Impact investments in today’s world assume great significance as they come with an explicit intention by the investors to make a positive impact on the society. Conventionally, impact is measured in the context of the UN SDGs. Multiple organisations in the past have taken up the task to measure the impact of projects based on the SDG framework with varying degrees of results. While these initiatives among several others involve fairly elaborate exercises at measuring the impact of projects and companies on the people as well as on the planet, the results may or may not be very relevant from an Islamic perspective. Singapore-based IBF DigiLabs, a member of the IBF Net Group, is seeking to address this challenge through its latest initiative, titled Confluence. The project has been selected to participate in the FIKRA Islamic Fintech Accelerator Programme for Cohort 2021, jointly offered by the Securities Commission (Malaysia) and the UN Capital Development Fund.
Confluence: A Need of the Hour
IBF’s latest project measures the impact of project(s) from the standpoint of the goals (maqasid) of Shariah as well as the United Nations sustainable development goals (SDGs), given that there is a significant degree of alignment between the two and has been aptly named as Confluence, says Mohammed Alim, CEO-Designate of IBF DigiLabs.
IBF DigiLabs has conducted intensive research on the alignment or otherwise of the SDGs with the objectives of the Shariah. The findings from such academic research are being enhanced to develop a robust framework. A text analysis of relevant data and literature enables a process of identification of new metrics in the light of Shariah objectives and redesignation of some existing ones based on alignment or otherwise of SDGs with the former, according to Dr Mohammed Obaidullah, Founder of IBF Net Group. These solutions are being rolled out in two phases:
Islamic Value Analytics
In Phase I of the project, the IBF Platform would combine the metrics using an algorithm and produce a score and/or a classification scheme reflecting the impact of projects using the lens of Shariah objectives as perceived by the respective stakeholders — the project owner(s) and the market. IBF DigiLabs has entered into an agreement to set up a joint venture, Islamic Value Analytics PLT with Ethis Global in Malaysia to implement its go-to-market strategy.
“This AI-based Impact Scoring Platform, besides being a stand-alone destination for investors interested in obtaining an impact rating for projects, would also serve as a front-end application with crowdfunding platforms seeking to raise equity resources. It can provide valuable data for Islamic investors seeking to make a difference to the world while realizing their risk-return expectations”, says Umar Munshi, Founder of the Ethis Group and Strategic Advisor with IBF DigiLabs.
In Phase 2 of the project, given the availability of alternative tools for measurement of environmental impact (e.g. carbon footprints) and social impact, the IBF platform would identify and adapt a suitable method in the light of the goals of Shariah for measurement and conversion of such impact into green/social cryptos. Projects can earn/liquidate such cryptos representing both types of impact at an Exchange to alter their risk-return-impact profile in the market.
This Platform, a marketplace for trading such cryptos, is being developed using Algorand blockchain technology which is scalable, secure, decentralized and Shariah-compliant. Algorand provides immediate transaction finality while preventing forks, offers highly customizable smart contracts, and asset tokenization built directly in layer 1. Further, Algorand (unlike other protocols with heavy carbon footprints) maintains a carbon-negative position at all times. The IBF Net Group has a strategic partnership with Algorand Inc. for all its blockchain related initiatives.
Together, the two IBF Platforms are expected to promote the Shariah goals of comprehensive human development through the Islamic capital markets. The Platforms with a clear and sharp focus on impact would direct resources to projects that lead to economic growth with equity as well as ethics and morality.