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Connecting Islamic Finance to Impact Investing

   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 hasinfluenced sustainable development practices over the years and the way Islamic religious normsrelate to sustainable development objectives.It is known that the way how Islamic finance operates is built on a particular set of ethical and moral principles. Islamic finance prohibits payments or receipts of predetermined, guaranteed interestrate. This stance does not leave the door open to the concept of interest and prevents the use of awestern-style debt-based instrument.

   Through Islamic values, there is a clear definition for Intent, which is highlighting risk-sharing andsocial welfare. These values have a history since the beginning of Islam, and as a consequence, theyare deeply connected within Islamic societies. The difference between risk-sharing and risk-transferis also discussed. Furthermore, we discuss Islamic finance, impact investing, their differences andcommonalities and what can we achieve when incorporated.

Image by Artur Aldyrkhanov

Introduction to Sustainable Portfolio Theory (SPT)

  Investors need good information in order to be able to make informed decisions on where to invest their capital. All investing is by nature forward looking. Traditional accounting is shareholder oriented and backward/real time oriented.

   Today’s investment management practices are based on Modern Portfolio Theory, whereas in this paper we propose a new perspective: The Sustainable Portfolio Theory which focuses on the sustainable investing. Intent depends on the purpose, culture of the investor, his/her value alignments, goals, mission and vision. As a second step, uncertainty is taken into consideration instead of statistical risk numbers. If the uncertainties are included, the investor gets a resilient portfolio. Surely, this can be as a byproduct after the intent has already been in place. Thirdly, the constructive foresight should be considered instead of traditional forecasting. By incentivizing collaboration between investors, we will be able to decide and co-create the preferable futures.

   This paper goes into details on explaining how SPT can make significant changes in the investing world and how it can help in reaching SDG goals.

Data on a Touch Pad

Blended Finance & the risk capitalization

   Blended finance is the strategic use of development finance and philanthropic funds to mobilize private capital flows to societal problems especially within emerging and frontier markets.  

   The World Economic Forum and OECD define blended finance as: “The strategic use of development finance and philanthropic funds to mobilize private capital flows to emerging and frontier markets.” In simpler words, blended finance means to blend or facilitate different sources of funding from private sector. 

   However, the “blending” idea has been around since at least 1919. Though the term was first used during the Third International Conference in Financing for Development in 2015.
In projects based on Blended finance there is always a need of catalytic capital, so that investors share the risk in ‘slices’. That is why Blended finance suits best in sectors that naturally have long-term projects like infrastructure projects, healthcare etc. 

   In this paper we claim that blended finance has an untapped potential in developing countries that can definitely help close the gap in order to achieve  SDG goals. 

   We go into details about the advantages blended finance has and which challenges it faces to become a common practice.

Image by Noah Buscher

Sovereign Wealth Funds and the Potential for Positive Impact

   This study assesses what can sovereign wealth funds achieve while having a positive impact in society. Despite considerable interest from the media and the policymakers, little formal research has been conducted on SWF. We think that there is an untapped potential in SWFs that might affect not only the economy, but other aspects of the society too by committing 

   A detailed literature review on academic research of SWFs is provided. We have extracted, collected, and analyzed data from 93 SWFs. This article answers questions like why is the fund created, what are the differences in how SWFs differ depending on the geographical location, the commodity they are based on. Did the fund explicitly mention any strategy on. Did the SWF intend to fund projects that do good in society? Do funds abide to the Santiago Principles, if yes, how. 

   The current trend on SWF activity is further discussed. By making large-scale and long-term investments which can be achieved through incubating new companies, developing infrastructure and creating economic clusters, SWFs can make possible thousands of job openings and can initiate sustainable economic growth. Thus, in this study we take into account the theoretical treatment, academics’ perceptions, and practical evaluation of SWF funds, both politically and macro economically.

Ongoing Projects: Projects
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