Current developments in our climate, such as the increasing frequency of extreme weather events, reveal the fragility of our relationship with the environment, and interestingly, we can look to the finance sector as an important player in redefining this. The finance sector can shape the future direction of our economy, and as such, may serve as a catalyst towards achieving a healthy and prosperous future and sustainable development. Socially responsible investment in sectors such as renewable energy, or in environmentally/ socially sound endeavors, can make a more meaningful contribution to the economy than perhaps more traditional ventures. And while there has been a rise in socially responsible investing over recent years, the OECD estimates that an additional US$ 5 trillion per year is needed to meet the needs of a growing population, which demonstrates the demand within this industry.
Looking to the long-term, responsible investments are anticipated to bring a greater return to investors. Awareness among consumers about the importance of sustainability is increasing, and social and environmental arguments are influencing decision making. Subsequently, ‘green’ businesses are more competitive and are likely to achieve greater financial results while simultaneously addressing the triple bottom line. Furthermore, conventional projects typically rely heavily on finite resources which are becoming increasingly scare. As such, businesses which decide not to adapt may face increasing commodity prices and problems in their supply chain. This, in turn, may negatively affect the return on investment. Consequently, in the long-term, it seems not only more ethical to do business responsibly, but also more strategically sound.
For the Middle East, the potential in sustainable business and socially responsible investing is extensive. One of the principles of Islamic banking is to not invest in projects that are harmful to society, which demonstrates the extent to which Islamic finance contributes to a wider values-based social system. The Islamic principles that guide Islamic finance include the understanding of humankind as trustees of nature. This ingrains a level of responsibility to safeguard society and environment, and highlights the potential for the region to pursue these principles even further in a business context. Taking these nuances into account, is the Islamic Reporting Initiative (IRI), which seeks to promote the use of triple bottom line reporting as a mechanism for business development and growth, in a context that is aligned with Islamic principles.
Additionally, the favorable geography of the region provides it with great renewable energy resources, such as solar power. This may serve as a major competitive advantage in the field of sustainable development, with consumers increasingly scrutinizing the social and environmental impact of organizations. While such technology, in the context of business, is relatively new, it is considered to present fewer risks than a continuing dependence on finite resources. This, alongside the curiosity of the region and extraordinary levels of innovation, points to the very real capacity the region has to be a leader in sustainable development.