City set for ‘dramatic growth’ of funds that combine ESG and Shariah as Islamic Finance underserves demand
London could see a dramatic growth in the number of investment funds that combine ESG and Shariah compliance over the next two years, finance experts have told City PM today.
Professionals working across a wide range of sectors in the Square Mile and beyond expect a dramatic growth in these funds, while half think a slight increase in the number of fund launches is more likely, with many believing that the current Islamic Finance market underserves ESG demand.
Moreover, three out of four professionals including asset managers, bankers, insurers, fintech executives and consultants said they see the demand for ESG investment strategies is not being met by the Islamic Finance market, according to the research by Maybank Islamic Berhad, the Islamic banking arm of Maybank Group, and IslamicMarkets.com, a platform that provides access to industry specific knowledge.
In fact, they believe that if investment products were certified as both Shariah and ESG-compliant more non-Muslims than Muslims would buy them given the strong demand for ESG in Europe.
“There is widespread agreement that the current Islamic Finance market is not meeting the potential demand for ESG and Shariah-compliant funds even though there is an expectation of a growing number of funds being launched,” commented Shakeeb Saqlain, CEO of IslamicMarkets.
“The issue remains, as it has for decades now, the lack of a global regulatory and legal framework,” he added.
Around 72 per cent agree the introduction of a global standard for ESG and Shariah would boost demand.
However, 55 per cent of those questioned believe the launch of a global standard is two years or more away and just half expect good progress or even dramatic progress in the next two years on the adoption of a unified global legal and regulatory framework for Islamic Finance to help end the lack of standardisation the industry has faced for decades.