We collectively need to go fast forward in developing and implementing green solutions in order to save our planet and to leave it in a better shape for generations to come.

The World-Of-Takaful platform enables you to share your ideas and concerns in developing and refining Green initiatives. It provides latest developments in Green solutions, including your views and findings, with actionable and practical ideas, products and services.

Going green is certainly the right step to expanding the global takaful market.

round

Green is in the DNA of Maqasid Al Shariah

The unchecked pursuit of power and wealth invariably disrupts the natural balance, leading to a host of negative consequences, including social inequalities, environmental degradation, and human rights abuses. These issues not only affect our “present” but also pose significant risks to economic and social well-being of future generations.

The need to maintain this natural balance is the very DNA of Maqasad Al-Shariah that encapsulates ESG imperatives and much more. Both emphasize the importance of considering the wider impact of economic activities on society and the environment.

Maqasid Al-Shariah fosters a sense of social responsibility among investors, directing their actions toward the preservation of faith, life, lineage, intellect, and wealth. This holistic approach not only aligns investments with moral imperatives but also positions them as a force for positive change and sustainable development.

The impact of negative screening in Islamic Finance and Takaful is significant as it shapes the ethical landscape of investments. Negative screening is about avoiding investments in activities that are considered harmful or unethical such as alcohol, tobacco, weapons, pork, gambling, adult entertainment, or any interest-bearing activity – or any speculative activity. While it ensures compliance with Shariah law, there is a growing recognition of the need to go beyond simple screening to address the full spectrum of a company’s impact on society and the environment. This includes how products and services are produced and their broader implications, which are essential considerations for achieving the objectives of Shariah and contributing to a sustainable future.

Green is Tayeb

Tayeb means “pure” or “wholesome,” implies a deeper consideration of the social and environmental impact of financial activities. In the context of Maqasid Al Shariah, Tayeb encourages endeavours that are not only permissible but also beneficial for individuals and the environment. This means that investments and financial practices should not only avoid harm but also actively promote good, aligning with the principles of environmental stewardship, social justice, and economic equity.

In practice, this is about:

  • Enhanced due diligence on the sustainability and ethical practices of companies before investment.
  • Active engagement with companies to encourage better environmental, social, and governance (ESG) practices.
  • Development of innovative products that link financial returns with positive social and environmental outcomes, such as green Sukuk (Islamic bonds).

Tayeb therefore represents a shift towards a more holistic approach to investing, where financial decisions are made with a conscious effort to contribute positively to society and the environment, going beyond mere compliance to embrace a spirit of ethical and sustainable finance.

The Tayeb approach is gaining traction within the Islamic finance industry as it aligns closely with the global movement towards sustainable and responsible investing. Initiatives like the UAE Central Bank’s Guiding Principles on Islamic Sustainable Finance and the Securities Commission Malaysia’s Maqasid Al-Shariah Guidance for the Islamic Capital Market are examples of how regulatory bodies are incorporating Tayeb principles to promote a more sustainable and equitable financial system.

Green is ESG

Green solutions are an important milestone in Islamic Finance’s journey from halal to tayeb.

The global drive towards sustainable ESG solutions is a response to these challenges. By integrating Environmental, Social, and Governance principles into business operations and investment strategies, organizations can contribute to a more sustainable and equitable world. ESG solutions aim to encourage responsible business practices that consider the long-term impact on the planet and society.

ESG solutions address these issues:

  • Environmental: This involves practices that reduce the ecological footprint of businesses, such as reducing emissions, conserving water, and minimizing waste. It also includes investing in renewable energy and supporting biodiversity.
  • Social: This focuses on the well-being of people, which encompasses fair labour practices, community engagement, diversity and inclusion, and human rights.
  • Governance: This pertains to the management of companies, including ethical business conduct, transparency, accountability, and protection of shareholder rights.
round

Is Takaful Green?

Not quite yet. It is Shariah Compliant but not Green, i.e., not Tayeb.

The takaful industry is still in early stages of adopting green practices. As climate change risks grow, there should be more of green takaful products emerging, especially in markets like Malaysia and the Middle East. Takaful companies need to promote and spread the concept of Green Takaful and work with governments, Islamic financial institutions, Awqaf and all the green verticals, to develop and implement takaful products and services in support of ESG Green initiatives.

Going Green and developing sustainable green economy is not a role or responsibility of a few but of all of us collectively, as a society, corporates, industries, manufacturers, and governments. The green imperatives are totally aligned with Maqasad Al Shariah principles and with the DNA of takaful which is about avoiding harm, benefiting society, and stewardship of the environment.

Going Green is about adopting practices safe for the environment. It is about changing our ways of thinking and doing all that is possible in making a difference, no matter how small it is, of giving and looking for incentives and discounts when “buying, selling or living the green initiatives”, of making products and services more expensive that are not eco-friendly; as otherwise, it is continuation of the same old ways, leading to slow-death of our environment and a bleak future of our generations to come.

It is time for all those industries including takaful, demonstrating commitment to Green initiatives, to benefit from international investors supporting them in these initiatives as well as to have a facilitated access to capital. Those who take timely action are the ones who will be the winners. The World-of-Takaful experts can help you to be connected to international investors for going Green.

.

Green Takaful ideas and initiatives

There are ways in which takaful providers ought to incorporate environmental sustainability. As customers, practitioners, advisors, and policymakers, they can seek and assess how Green initiatives are taking shape in insurance and how these can be applied, with the necessary changes, to takaful in our own markets. Here are some examples of the development of green insurance products:

Green Home Insurance

It covers energy-efficient homes and offer discounts for installing solar panels or other renewable energy. May also cover risks related to natural disasters.

It offers discounts for hybrid/electric vehicles. Have policies to offset carbon emissions from driving.

It incentivizes companies to reduce environmental footprint. Gives discounts for achieving efficiency/sustainability metrics.

It direct more of insurance revenues, funds and reserves, within the permissible regulations and solvency requirements, to be invested in green bonds, renewable energy funds, reforestation projects, and other sustainable assets.

It digitalize processes in order to reduce paper usage. Offer discounts for signing up for e-documents/notifications.

It encourage, promote and incentivize the use of recycled/upcycled materials to repair damages. To reward policyholders who opt for sustainable repairs.

To provide advisory services to help clients identify and mitigate climate change risks.
  • What are your views about green takaful?
  • If you need support in green takaful initiatives, please contact us.