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Business Recorder
22-04-2025
- Business
- Business Recorder
Madina to Wall Street: World's first Shariah-compliant ESG Index launches
During the 45th AlBaraka Islamic Economics Symposium in Madina, two organizations – the AlBaraka Forum for Islamic Economy and Spectreco LLC, a U.S.-based sustainability and technology firm – signed an agreement to launch what they call the world's first Shariah-compliant ESG Index, the firm announced in a press release on Tuesday. The initiative, announced in the presence of Prince Faisal bin Salman Al Saud, Governor of Madina, and senior figures in Islamic finance, marks a significant step in the evolution of values-based investing. Faraz Khan MBE, CEO of Spectreco and a long-time advocate for sustainable finance, described the collaboration as a 'powerful intersection of tradition, innovation, and global impact.' 'The world is becoming regulated through ESG laws and frameworks and Islamic economy works through shariah,' Khan told Business Recorder. 'In the space of sustainability the fundamentals of both world regulations are the same. So we become a bridge in the space of sustainability and ESG laws between two worlds and developed an index that aligns the investor, business and regulators from both worlds together,' he added. The agreement merges Islamic finance principles with contemporary Environmental, Social, and Governance (ESG) standards – an intersection that stakeholders believe is long overdue. 'Islamic finance weaves together responsibility, sustainability, and transparency,' Sheikh Yousef Hassan Khalawi, Secretary-General of the AlBaraka Forum, was quoted as saying in the press release. 'Through this partnership, we are building a legacy that values both people and the planet.' A platform rooted in faith and technology Unlike conventional ESG indices, this new framework will incorporate Maqasid al-Shariah – the ethical objectives of Islamic law – into its screening and reporting processes. It also promises to use AI-driven analytics, developed by Spectreco, to provide real-time ESG data aligned with Islamic financial requirements. The platform will screen investments based on sectoral exclusions, financial ratio thresholds, and environmental and social performance. It aims to serve institutional investors, regulators, and Shariah-compliant asset managers looking to integrate ESG considerations into their portfolios without compromising religious obligations. Responding to a Global shift The move comes at a time when ESG investing is gaining traction across both developed and emerging markets. According to industry estimates, ESG assets could surpass $50 trillion by the end of 2025 – but until now, there has been no index offering a faith-based ethical filter for Muslim investors at a global scale. The Islamic ESG Index will initially target markets in the Gulf Cooperation Council (GCC), Europe, and Southeast Asia – regions with sizable Muslim populations and growing ESG mandates. By offering dynamic transparency, active monitoring, and automated Shariah screening, the platform is being positioned as a transformative tool for Islamic finance institutions navigating a rapidly changing investment landscape. 'It's not just about meeting global standards,' Khan was quoted as saying in the press release. 'It's about raising them – by showing that faith and sustainability are not mutually exclusive, but deeply compatible.' 'Collaboration through technology for Impact in the space of ESG & sustainability and creating sources of Climate finance drives us as an institution and as team,' he told Business Recorder. A significant turning point Observers say the setting of the launch – Madina, one of Islam's holiest cities – was as symbolic as it was strategic. While financial innovation is often associated with hubs like New York, London or Dubai, the message from Madina was clear: ethical finance grounded in spiritual values can originate from the very foundations of faith. The initiative is still in its early stages, with further announcements expected on implementation timelines and partnerships. But for now, the message is resonating: as the world looks for financial systems that are resilient, transparent, and just, Islamic finance may have more to offer than ever before.
Arab News
22-04-2025
- Business
- Arab News
US tech giant joins hands with Saudi think-tank to launch AI-led, Shariah-compliant global ESG Index
KARACHI: US tech firm Spectreco LLC and AlBaraka Forum, a Saudi think-tank, would launch an Environmental, Social and Governance (ESG) Index in June to develop a robust benchmark for sustainable investments that align with the Islamic law and global regulations, the Spectreco chief executive officer told Arab News. The two partners announced the launch of the Artificial Intelligence-led Shariah-compliant ESG index at the 45th AlBaraka Islamic Economics Symposium which was held last week in the Saudi city of Madinah. 'The actual launch of this index will happen in Istanbul in June,' said Khan, the winner of UK's prestigious Order of the British Empire who was born in Pakistan's southwestern city of Quetta. 'In the next three to five years, we hope to make this index [will be] the most widely used index in the MENA [Middle East and North Africa] region, starting with Saudi Arabia and led by it.' The index is designed to be a 'game changer' and a smart, technology-driven solution that will integrate the faith-based financial system with global ESG regulations. It will have the fundamentals of both the global ESG regulations and Shariah-compliant financial systems, and will be binding them through technology, according to Khan. Spectreco and AlBaraka are currently looking for users, asset managers, banks and funds for the index that would help the Islamic economy and the wider world to integrate in a more value proposition-oriented way. The initiative would serve stakeholders, including investors, regulators and Islamic finance institutions seeking to align faith-based investment practices with modern sustainability goals, as the reporting of their compliance with ESG regulations is becoming mandatory for companies from Europe, the United Kingdom, Asia Pacific, and parts of North America. 'Now your trade and FDI both have embedded the sustainability and ESG and carbon footprint mechanisms across their space,' Khan told Arab News in an interview. He said Islamic economies from the Middle East and North Africa region, including Qatar, the United Arab Emirates (UAE) and Saudi Arabia, were moving toward mandatory ESG compliance reporting, while Oman had already made it mandatory. 'A huge Islamic economy is moving toward mandatory reporting,' said Khan, whose firm aims to simplify sustainability reporting, compliance and performance tracking across multiple jurisdictions. Speaking of the leverage his company has over others in terms of entering Saudi Arabia and other gulf markets, Khan said they have a technology that has an end-to-end mechanism and is driven by data, evidence and AI in the space of ESG and sustainability. 'We have on-ground expertise of the built environment and financial services and investor paradigm,' he said. Yousef Hassan Khalawi, secretary-general at the Albaraka Forum that aims to advance Islamic economy, said the global Islamic economy was attracting more and more people and its size was expected to increase to $7 trillion by 2028. 'This is yet not that number which can represent the capacity of Muslims which are as a population now almost around 25 percent' of the world population, Khalawi told Arab News in a separate interview from Bahrain. At $2 trillion, he said, the Islamic finance industry is still less than five percent of the global finance industry. He said the Shariah-compliant index would encourage bankers and business developers to develop more products that would meet global sustainability standards. 'It is, it should be a global index which means it should cover banks from Indonesia till Nigeria till even South Africa,' Khalawi said. Around 65 percent of Islamic banking assets were concentrated in the Gulf Cooperation Council (GCC) region as well as Malaysia, according to the Albaraka official. In Saudi Arabia, the size of retail Islamic banking stood more than 95 percent while the corporate size was over 70 percent. 'Here, you are focusing on the major markets and then the rest of the world will come easier,' he added. Khalawi called Pakistan a 'very important nation,' with one of the 'fiercest creators' of the Shariah-compliant economy. Pakistan's Islamic banking is growing at more than 20 percent every year and its government is trying to fully make its interest-based financial system Shariah-compliant by Dec. 2027, a deadline set by Pakistan's Shariah court in April 2022. 'Many initiatives also will come in Pakistan,' Khalawi said. 'For sure, we are considering Pakistan, as I said, in every single initiative we have.'
