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Brunei
Thursday, December 8, 2022
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Brunei
Thursday, December 8, 2022
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    Integrating ESG elements into Islamic Finance

    BIBD Asset Management (BIBD AM) recently participated at the 14th Annual Brunei Darussalam Roundtable and highlighted the importance of integrating environmental, social and governance (ESG) elements into Islamic Finance to create a more inclusive and well-rounded economy.

    The theme for this year’s Roundtable is ‘Moving Forward: Drivers of the New Economy’.

    The asset management firm, which operates under the license of BIBD Securities (BIBDS), was represented during a panel discussion at the event by Acting Managing Director of BIBDS Jason Wong. He shared several similarities within the concepts of ESG and Islamic Finance where both have shared fundamental principles such as the avoidance of harm, and on the macro-economic level, both Islamic Finance and ESG are tasked with improving social well-being, infrastructure and prosperity.

    Jason highlighted that currently Islamic Finance primarily adopts an exclusionary based screening approach which is dependent on the business objectives, the sector it operates in and leverage considerations while ESG adopts a proactive goal-based approach where investors look for evidence of positive purpose.

    “Considering the common underlying principles, it is not surprising to note that there is a strong convergence between Islamic Finance and ESG. It is our role as investment managers to manage these commonalities and marry the economies of scale between Islamic Finance and ESG”, he added.

    ABOVE & BELOW: Acting Managing Director of BIBDS Jason Wong (2nd left); and participants present at the event. PHOTOS: BIBD

    He shared that BIBD AM was set up in 2019 with the aim to merge ESG and Islamic Finance by taking the best approaches from each sector.

    To this end, BIBD AM has initiated several steps including establishing its ESG charter, introducing its ESG values of Alignment, Continuity and Education, becoming a signatory to the United Nation’s Principles for Responsible Investing (UN PRI), setting up an internal ESG taskforce and formalising its ESG investment approach.

    Within the organisation, BIBD AM actively promotes ESG related iniatives which includes conducting mental health awareness talks, taking on formal educational courses such as the Certified Financial Analayst (CFA) ESG course and appointing mental health ambassadors.

    As for its investment offerings, BIBD AM, in partnership with Arabesque, a global asset managmenet firm that embeds sustainability factors in its investment approach, has launched a Shariah-compliant ESG equity offering to its clients. In addition, BIBD AM has developed its own in-house ESG Sukuk strategy.

    On the Corporate Social Responsibility (CSR) front, BIBD AM has been involved in several of BIBD’s environmental initiatives including tree plantings and beach cleanups. BIBD AM has also carried out numerous financial literacy talks, career talks, corporate retirement planning roadshows and organised its inaugural investment challenge for university students.

    All these initiatives add up to the numerous steps that BIBD has taken as part of the Group’s Sustainability Framework which will guide the bank’s transformation into socially responsible and sustainable institution.

    In a separate panel discussion during the Roundtable, BIBD Head of Structured Finance, Azim Mohammad, shared that the entire global economy was devastated by Covid-19 and Brunei too, was not spared.

    He said while the situation has improved today, there are still economic and geopolitical uncertainties which are expected to happen in the near future. Whilst the economic outlook is important, Azim stressed the importance of preserving the environment as well.

    It is expected that with the current momentum, there maybe adverse effects to the planet by 2050 including food shortages, undernutrition crops, inaccessible logistical routes, and multiple natural disasters such as floods, droughts, storms, heatwaves and many more.

    Therefore, the future should also focus on ESG and Sustainable Development Goals (SDG)-related activities such as Green Sukuk and Sustainaibility Sukuk or Funding, he added.

    The seminar provided an avenue for local and regional financial regulators and industry players to share exciting ideas and value-added information on current investment strategies in the region, economic and financial market infrastructure development and prospects in the ASEAN region as well as opportunities beyond 2022, which in turn can contribute in the alignment of future capacity building plans.

    The Roundtable was attended by local and foreign participants including government officials, financial regulators and industry players.

    BIBD’s participation at the Roundtable also reflects our support and alignment to the Brunei Darussalam Central Bank (BDCB) Financial Blueprint and commitment to enhance financial literacy in Brunei as well as our commitment to support the objectives of the United Nations Sustainable Developments Goals which will ultimately support our aspirations of the Brunei Vision 2035.

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