RAISING AWARENESS and mobilization for global action but the world is ill-prepared for major shocks

"Après nous, le déluge" towards a shock theory of Islamic green finance

ISLAMIC FINANCE has developed rapidly since 1970s but has started adopting principles and tools of responsible finance and climate only since 2009

Islamic finance is one of the fastest growing segments of the global financial system growing since its debuts in the 1970s to an industry of $2.88 trillion globally by the end 2019 and forecasted to grow to $3.69 trillion by end 2024 (ICD-REFINITIV, 2020).

Perspectives of Islamic green finance (IGF) development under current market conditions

Islamic green finance now represents about 1-2% of IF industry, so it's a niche of niche industry.

One main reason pertains to the process of development of IGF:

• IGF is developing through policy transfer from conventional green finance policies => the policy outcomes and the success of IGF is dependent on the success of conventional green finance policies;

• The process of policy transfer does not initiate from market demand and carries a heightened risk of negative market perceptions

• Due to the lag in transferring relevant policies from conventional finance, combined with the lag for evaluation of Shari'ah compatibility of the new policies and instruments before implementation, IGF will be developing at a reduced pace and is exposed to risks of institutional obsolescence

The window of opportunity is expected to be largely missed without radically different policy formulation and market development Seven conditions are identified and more research is needed to better explore and prepare the aftermath of the next global shock.

  Refas. S & Ghlamallah. E "Après nous, le déluge" towards a shock theory of Islamic green finance 30th & 31st May, 2022 Movenpick Hotel, Karachi 1-INTRODUCTION : GLOBAL AGENDAS, FINANCING GAPS AND MACROECONOMIC RISKS § SDG and Paris agreement financing needs are not met.

"

  Après nous, le déluge" towards a shock theory of Islamic green finance 30th & 31st May, 2022 Movenpick Hotel, Karachi

  The adoption in 2009 by the International Fiqh Academy of a fatwā prohibiting, according to the principle of removal of corruption (dar' al-mafasid), environmental damage that harms the ecological balance or uses resources in an unsustainable way and do not take into account the interests of future generations was a decisive act.PROTECTION OF THE ENVIRONMENT AND MITIGATION OF CLIMATE CHANGE becomes a RELIGIOUSOBLIGATION and A PARADIGM CHANGE for the whole Islamic Finance industry is CALLED UPON 2-THE BIRTH, DEVELOPMENT AND EXPECTED FUTURE OF ISLAMIC GREEN FINANCE Refas. S & Ghlamallah. E "Après nous, le déluge" towards a shock theory of Islamic green finance 30th & 31st May, 2022 Movenpick Hotel, Karachi

•

  3. A SHOCK THEORY FOR THE DEVELOPMENT OF ISLAMIC GREEN FINANCERefas. S & Ghlamallah. E "Après nous, le déluge" towards a shock theory of Islamic green finance 30th & 31st May, 2022 Movenpick Hotel, Karachi Despite the alignment of ethical principles of Islamic finance with the principles of Green finance and climate action, a central assumption of this paper is that a massive transition from the current consumption-driven and unsustainable Islamic finance industry cannot happen unless a major economic, social or political shock triggers this transition. 1. First assumption: only systemic risks can provoke the magnitude of change needed to effectively transform the Islamic economies towards sustainable and climate-resilient pathways 2. Second assumption: by transferring and adopting a package of reforms and policies from different contexts (developed economies, pre-shock context), the IF industry is actually missing the preparation needed for this transformation "Après nous, le déluge" towards a shock theory of Islamic green finance 30th & 31st May, 2022 Movenpick Hotel, Karachi What are the critical conditions and policy directions to build back better after a systemic change and effectively develop an IGF sector that would support the economy for a sustainable and equitable future for all? 3. A SHOCK THEORY FOR THE DEVELOPMENT OF ISLAMIC GREEN FINANCE Refas. S & Ghlamallah. E "Après nous, le déluge" towards a shock theory of Islamic green finance 30th & 31st May, 2022 Movenpick Hotel, Karachi Critical conditions for the development of Islamic Green Finance in the aftermath of a systemic shock • Critical condition 1: Government stability; • Critical condition 2: Mass urban relocations; • Critical condition 3: De-commoditization of consumption; • Critical condition 4: state control over unsustainable industries; • Critical condition 5: dematerialization of the economy through technology and state planning; Critical condition 6: a large-scale reconstruction financing program tied to mobilization of human capacities and natural resources; • Critical condition 7: an interventionist policy to salvage and consolidate the banking sector and transition to Islamic Green Finance. 4. CONCLUSION, A MATTER OF URGENCY FOR THE WHOLE ISLAMIC FINANCE SECTOR Refas. S & Ghlamallah. E "Après nous, le déluge" towards a shock theory of Islamic green finance 30th & 31st May, 2022 Movenpick Hotel, Karachi The world is waking up from the shock of the COVID-19 with a firm and resolute global commitment: "Build Back Better." But COVID-19 was probably "just a severe warning" to a much deeper crisis forthcoming. The next major global crisis will arguably determine the fate of most vulnerable nations in the next decades and of the NEXT TWO GENERATIONS of human beings at least. The current global IF institutions are not equipped with capabilities and resources to adopt packages of reforms radical enough to bring rapidly enough the sector back on track before the crisis hits.

30th & 31st May, 2022 Movenpick Hotel, Karachi

Thank you!

Questions?

You can write us @: refas.salim@std.izu.edu.tr ezzedine.ghlamallah@univ-amu.fr