The 72nd session of the UN General Assembly held from September 19 to 25 in New York saw no shortage of tit-for-tats between statesmen, notably the war of words between US President Donald Trump and North Korea’s leader Kim Jong-un, which overshadowed a number of important debates and side events of this UN meeting.
One of it was the gathering of officials and executives from public and private institutions and investors for a high-level side event entitled “Realising Agenda 2030: How Islamic Finance through Impact Investing can help achieve the Sustainable Development Goals (SDG)”
This event, co-organised by the Islamic Development Bank and the UN Development Programme (UNDP) and held with the support of the Organisation of Islamic Cooperation’s New York office, emphasised that the successful implementation of the UN’s 2030 Agenda and the accompanying SDG – also referred to as Global Goals – require “a significant amount of financial resources, beyond traditional development financing.”
Among the innovative approaches, which are being seen as required to unlock new sources of capital, the UNDP once more mentioned Islamic finance and how it could be tapped as “a strong and scalable funding source for global development.” To that end, the event brought Islamic and other development financiers together to seek new partnership and collaboration opportunities towards the implementation of the Global Goals.
According to Magdy Martínez-Soliman, UN assistant secretary general and director of UNDP’s Bureau for Policy and Programme Support, the gap in SDG financing is currently estimated at $2.5tn every year.
“Official development assistance alone is not an adequate source of financing,” he said, adding that Islamic finance could effectively come to the rescue.
“Islamic finance is one of the fastest growing sources of finance in the global financial industry with global assets in the sector expected to reach $3.5tn in 2021. Considering the scale, I would like to underline that Islamic finance could offer a strong, non-traditional source of financing to advance SDG implementation,” Martínez-Soliman said.
The IDB, for its part, has made it clear that it is strongly committed to supporting the deployment of Islamic finance instruments for achieving the SDG. As a key driver, it established the Global Islamic Finance and Impact Investing Platform (GIFIIP) which has been tasked with creating a framework for an Islamic finance-based impact investing ecosystem. The GIFIIP’s role is also the matchmaking between Islamic finance investors and other players, such as business incubators, development organisations and, most importantly, inclusive business ventures seeking capital. This is particularly important for the Organisation of Islamic Cooperation, where 19 of 50 member countries are in the low-income country group and/or affected by poverty.
“We are strongly committed to Islamic finance for reaching the Global Goals because creating environmental and social returns in addition to financial benefits for society essentially represents the basic principles of Islamic finance,” Sayed Aqa, IDB vice president, said.
The cooperation between the UNDP and the IDB goes back more than 30 years, following their first memorandum of understanding in 1986. Over time, the cooperation encompassed a number of efforts, for example funding more than $240mn over the past ten years for agriculture, electricity and housing projects for Palestinian people. In 2015, the UNDP and the IDB joined forces to achieve the 2030 global development agenda with a focus on impact investment and poverty reduction in its member countries.
The SGD are a broader intergovernmental agreement and a successor to the Millennium Development Goals over a set of (albeit non-binding) 17 Global Goals with 169 targets within them. Islamic finance, which embodies socially responsible investment principles, is particularly seen suitable to promote sustained and inclusive economic growth and ensure social development and environmental protection while supporting peaceful, just and inclusive societies. This is made possible through its prohibition to invest in activities related to tobacco, alcohol and drugs, speculation, gambling, indecent products and weapons manufacturing.
Among the financial instruments it provides, sukuk, Islamic microfinance and micro-takaful stand out for SDG. It is expected that events such as the one at the UN will continuously unleash further innovative ways for sustainable development financing, assist in developing appropriate investing tools and improve access of more impact enterprises to Islamic funding.