July 11-13, 2023, Cambridge UK

3 DAYS / 10 Workshops
MORE THAN 200 ACADEMIC PAPERS

Sustainable Development Financing and the Role of the Financial Sector in the GCC Region

The magnitude of the issues the world has been experiencing, both economically and environmentally, has reached such levels which require urgent action to ensure human security. Therefore, the urgency of sustainable development is no longer a niche topic but has become part of global morality as expressed in various international initiatives such as SDGs. As part of such initiatives, the November 2021 United Nations Climate Change Confe ...


The magnitude of the issues the world has been experiencing, both economically and environmentally, has reached such levels which require urgent action to ensure human security. Therefore, the urgency of sustainable development is no longer a niche topic but has become part of global morality as expressed in various international initiatives such as SDGs. As part of such initiatives, the November 2021 United Nations Climate Change Conference (COP26) in Glasgow sought to devise compelling initiatives to combat the climate crisis. Later in 2022, a follow-up conference on this issue convened to discuss a global biodiversity framework. Exploitative production and excessive consumption habits as the norms of the market economy have resulted in catastrophic environmental, financial, and socioeconomic impacts. Despite the enormous capital and financial gains and movements, poverty remains a pressing issue; exclusion and disenfranchisement of the impoverished remain critical challenges in the 21st century, while climate change due to such products and consumption patterns affects every corner of the world.The institutionalisation of the Sustainable Development Goals (SDGs) paradigm by the United Nations (UN), which has become part of national public policy in many countries, including in the GCC, stands as an official declaration of the unacceptable economic and financial behaviour of individuals, firms, and corporations which have caused enormous disruption to natural and human life. The call for integrating sustainability and the interests of all the stakeholders in all economic and financial decision-making has been the central discourse and policies of many NGOs over the years, which has now been taken up by multilateral organisations led by the declaration of SDGs by the UN.SDGs have taken a crucial step by binding all the countries globally and universalizing the expectations of sustainable development beyond the developing country focus of Millennium Development Goals (MDGs). Therefore, global mobilization for 17 goals, 169 targets and 232 indicators of SDGs, including climate change issues, has become the leading global policymaking issues in recent years. The nature of current challenges requires organised, structural, and international mobilization beyond nation-state solutions. Despite certain controversies among the targets, as part of the global mobilization, most UN member countries have become party to the SDGs and incorporated them in their public policy as a vital and positive sign for change. In addition, national governments and international agencies have also initiated motivating strategies for their corporate and financial sector for sustainable practices and also generating the necessary financing to fill the financing gap.While the financial sector has always been an essential instrument of prosperity and development throughout history, in recent years, the growth and movement of capital within the financial sector have become objectives in their own right rather than instruments for facilitating economic activity, growth, and development as identified by the increasing financialization. The financial sector has consequently expanded through artificial products and mechanisms, resulting in further disconnection from the real economy and producing unsustainable practices.The growing asymmetry between the real economy and the financialised economy indicates the unsustainable nature of the global economy – World GDP was only 8.3% of the total financial assets in 2019, showing the enormous pressure exerted on the resources in the world. Moreover, banks and financial institutions have created demand far beyond the reasonable level through their lending and financing channels. The results are twofold: strain on global resources and an escalation of the environmental crisis. Further, increased access to finance is not translating into equitable resources for the impoverished – an injustice that must be addressed.

In order to confront these challenges, the new consensus around sustainability has increased stakeholder expectations, which should be considered as part of the rescuing process – rescuing humans, land, and labour – to prevent further deterioration of the conditions. An official UN-based index, other multilateral institutions and, unofficially, many indices and studies have been developed to measure SDGs’ performance in all jurisdictions.

A further important step in 2021 was the creation by the International Financial Reporting Standards Foundation, with widespread governmental and international support, of a new International Sustainability Standards Board to create new disclosure standards – starting with a focus on the climate. In addition, the corporate governance system in firms and business are expected to develop sustainability practices through specific committees to ensure sustainable compliance. The public concern surrounding the abovementioned challenges has spurred the growth of ESG investing, namely integrating Environmental, Social and Governance at the corporate level. Although the (older) ESG paradigm is capable of embracing the SDGs, it is broader and less precisely defined. In some areas, this has led to allegations of ‘greenwashing’, in which businesses choose to be assessed under the definitions that most suit them. Socially Responsible Investing (SRI) or Impact Investing is also used and overlaps with ESG and SDGs. In response to these trends, there have been significant developments within the financial sector, including the emergence of sustainability-linked instruments, green bonds and green Sukuk and initiatives by financial sector supervisors; for example, the Network for Greening the Financial System, the Sustainable Stock Exchanges (SSE) initiative and the UNDP's Financial Centres for Sustainability (FC4S). Initiatives have also emerged from the sector itself, notably the promises made at COP26 by the Glasgow Financial Alliance for Net Zero, a coalition of banks, insurers, and major investors. This is part of a process in which banks and financial institutions are expected to align themselves with the sustainable development paradigm as part of a global community. Correspondingly, the increased focus in financial markets on sustainable development, and the initiatives, both private and public in present times, have resulted in tremendous opportunities for sustainable finance in general and Islamic finance in particular. To respond to these demands and opportunities, banks and financial institutions, including the Islamic finance sector, must develop the necessary frameworks, taxonomies, mechanisms, practices, and measurements to demonstrate sustainable development credibility in economic, social, environmental, and governance spheres. This requires going beyond the common pattern of the financial screening process to one of the positive choices within an enhanced governance system based on integrating the interests of all the stakeholders so that ‘rescuing and healing’ can be possible. Hence, sustainability requires transforming business, economic and financial practices and individual consumption behaviour.




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Workshop

Directors


Prof. Mehmet

Asutay

Director of the Durham Centre in Islamic Economics and Finance -
Professor of Middle Eastern and Islamic Political Economy & Finance at the Durham University Business School



Dr. Dalal

Aassouli

Assistant Professor of Islamic Finance and Sustainable Development at College of Islamic Studies -
Hamad bin Khalifa University


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