The devastating impact of the Global Financial Crisis was intensified by the delinking between finance and the economy, and by international financial centres having become a leading source of national income and wealth in their own right. In short, there was too much finance. However, the reaction since to the unethical behaviour and excesses that caused the crisis, though understandable, may have swung too far in the other direction by relying too heavily on rules and regulations rather than addressing the underlying ethics.
Responsible finance, by providing models for different forms of finance that explicitly factor in ethics, provides an alternative response. This report highlights the specific characteristics and features that ethical finance and Islamic finance share and those that set them apart. In reviewing the similarities and assessing future connections, this report aims to provide a firm basis for cooperation between the two types of finance and contribute towards a greater understanding of the forms of finance that bring value to the economy, society and the environment and thereby support sustainable development in the global economy.
Collaboration between the responsible forms of finance will yield benefits from the knowledge and experience that has been gained in assessing the impact of such financing and investments on the economy, society and the environment. It must promote greater awareness of the potential role these respective responsible forms of finance have in delivering a form of finance that is well anchored to the economy and that brings value to society and environmental sustainability.
A framework of cooperation will be helpful in articulating the stated intent of both forms of responsible finance to achieve this greater awareness and enabling an assessment of the impact of the various aspects covered by each type of responsible finance. With financial reforms by the international community now largely in place, the imperative for future finance is not only to become stable and resilient but also to become a deep anchor to its bedrock – the real economy – and to generate a positive benefit for the wider society and to environmental sustainability.
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