Leading institutions came together to show how sustainable, responsible and Islamic finance can deliver a legacy of massive impact

The Responsible Finance & Investment (RFI) Foundation and Swiss Arab Network concluded the fourth RFI Summit 2019 last week.  The Summit, held over two days, saw discussions centered around how to create A New SRI combining Sustainable, Responsible and Islamic Finance.   

During the RFI Summit opening keynote address, H.R.H. Princess Sarah Zeid of Jordan delivered a call to action for the financial sector: “I challenge you to come together and initiate a sustainable, responsible and Islamic approach to address the seismic challenges facing humanitarian settings globally. Let us commit, act and reconvene next year with progress and solutions.”

Following Princess Sarah’s call to action, RFI Summit participants joined discussions with financial institutions, asset owners and those developing capital markets instruments to address humanitarian and sustainable development needs.  A consistent theme during the RFI Summit was that action is spurred on not only by an ethical imperative but also an enhanced commercial reality.

The global commitments to the Paris Agreement targets and the Sustainable Development Goals (SDGs) reflect the inseparability of economic, social and environmental impact.  The world is on the cusp of a transformation and a new SRI that links a common narrative of humanity’s shared interests with a business case to support action provides the way forward. 

Speaking at the RFI Foundation Summit, Niall Hannigan, CFO of Masdar, the Abu Dhabi Future Energy Company owned by Mubadala Investment Company, said: “The renewable energy market started out as a high-cost and high-risk investment, not only for governments, but also companies, banks and investors. Fast forward to today, however, and the economic argument for renewables is undeniable. Technology driven significant price reductions, combined with a substantially improved risk profile, makes renewables an increasingly attractive sector for investment for broader and diverse sources of capital.

“The recent hybrid refinancing deal for the 402-megawatt Dudgeon offshore wind farm in the United Kingdom, which is owned by Equinor, Masdar and China Resources Group, is a perfect example of this change in investor sentiment. The refinancing included approximately GBP561 million of commercial bank debt and GBP706 million of senior security notes privately placed with institutional investors. Both tranches were oversubscribed, reflecting strong credit features and investor interest.

“What we are seeing is a greater appetite for money to go into sustainable, responsible investing –  but what helps to facilitate this is that it makes economic sense.” 

The mainstreaming of renewable energy has led to increased funding for projects relating to energy efficiency technology and smart homes/buildings, each of which are aligned to the Paris Agreement and SDGs.  In order to meet the call to action from Princess Sarah, Summit participants discussed ways in which these types of new commercially-viable investments could be further expanded into other areas of relevance to the SDGs, including those in support of humanitarian needs. 

One example that was presented during the RFI Summit is the International Federation of Red Cross/Red Crescent Societies (IFRC) and Islamic Development Bank’s One WASH Sukuk. This sustainable development oriented sukuk pushes the envelope within the commercial context by combining a blended finance structure underpinning a sukuk aimed at commercial investors. Upon issuance, the One WASH Sukuk would fund the delivery of long-term sustainable water and sanitation infrastructure projects inclusive of hygiene promotion and capacity building to communities vulnerable to cholera who presently lack access to safe water and adequate sanitation. These interventions will therefore contribute to both the global Cholera Roadmap to end cholera and SDG’s 3 and 6.

Blake Goud, CEO of the RFI Foundation, noted: “With the support of RFI Summit sponsors, partners and participants, the RFI Summit has been an unparalleled success. This year’s RFI Summit 2019, our fourth, brought together many participants from across the responsible finance industry who believe in the principles of responsible finance and have shown how they work seamlessly when applied in Islamic finance.  The responsible finance champions highlighted during the RFI Summit provide a roadmap that every Islamic financial institution should look to when they assess their own strategic direction and the future of the Islamic finance industry.”

Mounir Khouzami, Executive Board Member, Chairman of the Advisory Board and Co-Founder of Swiss Arab Network added: “Bringing the experience built up on responsible finance from Kuala Lumpur to Zurich to Abu Dhabi, we have promoted the highest quality of discussions and engagement and we thank Abu Dhabi Global Market for providing a venue for this Summit discussions. We look forward to working with the RFI Foundation to ensure that the solutions outlined by Princess Sarah called for are delivered during the coming year.”