What is the work of the RFI Foundation, the industry body for the responsible finance sector, and what would it take to get Islamic financial institutions on the responsible finance track? RFI Foundation CEO Blake Goud says: "When it’s just a theoretical argument, as it has been for too many years, it’s difficult to get institutions to get on board with thinking about how it affects them in a practical way."
Listen to our interview with Goud. If you can't access audio the full transcript of the interview is provided below.
Emmy Abdul Alim (EAA: Editor, Salaam Gateway): Thank you for listening to Salaam Gateway. You’re listening to our interviews with Islamic economy people from the Global Islamic Economy Summit that was on October 30 and 31 in Dubai.
Hi, Blake, thank you for joining us on Salaam Gateway!
Blake Goud (BG): Thank you for inviting me.
EAA: You’re here this year at the Global Islamic Economy Summit in Dubai. Of course, a lot of people in the Islamic finance industry are very familiar with you. You’re now the CEO of the RFI and we just heard that the RFI Board of Trustees has expanded and you have new members. Could you tell us more about why you’re adding on a lot more trustees to RFI and the work that you do in general for people who aren’t familiar with RFI?
BG: Yeah, thank you for having me on the podcast. The RFI Foundation was set up to connect responsible finance practices that are happening outside the Islamic finance industry with what’s happening inside the Islamic finance industry and to really encourage convergence towards shared objectives that really unify responsible finance as a whole, which we define as environmental social governance, socially responsible investing, impact investment and Islamic finance.
Our organisation at the heart of it is a network organisation. We are supported by our members and so, having trustees representing diverse perspectives is really important to make sure that what we’re developing in terms of the support we are providing to members is really encompassing all of the various approaches from across responsible finance.
Our new trustees, Inge Relph and Mounir Khouzami, bring perspectives from responsible investment from Islamic finance and with a connection to innovative technology, which is something that we announced a few weeks ago – a database on sustainable finance actions and commitments, backed up by the blockchain.
So, in order to take these programmes to completion, we really need to have these types of skills represented on our Board. So, we’re really happy to have them join and we have a tremendous Board who have provide tremendous support for us as we have been growing.
EAA: The Board does have a lot of experience – each member of the Board and collectively as well. That’s a lot of huge skill sets and experience in the industry. But beyond being a network industry in that sense, how do you support members? And then how do you support people or organisations that are not members within the wider… both Islamic finance and the conventional finance industry?
BG: The way we have approached working with members is, first, helping them to understand the base business and ethical case for responsible finance.
You need to have somebody who is a champion within an institution to make progress. And so we’ve seen the most successful developments have really come where that has been present.
Once an institution gets on board with the general concept, it always translates into ‘How are you going to implement it?’
So the first step in that process is identifying what levers you have to drive change and what change you want to see. So that is the first step, development of a statement of intent.
Then we work with members to connect them to resources around setting KPIs along the way, training, capacity building, resources and then, finally, tracking, monitoring and reporting their commitments and actions. And that was the database that I mentioned earlier.
EAA: So do you work like a consultant, in that sense? For example, if a bank came to you and said, ‘We really don’t know how to do this’, do you go in like a management consultant and try and break it down for them and take them through it?
BG: Yeah, it’s… there’s only so much you can do on a more general purpose research and awareness building efforts to get real change to happen.
And so, at the end of the day, when you have a member that comes with an interest in it, it’s really important to go and work with them on the specific issue that they are facing within their business, because every financial institution is different and every financial institution takes a different approach to responsible finance.
So it’s really important to have something that’s customised and developed around the capabilities and needs and interests of each financial institution.
EAA: You mentioned real change. Let’s talk about real change beyond all the rhetoric which we hear a lot about, beyond thought leadership, etc., what do you see, as CEO of RFI and being in this industry for quite a while, as good examples of responsible finance within the Islamic finance industry?
BG: I would say there are two really good examples from within our membership base. CIMB Islamic, which is part of the CIMB group in Malaysia really started incorporating environmental and social impact into their financing business two years ago.
They’ve gone through a process to building internal buy-in and it’s really translated into significant action at the CIMB Group level, where they’ve developed environmental and social risk management, policies and procedures, and have recently joined the UN Environment Programme Finance Initiative, and also the Principles For Responsible Banking, which is going to be launched in November at the Global Roundtable in France.
So that is one example and another example is SEDCO Capital, which is a Saudi asset management firm, who have been consistently the most active or one of the most active Islamic financial institutions within the UN Principles for Responsible Investment.
They’ve taken an approach that shows how you combine those ethical and business imperatives behind responsible finance with their prudent ethical investment strategy. And they’ve been expanding it into the reach of that strategy across their investment activities.
That shows from a banking perspective and from an asset management perspective how there are opportunities for responsible finance action in Islamic finance.
And now we have those institutions as a demonstration of fact, it should be easier for other Islamic financial institutions to see how responsible finance could factor into their business in the future.
EAA: Do you think that’s enough, though? That’s two examples only – that doesn’t sound like a lot for the whole industry to go on… One bank in Malaysia, and then an institution in Saudi Arabia. Do we need a lot more for people to really wake up and say: ‘Gosh! I think we really need to do this now!’?
BG: Well there are more institutions that are on the journey and particularly have regulatory encouragement in Malaysia with the value-based…
BG: Yeah, the value-based intermediation framework from Bank Negara.
They really are working on driving systemic change in one of Islamic finance’s largest markets. And so as that shows results in terms of actions and outcomes, I think that’s going to provide a much bigger push for other markets to accelerate their actions.
EAA: We’re probably going to have to wait a while, because they have only just released those guidance notes just recently in October. It will take a while to settle in all those KPIs and scorecards that have just begun, and it will probably be a year before we get a review, for example. We’ve been waiting quite a long time. I mean, within the industry, people like you and your peers have been talking about responsible finance for a very long time. Do you see, from where you stand at RFI, that momentum accelerating and that people realising and setting deadlines in the short to mid-term?
BG: Yeah, I see conversations have been much more conducive to the idea that there is going to be more rapid action from here. But when it’s just a theoretical argument, as it has been for too many years, it’s difficult to get institutions to get on board with thinking about how it affects them in a practical way.
When you can go to them and give concrete examples and concrete successes, the conversation gets a lot easier. And that’s what we’ve been seeing, particularly over the last six to nine months.
EAA: So, conventional finance, of course, is far more advanced in responsible finance than Islamic finance is. Why do you think that’s so, putting aside the fact that, yes, Islamic finance and Islamic banks have only been around for 40 or so years? That aside, what are some other reasons that you can put forth for Islamic finance being behind conventional finance in responsible finance?
BG: I would say that the main factor that puts Islamic finance behind is the structure of the industry being mostly concentrated in banking.
If you look at where responsible finance has taken off the most in the conventional industry, it has been the investment space. And there’s a lot more freedom to experiment within the asset management sphere and among asset owners.
That’s where a lot of the most concrete actions have taken place with the Principles for Responsible Investment now at 82 trillion of their signatories. And you see the banking industry has moved slower globally on these issues because it’s a very heavily regulated industry and there’s that focus on financial stability above all else, which tends to tamp down on creativity a little bit compared to other parts of the financial sector.
EAA: Okay. I know that RFI had a whole line to do with fintech? You did the SDG which is – remind me what your SDG stands for?
BG: Support Disruption for Good.
EAA: Right. Support disruption for good. So you’ve done one round of that –
EAA: Two rounds of that, sorry. What’s come out of Support Disruption for Good that you will channel back into your members and how you work with them to implement steps for their move into responsible finance?
BG: The SDG challenge for most of our financial institution members is more of an aspirational idea.
They can’t necessarily innovate as quickly as a fintech, but the innovations that fintech is showing are possible can spark change about where they should be looking into the future.
So if you look at the winners, the past winners, we’ve had some really amazing success. The winner from two years ago, Tez Financial, from Pakistan, just recently secured $1.1 million in seed financing from the Omidyar Network.
And so, if you’re looking at impact and recognition that what we saw in them two years ago, what the judging panel saw in them two years ago, has now been validated by a globally-recognised organisation like the Omidyar Network.
It is really, I think, a sign that the winners from the SDG challenge are really the leaders in what’s going to happen in the future. So, Islamic finance institutions looking for where should we explore, what’s next, what’s coming next in responsible finance, can really look at the winners from the SDG challenge for guidance.
EAA: Is your SDG going to happen next year again?
EAA: Same time, April, around your Summit?
EAA: Okay. So we will hear about that soon then.
BG: We’ll hear about the Summit soon, and we are looking to move it to the GCC. So we should have an announcement over the next month or two.
EAA: Okay, can’t wait to hear about it.
EAA: Thank you, Blake.
BG: Great. Thank you for having me.
(Interview by Emmy Abdul Alim firstname.lastname@example.org)
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