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CONNECTING ISLAMIC FINANCE WITH IMPACT INVESTING

​Nowadays, the challenges of sustainable development, such as poverty, social inequality, and environmental hazards far exceed the capacities of governments and philanthropy. In this regard, the 2030 Sustainable Development Agenda foresees the reactivation of a global partnership for sustainable development. In the present article, we focus on examining the connection between Islamic finance with Impact investment. We highlight the cultural values being the background on both sides.


Through the literature review, this study aims at exploring how Islamism and Islamic culture has influenced sustainable development practices over the years and the way Islamic religious norms relate to sustainable development objectives. We will also focus on highlighting the risk sharing principles as a beneficial concept for creating impact through investments.

 

Money with Purpose

Abstract

The uncertainty we witness makes it clear that we need new tools for long term decision making instead of models built on analyzing historical data. This applies also for the financial sector. We are currently witnessing a shift from ESG investing into the realm of impact investing. Impact Investing targets specific solutions and has impact criteria at the core of the investment decision making process.


Authors suggest a holistic approach to strategic asset allocation, as well as looking at action options based on multiple future scenarios, instead of one baseline model. Every forward looking strategy begins with the definition of intent. Intent incorporates the values and organizational culture of investors, enabling investors to consider the potential positive and negative impacts of their investment decisions. In this article, the use of strategic foresight methods is advocated as a way to expand the knowledge base of strategic asset allocation. Based on highlighting the move from the short-term biased shareholder model to the broader stakeholder model, and instead of conventional forecasting approaches the authors suggest adaptive foresight methodologies to be used at co-creating the future.