Tuesday, 6 March 2012

Will "Shari´ah compliant suduk financing" save the world from catastrophic global warming?

Shari´ah law forbids lending money for gain.That is why Aaron Bielenberg of the Abu Dhabi based Clean Energy Business Council is now promoting  "Shari’ah compliant, clean energy investment opportunities" for the "Islamic community".  The new financial instruments, "Green Suduk Climate Bonds", are also promoted by the HSBC´s "Islamic arm":

“There is a lot of pent up demand (for suduk)," agrees Mohammed Dawood, the head of capital markets at HSBC Amanah, the bank’s Islamic arm.

The Energy & Environmental Magazine has more on this:

A new type of financing is being developed to encourage millions of pounds worth of long-term investment in green technology, in particular from the Islamic community.
Hundreds of billions of pounds worth of investment in green technology is required around the world to create the low-carbon future. However, many projects are unattractive to some investors because of their long-term nature.
Also, Shari'ah law forbids the lending of money for gain, yet many green energy projects are required in Islamic nations, such as Saudi Arabia, and yet there is a surplus of cash held in the Muslim world waiting to be utilised.
All three challenges are being tackled by the development of a type of bond called Green Suduk Climate Bonds.
The Climate Bonds Initiative, the Clean Energy Business Council of the Middle East and North Africa and The Gulf Bond and Sukuk Association are today launching a Green Sukuk Working Group, which will use market expertise to promote the issuance of sukuk for the financing of climate change investments and projects, such as renewable energy projects.
The Working Group is inviting participation from other organisations interested in the potential of green sukuk financing.
Suduk are financial certificates, or the Islamic equivalent of bonds, which are structured to comply with Shari’ah Islamic law, which prohibits the charging, or paying of interest.
To give an idea of the potential, Standard & Poor estimates that 20% of banking customers in the Persian Gulf and Asia would now choose an Islamic financial product over a conventional one with a similar risk-return profile.
Because the lending of money in Islamic culture has a moral dimension, rather than a financial one, then there is a good fit with the ethical aspect of green financing.
Aaron Bielenberg of the Clean Energy Business Council, a non-profit, non-governmental association established in Masdar City, Abu Dhabi, said that projects in the region are desperate for finance.
“There is a significant and growing number of projects, for example renewable energy in the Middle East, that are ideally suited to sukuk investors," he said. "This group will help investors more easily identify Shari’ah compliant, clean energy investment opportunities.”

"Suduk financing" - "although probably not "Shari´ah complient" - is actually nothing new to Europe. That´s what the European Central Bank has been concentrating on recently. And there have been more than enough takers for the ECB´s (practically) interest free loans. So, probably Mr. Bielenberg´s "Shari´ah compliant" financial instruments will be a success in the Islamic world, too. However, one wonders  what business opportunities HSBC´s "Islamic arm" sees in the "Shari´ah complient" interest free "suduk financing"?

And by the way, the huge European and U.S. subsidies to "renewable" energy projects are in reality a kind of "suduk financing", extremely popular among "green investors" in western countries. Fortunately, however, many governments have now realized that it is time to cut this enormous waste of taxpayers´ money.

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