Hard on the heels of COP26 (2021 United Nations Climate Change Conference), an index developed in Sweden to measure the impact of consumer financial transactions on the climate confirms it is undertaking an exercise to be in compliance with Shariah principles, providing end users of Islamic financial services with tools for everyday climate action. VINEETA TAN has more.
Aland Index Solutions, a joint venture between Doconomy and Alandsbanken, has engaged Bahrain’s Shariyah Review Bureau to certify, supervise and audit the cloud-based index. Developed in 2016, the Aland Index, which works with banks representing 360 million customers globally, quantifies and measures the impact of customers’ consumption by connecting spending patterns with climate impact. Essentially, the index tracks the CO2 emission and water footprint of every transaction made.
“Our goal is to scale our climate measurement capabilities to all Islamic financial institutions and participants around the world and within a secure and trusted environment which we have built with our index,” Mathias Wikstrom, Doconomy’s CEO and co-founder, shared. Shariah compliance is a key growth driver for the firm as it looks to expand its customer base in the Middle East and South Asia, Wikstrom added.
The drive toward more sustainable choices has gained greater momentum in the Islamic world with key Shariah financial markets such as Malaysia, Indonesia and a handful in the GCC such as Saudi Arabia displaying their commitments by engineering ethical and sustainable financial instruments which are also in line with Islamic laws. This has led to products such as sustainability Sukuk like those issued by the IsDB Group and the Malaysian government, green Sukuk by the Indonesian government and corporates in Malaysia, the UAE and Saudi as well as a host of Islamic environmental, social and governance funds and financing schemes.
There are several initiatives to measure the impact of Islamic sustainable financial instruments including by tech company IBF DigiLabs which is building a platform to measure, rate and exchange impact units through the use of blockchain technology.