Finance
SC partners IsDB to advance Islamic Capital Market, Social Finance
PETALING JAYA: The Securities Commission Malaysia (SC) today signed a Memorandum of Understanding (MoU) with the Islamic Development Bank (IsDB) Group, paving the way for greater cooperation in Islamic capital market (ICM) and broadening the reach of Islamic fintech and social finance, particularly waqf.
Prime Minister Datuk Seri Anwar Ibrahim and IsDB president and chairman Dr Muhammad Al Jasser, witnessed the signing of the landmark MoU, the first-of-its-kind between the Malaysian capital market regulator and the premier multilateral development bank of the Global South.
The SC chairman, Datuk Seri Dr Awang Adek Hussin and IsDB vice president, finance and chief financial officer, Dr Zamir Iqbal signed the MoU on the sidelines of the IsDB Annual General Meeting 2024 in Riyadh.
Anwar and Muhammad Al Jasser, in their meeting in March 2023, had agreed that regulators, authorities and businesses in Malaysia to work closely with IsDB to explore new areas of collaboration. These include developing and piloting innovative Islamic finance products, promoting the halal industry, and supporting micro, small and medium enterprises (MSMEs).
Under the MoU signed this morning, both the SC and IsDB will collaborate in several key areas. These include facilitating innovation in Islamic fintech, promoting development of Islamic social finance, and encouraging inflow of investments, among others.
It also aims to increase capacity building, knowledge sharing and joint technical projects in key interest areas related to ICM, which can also be capitalised by both institutions for the benefit of other IsDB member countries.
Awang Adek said the synergistic collaboration marked a historic milestone for the SC and IsDB.
“We now intend to broaden and deepen Islamic fintech state of play via scalability and new markets as well as amplify opportunities through social finance including development of waqf assets, by using our respective capital markets and financial development expertise,” he added.
Through greater collaboration, he said both parties can also develop and scale up the MSMEs, in support of their aspirations.
Muhammad Al Jasser said, “Under this MoU, the Securities Commission Malaysia and IsDB will collaborate to enhance Islamic fintech, social finance, and attract foreign investment in private markets. This will enhance the Islamic capital markets not only in Malaysia but also across IsDB Member Countries. This partnership prioritises support for MSMEs and private markets, which are crucial for economic empowerment.”
Awang Adek added that this MoU is also in line with the key strategic initiatives for the Malaysian ICM under the Capital Market Master Plan 3 (2021 – 2025), including expanding the reach of ICM to the broader stakeholders of the economy and embracing collaboration and innovation for growth.
To that end, the SC together with its affiliate, Capital Markets Malaysia recently engaged with various stakeholders in Abu Dhabi, Dubai and Riyadh. This includes lending Malaysia’s voice to reinforcing ICM’s impact and enhancing Malaysia’s global thought leadership.
In several panel sessions in the region, the SC’s executive director of Islamic Capital Market, Sharifatul Hanizah Said Ali spoke about how ICM can be harnessed to structure innovative financing instruments to further advance social impact investing, sukuk issuances and Islamic asset management.
In 2023, the Malaysian ICM grew 4.5% to RM2.4 trillion while sukuk outstanding rose by 7.4% and Shariah-compliant equities by 1.5%.
Malaysia remains the global leader in ICM, particularly in sukuk outstanding as well as Islamic fund management, securing top rankings in global indices including Islamic Fintech Index, the Global Islamic Economy Indicator and the global Islamic Finance Development Indicator for the 10th consecutive year.
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The World Bank is ditching its commitment to steer 45 percent of its spending toward projects with climate benefits, after facing pressure from the Trump administration.
The move, announced Monday following a meeting of the bank’s board of directors last week, marks a victory in President Donald Trump’s effort to purge climate policies from U.S. foreign policy. His administration has described the target as “distortionary” and “nonsensical.”
The bank preserved its broader Climate Change Action Plan — of which the 45 percent target was a key metric — just days before it was set to expire at the end of June. In addition to directing money toward climate projects, the plan provides technical support for helping countries reduce their greenhouse gas pollution and adapt to rising temperatures.
“We will retire the 45% climate co-benefits target,” the World Bank Group said in a statement, noting that it had “done significant work in answering client demand and needs.”
The bank’s work on climate “is and will remain firmly client driven, supporting them in delivering on their own ambitions as set out in their national plans and NDCs,” the statement added, referring to the nationally determined contributions countries submit under the Paris Agreement.
The decision to drop the climate finance target follows months of pressure from the Trump administration. People with knowledge of the negotiations said the U.S. was firm that the target must go despite other countries indicating their support for the bank’s climate goal. The U.S. has sway over the bank’s decisions as its largest shareholder.
Beyond the finance target, the Climate Change Action Plan also provides diagnostic reports on countries’ climate and development goals and aims to align lending with the Paris Agreement, which calls for preventing temperature rise from surpassing 2 degrees Celsius since the Industrial Revolution.
The bank said it would honor a board request to undertake an independent evaluation of the climate plan to determine if it’s helping countries grapple with rising temperatures. The decision effectively extends the plan beyond its expiration at the end of June.
The climate target was supported by many of the bank’s shareholders. It’s also been a prominent signal of the bank’s support for climate action at a time when the impacts of rising temperatures are accelerating.
“This is way, way away from where we should be for a responsible financial architecture,” said one official from a developed country who was directly involved in the negotiations and was granted anonymity to describe internal discussions.
The bank will continue to track and report on the amount of money going to projects with climate co-benefits. It exceeded its own target last year by directing 48 percent of its financing to climate-related projects.
Other climate targets embedded in agreements that govern different arms of the bank will remain, including one for the International Development Association, the bank’s fund for the poorest countries.
Multilateral development banks play a key role in global climate negotiations, where wealthy countries have committed to helping provide $300 billion a year for poorer countries by 2035. That no longer includes the United States, which has left the Paris Agreement and will exit the underlying United Nations Framework Convention on Climate Change early next year.
“Targets send enormous signals about an institution’s direction of travel,” said Clemence Landers, a senior fellow at the Center for Global Development. “At the same time, it’s a sign of the times and the World Bank is doing its level best to not rankle its largest shareholder.”
She believes the bank will continue financing renewable energy projects in countries that want them, despite having dropped its climate target.
“I wouldn’t be shocked if the bank continued to have an extremely robust clean pipeline with or without this target,” said Landers.
The bank says retiring the 45 percent target is part of its shift from a focus on “inputs to outcomes.” It will continue to monitor and report net greenhouse gas emissions across its projects and countries’ ability to withstand climate risks.
“We will continue to report to the Board on progress, including on climate co-benefits, and to contribute to our related joint MDB efforts,” the statement said, referring to its role as a multilateral development bank. “We will explore and discuss ways to better structure our engagement on adaptation, nature and pollution.”
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