KUALA LUMPUR: Sultan of Perak Sultan Nazrin Muizzuddin Shah today called for the restoration of "humanity in finance", where the pursuit of economic growth is balanced more carefully with the goals of environmental stewardship and social inclusion.
Speaking at the 15th SC-OCIS Roundtable at the Oxford Centre for Islamic Studies in the United Kingdom, Sultan Nazrin said the pursuit of profits must be tempered by recognition of collective responsibility to protect the environment and better serve society.
Businesses, he said, must become part of the solution to various global challenges.
"They must take responsibility for their broader impacts on the world around them, on their stakeholders and shareholders – no longer able to dismiss these as being outside their primary profit-making functions.
"And the good news is that there is now widespread recognition that the time for unfettered capitalism is over. Businesses are no longer able to disregard their broader impacts.
"Instead, they are expected to avoid and minimise harm, and also, increasingly, to compensate for any harm they have caused. Mining companies must clean up when they leave a site. Agricultural companies must allocate land for protective buffers around waterways," he said.
Sultan Nazrin said more detailed and stringent regulations are being implemented to ensure that external consequences are taken on board and to serve stakeholders better.
"Rather than being voluntary or 'nice to have', as they have been in the past, environmental and social responsibilities are increasingly being integrated into regulatory frameworks, at national, regional, and even international levels.
"They now exist alongside other corporate governance requirements, as expressions of a business sector which is beginning to comprehend its responsibility towards humanity.
"Hence the birth of ESG (Environmental, Social and Governance) – which is a set of standards measuring a business's impact on society, and the environment and how transparent and accountable it is."
Sultan Nazrin noted the continued pushback from the business and financial worlds in this regard given the costs involved in adjusting to the burgeoning regulations.
He said despite the expected resistance, ESG's 'ecosystem' of requirements and regulations continues to evolve and are
spreading across multiple jurisdictions and sectors of the real economy.
"This emphasis on ESG is another way of framing or articulating the need to restore humanity in finance. ESG compliance is helping to strengthen accountability, not only to shareholders but to stakeholders more broadly.
"This includes improving transparency through disclosure and data requirements. I truly believe the need to demonstrate compliance with ESG frameworks is a catalyst for change."
Sultan Nazrin said for the business and financial worlds to play their full role in addressing the multi-faceted global crisis, they must move beyond compliance and the fulfilment of negative obligations, towards making a positive contribution.
"In fact, the single overarching principle of Islamic law enshrined in a famous legal maxim (dar' al-mafasid wa-jalb al-manafiʿ) is 'to avert harm and to promote benefit'.
"And it is here, with its unwavering faith-based commitment to avoiding harmful activities and striving towards social good, that Islamic Finance can set an example for the conventional finance and business worlds.
"Efforts in the sphere of Islamic Finance are increasingly focussed on moving beyond Shariah compliance alone, towards the fulfilment of the higher social and humane objectives captured by the concept of Maqasid al-Shariah."
Sultan Nazrin also highlighted the growth of Islamic finance at around 10 per cent year-on-year between 2013 and 2023.11
"That growth is expected to continue, with the industry projected to be worth a staggering US$ 6.67 trillion by 2027.
"And yet, despite that impressive growth, and its increasing presence in mainstream global finance, I believe that Islamic finance has a still larger role to play on the world stage. What it offers is moral leadership: an approach to finance that is guided by principles of care for humanity and care for the planet."
Sultan Nazrin said global finance could learn much from Islamic finance because values like responsibility, sustainability and generosity transcend the boundaries of religion.
"While I hope that Islamic financial institutions continue to grow and thrive, my greater hope is that all financial institutions will absorb something of the spirit of Islamic finance, on the path to restoring humanity in the sector."