintech, trying to ensure the industry is fi t for purpose in the 21st century. Islamic finance (will become) an important part of the wider ethical finance agenda.”

The forum closed on an inspiring note with an optimistic outlook by Nigel Kershaw, the chair of the Big Issue, highlighting that the democratization of finance will lead to the wider adoption of ethical finance as an integral part of investing, saying: “There is a lot of talk about ethical finance and in particular ESG and social impact because it’s talked about primarily by people involved in the financial sector. I believe the democratization of capital is extremely central to what we do. Quite often, the discussion is top-down supply and product-led and for me, it often misses one of the most important social outcomes that is quite often forgotten, that is the opportunity for ordinary people to invest and save in creating a better place to live for themselves, their families and the community around them. It’s not about mainstreaming ethical finance; it’s all about bringing the mainstream to us.”

The GEFF plays an instrumental role in connecting thought leaders and stakeholders from the responsible and Islamic finance world to learn, collaborate, and work toward a mutually inclusive desire to develop finance as a force for good.

Giving It Away

I applaud Mark Zuckerberg and his wife Priscilla’s announcement this week to give away 99% of their Facebook shares to a new charitable foundation. The news brought to the forefront the Giving Pledge initiative started by Bill Gates and my mentor Warren Buffett. The duo challenged the world’s richest families to join them in not hoarding their money but using it for the greater good.

Bill and Melinda Gates said in a statement after the Zuckerberg-Chan news said: “As for your decision to give back so generously, and to deepen your commitment now, the first word that comes to mind is: Wow. The example you’re setting today is an inspiration to us and the world. We can be confident of this: Max and every child born today will grow up in a world that is better than the one we know now. As you say, ‘seeds planted now will grow.’ Your work will bear fruit for many decades to come.”

Added Buffett in a statement: “A combination of brains, passion and resources on this scale will change the lives of millions. On behalf of future generations, I thank them.”

Now you don’t have to be a billionaire to pledge and make a difference. Each and every one of us can make a commitment to be more responsible with our money and making sure we give it away while we can.

To inspire us we have the likes of Zuckerberg and according the Generosity Index (calculated as the ratio of lifetime donations to current net worth in U.S. dollar figures), there are many unsung heroes who have truly made a sacrifice and given away the vast majority of their fortune during their lifetime.

Ranking in absolute dollar terms, they most generous as posted on Business Insider are:

1. Bill Gates

Co-founder of Microsoft

Lifetime donations: $27-billion

Net worth: $84.2-billion

Generosity Index*: 32%

2. Warren Buffett

Chairman and CEO of Berkshire Hathaway

Lifetime donations: $21.5-billion

Net worth: $61-billion

Generosity Index: 35%

3. George Soros

Retired founder of Soros Fund Management

Lifetime donations: $8-billion

Net worth: $24.4 billion

Generosity Index: 33%

4. Azim Premji

Chairman of Indian consulting and IT company Wipro

Lifetime donations: $8-billion

Net worth: $15.9-billion

Generosity Index: 50%

5. Charles Francis Feeney

Retail magnate

Lifetime donations: $6.3-billion

Net worth: $1.5-million

Generosity Index: 420,000%

6. Sulaiman bin Abdul

Aziz Al Rajhi

Co-founder of Al Rajhi Bank

Lifetime donations: $5.7-billion

Net worth: $590-million

Generosity Index: 966%

7. Gordon Moore

Co-founder of Intel

Lifetime donations: $5-billion

Net worth: $6.5-billion

Generosity Index: 77%

8. Carlos Slim Helú

Chairman of Grupo Carso

Lifetime donations: $4-billion

Net worth: $27.3 billion

Generosity Index: 15%

9. Eli Broad

Former CEO of SunAmerica

Lifetime donations: $3.3-billion

Net worth: $7.3-billion

Generosity Index: 45%

10. George Kaiser

Chairman of BOK Financial Corp.

Lifetime donations: $3.3-billion

Net worth: $9.3-billion

Generosity Index: 35%

13. Mark Zuckerberg*

Founder and CEO of Facebook

Lifetime donations: $1.6-billion

Net worth: $40.7-billion

Generosity Index: 4%

Edinburgh Hosts GEF Forum 2015

“I am at peace. If you see graft and don’t speak out against it, you are part of the system that enables it. I was unable to let it continue to happen and weigh on my conscience.” stated HRH Muhammad Sanusi II, Emir of Kanoand former Central Bank Governor of Nigeria in an extraordinary live on-stage interview at the end of the Global Ethical Finance Forum held last week at the prestigious Balmoral Hotel in Edinburgh, Scotland.

The interview with the Emir of Kano was the perfect culmination for the two-day forum which gathered 300 delegates from across the ethical finance industry including Islamic Finance, Socially Responsible and Impact investing. The delegates included industry leaders, academics, students, and financial service participants from across the Middle East, Africa, East Asia, Europe and North America.

The candid and informal interview with the Emir of Kano describing his own personal experience as the former central bank governor of Nigeria during the credit crisis of 2008. His experience and advice for Islamic bankers was to install safeguards to eliminate corruption and to hold accountable individuals for their irresponsible actions. He feared that we were heading towards another global financial crisis as many of the issues from the previous banking crisis remained unresolved.

The Emir further clarified that ethical finance to fully be a leading part of the future of global finance; it must not only incorporate Islamic finance and other faith groups but also provide a real value proposition that puts the customers and depositors ahead of the equity stakeholders. A key issue in the current financial system as current banking and financial regulations favoured the equity holders of the bank which typically account for only 10% of the assets at the expense of the customers (deposit holders) that have contributed the remaining 90% of the bank’s assets.

The Emir also highlighted an underlying holistic issue for conventional banking which is also shared by most Islamic banks; failure to contribute to the good of the society with emphasis on fairness and social justice.

Almost certainly most of the delegates at forum shared the views of the Emir and even Keith Brown MSP, Scotland’s Cabinet Secretary for Infrastructure, Investment & Cities in his opening remarks stated, “Creating a fairer society is not just a good on its own, it is also essential for long-term prosperity.”

The renowned Dr. Zeti Akhtar Aziz, Governor of Bank Negara Malaysia, the leading voice of emerging markets stressed the need for sustainable economic development saying: “The value of financial intermediation includes mobilize savings, promoting the efficient allocation of resource, reducing informational asymmetry, and manage risks. Emerging markets have benefited from transformative role of finance in the development of emerging markets in the 21st century.”

So indeed the forum provided a great platform for discussion between Islamic finance and conventional finance on a unified platform of “ethical” finance. Panel discussions included investment screening processes, green bonds and sukuks, regulation, technology and the summary of the newly released Responsible Finance Report produced by Thomson Reuters and the Responsible Finance Institute. The forum reaffirmed the similarities between ethical and Islamic finance but also brought to light a key issue for Islamic financial institutions that is often overlooked; is it possible for a product to be “Shariah Complaint” and not ethical?

The answer is yes. One panel discussion highlighted this very issue and discussed ways to incorporate ethical guidelines in Islamic finance products to make the product not just be Shariah compliant on the surface but Islamic to the core.

A simple example helped delegates understand the issue at hand. A clothing manufacturer with no debt and meeting other generally accepted Shariah screening metrics which typically are financial ratios and business or product being of a halal nature would pass as being a Shariah compliant investment. However, the company is using suppliers in Thailand which are employing child labour or have exploitive employment practices. Shariah screening would fail to capture this issue which is clearly against Islamic or Shariah principles.

Socially responsible investing employing Environmental, Social, and Governance screening would be able to capture the issue of child labour as it would extend its screening beyond the surface of the company to look at the supply chain and practices of the company.

Shariah screening in most cases would fail to capture unethical practices of any business and would wrongly pass off businesses as being Shariah compliant despite their un-Islamic business practices. Panellists suggested Shariah scholars be given a broader mandate which would include assessment of the business operations. Perhaps even having Shariah scholars sit on the boards of financial institutions or companies so they can see that board and management decisions are being made in an ethical responsible manner.

Then we would surely solidify ethical and Islamic finance by ensuring that every Islamic finance product is truly ethical meeting the requirements of responsible Muslims and non-Muslims alike.

Article by Suhail Ahmad, published in the Islamic Finance News – Sep. 09, 2015