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  • Islamic finance: an instrument to unlock the potential of blue economy and sustainable future

The goal of the green economy is to attain sustainable development that preserves and enhances the environment by lowering the environmental risk in a particular consumption-production relationship where the world’s economies are directed to use marine resources without endangering their environmental sustainability due to the establishment of an ecological shortage of terrestrial resources, which illustrates the transition from a green to a blue economy. The main goals of the “blue economy” are also to raise living standards, economic growth, and social inclusiveness while maintaining environmental equilibrium.

The blue economy, according to the World Bank Group and the United Nations (UN) (2017), is a concept that aims to ensure the environmental sustainability of the seas and coastal areas while promoting social inclusion, economic growth, and the preservation or enhancement of livelihoods. If we look around than we realise the fact that there is currently little work being done on the blue economy in Islamic finance and economics. However, the goals of the blue and green economies are identical like lowering CO2 levels, lowering global temperatures, and creating new technologies to safeguard the environment.

Some scholars have noted that maritime resources support both the economy’s expansion and the sustainability of the environment. Because they create at least 50% of the oxygen in the atmosphere, the roles played by large whales and phytoplankton, the smallest living thing, are particularly significant in lowering CO2.

As per Paris Agreement, which aims to safeguard the environment, was signed by 135 countries. Everyone and everywhere is working to prevent climate change from harming Earth’s environment, both in the East and the West. Nonetheless, the majority of signatory nations are undeveloped, financially strapped, lacking in technological know-how and aptitude, and climate change-prone. These nations must receive assistance for them to advance technologically and be able to meet the basic requirements for the lofty objectives of the Paris Agreement. It’s also a noticeable fact that the majority of Muslim nations are least developed. As a result, under the auspices of Islamic law, they must choose the course that will enable them to safeguard Earth’s ecology whereas the improvement of the environment, people, and prosperity is also emphasised in the 2030 Agenda for Sustainable Development.

Smart shifting

As, per SDGs, the costs associated with GHG emissions and global warming are significant and are felt globally. Both have a detrimental effect on the agricultural sector’s productivity, intensify worldwide wildfires, and raise sea levels, which results in flooding and an increase in extreme weather as well as worldwide temperatures.

The International Monetary Fund has suggested a carbon tax, stating that “we are in a position to achieve the GHG emission target agreed under the Paris Agreement by imposing a tax of $75 on the per tonnes production of CO2. Therefore, it is high time to call to action to lower global GHG emissions through the incorporation of low-carbon innovation, low-cost greenhouse gas mitigation, and environmentally beneficial technology. But environmental protection will be achievable if everyone focuses on this task where the green technologies are too expensive to afford so, limited applications are noticed in developed countries while developing countries are still struggling to afford them. This problem will lead to a smart shifting of policymakers from a conventional green to a blue economy.

Reducing environmental risk is the primary goal of the green economy attempting to preserve the environment and raise living standards. However, experts and decision-makers are aware that the resources are limited. Thus, the moment has come to investigate more beneficial and productive resources. After taking the aforementioned into account, experts and decision-makers have recommended exploring and using maritime resources, with the caveat that the sustainability of the ecosystem not be destroyed so, they proposed switching from a green to a blue economy. The blue economy idea aims to maintain the environmental sustainability of the seas and coastal regions while simultaneously fostering social inclusion, economic growth, and the maintenance or enhancement of livelihoods. The main goals of the blue economy are to raise living standards, boost economic growth, and expand social inclusion while preserving and preserving the environment. The following are some of the subsets of the universal set known as the blue economy: “The blue economy is the sustainable use of ocean resources for economic growth, improved livelihoods and jobs, and health of the ocean ecosystem.” The term blue economy refers to a wide range of activities, including maritime transportation (more than 80% of international goods traded are transported by sea), renewable energy (sustainable marine energy can play a vital role in social and economic development), and fisheries (marine fisheries contribute more than $270 billion annually to global GDP). Tourism (particularly coastal and ocean tourism) has the potential to boost the economy and create jobs. This volume is predicted to double in 2030 and quadruple in 2050. It is believed that a blue economy is better for the universe than a green economy from an environmental perspective. In comparison the green economy, which promotes environmental sustainability, it lowers CO2 and the world temperature more.

If we develop the link between Religion and Sustainable Development then we realise the fact that economics believes that individuals in their choices are either producers or consumers and their decisions are rational and narrowly self-interested. However with the adoption of the UN 2030 Agenda and the Paris Agreement on the SDGs, the idea of ‘economic man’ has changed to reflect human moral and ethical principles. People are now inspired to take care of the environment and each other. All religions emphasise the protection of the Earth, human well-being, people’s level of affluence, and relationships based on peace and harmony so, there is a strong connection between religious morality and the environment where religion acts as a significant influencer, particularly on development initiatives, practices, and policy formulation.

Religious guidance

After the publication of the Brundtland Commission Report commonly known under the name “Our Common Future” many religious institutions have tried to develop a connection between religion and SDGs to answer the question, of why religion is important for sustainable development and what role religion can play in sustainability. It is an evident fact that, whenever any community or society needs any social and economic support, religious institutions extend their services for solutions to these issues.

We witness this fact in the history of different religions like in Islam WAQF has a solid history. Similarly, the philanthropic role of the church, Satrams in Hinduism, the institution of Tzedakah in Judaism, and Dharma Drum Mountain in Buddhism underline the vital role of religious foundations in human behaviour. Many researchers suggested that fact, if we want to achieve the SDGs of 2030, then we have to follow the ethical and moral values of religions. It is a well-known phenomenon that religions maintain a balance between material and spiritual needs as all faiths forbid excess, take into account the requirements of future generations, impart life lessons about the meaning of life, and counsel us on virtues and vices. All religions also provide us with guidance on harmony and cooperation.

We as Muslim reaffirm that the natural world is God’s creation and that it is good both in and of itself and in supporting human life according to God. We shall endeavour to encourage human cultures to manage, use, and occupy Earth responsibly, given the fragility of creation’s life and resources.

Islam being the universal religion, addresses every aspect of life. The Qur’an already refers to the SDGs that are being considered by the UN. Islam opposes poverty and the systems that support it, including WAQF, the interest-free system, the law of inheritance, the institution of charity, and zakat, among many others. Islam forbids wasting any resources. It is not acceptable to propagate corruption or mischief on Earth, nor is it acceptable to live extravagantly. It is mentioned in the Qur’an, Surah Al Baqrah, verse 27 that, “Those who break the covenant of Almighty after ratifying it, and sever that which Almighty ordered to be joined, and [who] make mischief [on Earth]: Those are they who are the losers.”

Almighty (swt) discussed the green economy in Surah 28, verse 77 and Surah 2, verse 60, Almighty (swt) said: ‘…And do not desire corruption in the land. Indeed, God does not like corruptors’. Eat and drink from the provision of the Almighty, and do not commit abuse on Earth (Sustainability). In the Qur’an, Surah 6, verse 99, Almighty (swt) mentioned the green economy in a very beautiful way: ‘And it is He who sends down rain from the sky, and we produce thereby the growth of all things. We produce from it greenery from which we produce grains arranged in layers. And from the palm trees of its emerging fruit are clusters hanging low. And [We produce] gardens of grapevines and olives and pomegranates, similar yet varied. Look at [each of] its fruit when it yields and [at] its ripening. Indeed those are signs for people who believe.

Almighty (swt) also mentioned in Surah al Nahl, verse 14, about the different dimensions of the blue economy. In this verse, Almighty (swt) mentioned food, economy, transportation, and all other bounties related to the blue economy: ‘And it is He who subjected the sea for you to eat from it tender meat and to extract from it ornaments which you wear. And you see the ships plowing through it, and that you may seek of His bounty; and perhaps you will be grateful.

It is evident from the verse above what Almighty’s (swt) bounty on humanity is. We were told “how He subjected the seas, with their waves lapping the shores, and how He blesses His servants by subjecting the seas for them,” according to what He said. Fish flesh and halal are available for human consumption in the oceans according to the will of Almighty (swt); in both cases, the fish are captured either alive or dead. It is allowed to consume them even in the state of Ihram. This is the source of commerce and business relevant to food, the World GDP is boosted by marine fisheries by more than $270 billion a year. However, Almighty (swt) also mentioned the trade and economic benefit of the precious jewels and pearls he had created in the oceans. These can also be used as ornaments. If the resource is handled wisely going forward and value chains are built to support these beneficial socioeconomic and environmental effects, these synergies can grow even more.

If we take a look at Islamic nations of the entire world (whether they are lower-income, middle-income, or higher-income countries) they follow the basic practices of Islam where high priority is given to moral and ethical principles integrated into the sustainable development approach.

The primary goals are justice and equality; corruption has no place on Earth. Aside from lowering unemployment, the primary objective is to eradicate poverty but unfortunately, the majority of Muslim nations have poor management, high rates of poverty, unstable political environments, unstable food supplies, and unstable borders, and one of the main reasons behind this issue is the unsustainable practices (misuse of God’s provided natural resources and inequitable distribution) if they switch from the green economy to the blue economy they may attain better outcomes in terms of lower poverty, better livings, zero hunger and much more.

Islamic finance encompasses ethical and business elements. Its moral principles such as fairness, equity, and honesty are for the benefit of people, and its business activities are for the expansion of economies. As we are all aware of the fact that, risk sharing leaves negative footprints on poverty and equality where poverty alleviation is one of the major matters of concern for the policymakers so, there is a huge space for Islamic financial institutions as they always work on Shariah compliance even at the time of raising capital. As in Surah Nahl, the Almighty encourages humanity to explore, develop and receive economic benefits from the sea for their economic sustenance so, being the follower of Shariah it is the major responsibility of Islamic financial institutions to play their role in promoting blue growth in the economy where these institutions have the capacity to finance blue growth through Islamic financial instruments of ijara, musharakah/mudharabah and Sukuk.

In addition, states of all Islamic countries are also bound to formulate policies through regulations that support blue growth where, Islamic financial institutions may explore opportunities in different projects related to sea-based technologies, renewable energy, shipbuilding, ship breaking, fishery, coastal tourism, sea transport, etc. that definitely reduce poverty and generates employment. The majority of poor nations lack the energy resources necessary to transition from a green to a blue economy; if these nations installed windmills with the help of Islamic financial institutions, things would drastically alter. These wind-generated electricity Projects are both cost-effective and environmentally beneficial, and they will produce energy. Similar to this, tides and ocean waves can likewise provide energy.

Islamic financial organisations can therefore issue blue bonds, just like they can with green bonds, and as was previously mentioned, they have potential. But these bonds ought to be in line with the Sustainable Development Goals (SDGs), which means they ought to be ethical investments that abide by governance, social, and environmental standards. Additionally, this industry is crucial to increasing the resilience of the ocean. The specialists of Islamic financial institutions must develop new Islamic financial instruments if we are ready for a transition to a blue economy. This will also satisfy the requirements of Maqasid Al Shariah. 

 Consequently, Islamic blue finance presents a fantastic chance for the Islamic financial sector to make investments in the blue economy. It’s high time to get a blue economy.

The Author is MD IRP/Faculty Department of H&SS, Bahria University Karachi