A pioneering finance initiative, influenced by the Islamic principle of “Tayyib”, emphasising purity, wholesomeness, and impact, debuted on December 05, 2023, at Dubai International Finance Centre.
The initiative stems from a comprehensive 1-year market assessment jointly commissioned by the UK Islamic Finance Council (UKIFC) and the Global Ethical Finance Initiative (GEFI) in the prior year. It aims to build on the Shariah-compliant model of Islamic finance, introducing a Tayyib-inspired approach with enhanced ESG and sustainability considerations.
Encompassing the principles of Maqasid al-Shariah and Qawaid, the Tayyib approach presents promising prospects for setting new standards in responsible investing, leveraging Islamic values as its cornerstone.
The global collaborative effort, known as the Tayyib Secretariat, involves Malaysia, the UAE, and the UK, with UKIFC and ISRA Consulting as co-managers, DIFC as the Host Financial Centre and PwC Dubai as the Technical Partner.
The initiative will establish an Advisory Panel representing Shariah scholars, multilateral entities, and select industry stakeholders, accompanied by an Industry Consultation Group to bolster the Secretariat’s endeavours.
Key focus areas of the Tayyib Secretariat include:
- Developing a set of investment principles inspired by Tayyib across select asset classes
- Supporting Islamic asset managers to access global ESG liquidity pools
- Inspiring new innovative ESG-linked, Tayyib-inspired products
- Aligning Islamic finance with conventional ESG and impact investing
- Providing a voice for Islamic finance in the mainstream sustainable finance sector
Project Tayyib strives to complement Islamic finance’s established “halal” paradigm with a reinforced emphasis on active, responsible investing rooted in Islamic values, incorporating ethical considerations such as environmental stewardship, labour rights protection, and social contributions.
Despite its inherent ethical focus, Islamic finance has had limited engagement with the broader sustainable finance domain, even as many Muslim-majority nations face substantial impacts from climate change.
The Islamic finance sector, valued at over $4 trillion, spans prominent financial hubs globally, with the initiative seeking to build upon the success of Shariah-compliant options and drive further financial inclusion and GDP growth.
Projected as a market-driven initiative, Project Tayyib evolved from years of market assessment and collaboration among stakeholders from the UK, Malaysia, and the GCC, reflecting genuine global engagement and demand.
Notably, other global initiatives inspired by the Tayyib concept and a deeper exploration of Maqasid al-Shariah objectives are underway across various regions and sectors. These initiatives aim to foster more inclusive, environmentally conscious financial markets.
ESG and Islamic finance
The development of Tayyib-inspired investing principles involves meticulously considering Shariah law as a guiding framework, alongside assessing existing responsible investing frameworks and challenges asset managers face in their application. Research and development to craft market tools integrating these principles into investment management will be a pivotal function of the Tayyib Secretariat.
Forecasts predict substantial growth in ESG investing and Islamic finance, with ESG investments expected to surge by 84% to over $30 trillion by 2026 and Islamic finance reaching $5.9 trillion within the same timeframe. Islamic asset managers stand to benefit from global liquidity pools targeting the Global South, a natural market for these managers with profound insights into the region.
Moreover, the initiative anticipates substantial demand for green and sustainable Islamic financial products, with estimations from UKIFC suggesting a potential additional capital raise of $30 billion through the green and sukuk (Islamic bonds) market by 2025.
With mounting discussions surrounding the concept of Tayyib and its potential market impact, there’s a growing momentum for this initiative to materialise, bridging cultures, fostering inclusive growth, and contributing significantly to addressing the climate emergency.
