1、UAE ISLAMIC FINANCE REPORT 2023THE YEAR OF SUSTAINABILITYUAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|2AAOIFI Accounting and Auditing Organization for Islamic Financial InstitutionsADGM Abu Dhabi Global MarketCBUAE Central Bank of the UAECIBAFI General Council for Islamic Banks and Fin

2、ancial InstitutionsCOP 28 Conference of the Parties of the UNFCCCDFSA Dubai Financial Services AuthorityDIFC Dubai International Financial CentreESG Environment,Social and GovernanceFSRA Financial Services Regulatory AuthorityGSSS Green,Social,Sustainability and Sustainability-LinkedHSA Higher Shari

3、ah AuthorityIFDI 2023 Islamic Finance Development Indicator 2023IFSB Islamic Financial Services BoardISSCs Internal Shariah Supervisory CommitteesIsDB Islamic Development Bank GroupMOCCAE Ministry of Climate Change and EnvironmentSCA Securities and Commodities AuthoritySDGs UN Sustainable Developmen

4、t GoalsSFWG Sustainable Finance Working GroupTable of AcronymsUAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|3Table of Acronyms 2Message from the Governor of the Central Bank of the UAE 4Message from the Higher Shariah Authority Chairman,CBUAE 5Message from the Assistant Governor of the

5、CBUAE,Banking&Insurance Supervision 6Islamic Finance and Sustainability Overview 7Global and UAE Islamic Finance Overview8Expanding Regulatory Drive for Sustainability 10Chapter 1:Development of the Islamic Finance Sector in the UAE.14Evolution of the Islamic Finance Industry in the UAE 15Islamic Fi

6、nance Regulatory Landscape 16Supporting the Islamic Finance Environment in the UAE to Enable Sustainability 21Chapter 2:Islamic Finance Landscape and Financial Performance.24Islamic Banking 25Takaful Insurance 30Sukuk 34Chapter 3:Sustainability Developments and Initiatives in the UAE.36Sustainabilit

7、y Agenda by the Government of the UAE 37Central Bank of the UAE Sustainability Agenda 40Sustainable Finance and Sustainability at Islamic Financial Institutions in the UAE 42Chapter 4:Outlook on Sustainability Adoption by Islamic Financial Institutions in the UAE.43Sustainability Strategy and Govern

8、ance 45Sustainability and ESG Criteria 47Sustainability Roadmap 48Sustainability Financial Goals49Sustainability in Product Offerings 50Opportunities and Challenges in Implementing Sustainability 51Sustainability Disclosures 52Takaful Insurance Companies 53Islamic Finance Companies 54Appendix.55Refe

9、rences.57Table of ContentsUAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|4The Central Bank of the United Arab Emirates(CBUAE)is pleased to launch the UAE Islamic Finance Report 2023:The Year of Sustainability.We mark the theme of sustainability in this report as the UAE hosts the 2023 UN

10、 Climate Change Conference(UNFCCC COP 28)this year.This study showcases our approach to support the development of Islamic finance within the UAE.It is also in line with the vision of the UAEs leadership and its strategy to promote sustainable growth within the financial sectorIslamic finance includ

11、ed and encourage sustainable development.The UAE is the home to the worlds first modern commercial Islamic bank,which was established in Dubai in 1975.Since then,the Islamic banking sector has become an integral part of the UAEs financial industry,accounting for 23%of total banking assets within the

12、 UAE in 2022,equivalent to AED 845 billion.The growth in Islamic banking assets in the UAE is supported by strong funding conditions of Islamic banks and Islamic windows.Recent growth has also been driven by the economic activities of retail and corporate consumers despite the increases in benchmark

13、 rates.As a systemic component of the banking sector,Islamic banks play an important role in developing and implementing sustainable finance plans and aligning with sector-wide sustainability objectives in support of the initiatives of the Year of Sustainability.Other than the banking sector,the UAE

14、 is also supporting the takaful sector and sukuk issuances,served by a strong presence of Islamic financial institutions and an enabling industry ecosystem.This report provides an overview of the performance of the different Islamic financial sectors that shape the industry as a whole.The study also

15、 covers the diverse ecosystem of the industry,including the legislative,regulatory and Shariah governance landscape,as well as human capital development and innovation within Islamic financial institutions.These contributions and sectors are important for the holistic development of the Islamic fina

16、nce industry.As the industry increasingly aligns itself with sustainability practices,we see the strategies and operations of Islamic financial institutions following suit,as indicated by our UAE Islamic Finance Sustainability Survey.This survey was developed to capture the sustainability strategies

17、 and practices of the Islamic finance industry in the UAE.The results illustrate that all Islamic banks in the UAE have sustainability strategies in place a key foundation to support the transformation required by the Islamic finance industry to support a more sustainable future.This is further stre

18、ngthened with the release of the Guiding Principles Regarding Sustainability in Islamic Financial Institutions by the Higher Shariah Authority.The Guidance adds to the Central Banks sustainability agenda,which is a key focus area of our strategic plan,and covers regulatory,supervisory and risk manag

19、ement aspects.We will continue our efforts to support the development of Islamic and sustainable finance sectors in the UAE and we hope the findings of this report will provide a meaningful impact towards achieving a sustainable future.Message from the Governor of the Central Bank of the UAE H.E.Kha

20、led Mohamed BalamaGovernor,Central Bank of United Arab Emirates UAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|5The principles of Islamic law and Shariah are inseparable from the ethical and social values of Islam with regards to the objectives relating to the protection of life,wealth,i

21、ntellect,progeny and faith,all of which span across generations.The fundamental alignment of Shariah principles with the concepts that have been embedded in sustainability provides Islamic finance with a clear rationale to lead on the sustainability front.In 2023,the UAE Higher Shariah Authority iss

22、ued guidance concerning the application of sustainability within Islamic financial institutions.The document roots the responsibility for action on environmental and social impact in the requirements associated with ownership of assets.We believe that this provides a strong starting point for Islami

23、c financial institutions to adopt sustainability and engage in sustainable finance as best practice in alignment with Shariah principles.Such guidance and other initiatives on Islamic sustainable finance are reflected upon in this report.We are pleased to launch this report during the Year of Sustai

24、nability and coinciding with the UAE hosting COP 28.We ask Allah that it serves as a meaningful reference for the market to align Shariah principles with sustainable finance.Message from the Higher Shariah Authority Chairman,CBUAEH.E.Eminence Sheikh Dr.Ahmed Bin Abdulaziz Al HaddadHigher Shariah Aut

25、hority Chairman,Central Bank of United Arab Emirates UAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|6The UAE Islamic Finance Report 2023 provides an overview of the development of Islamic finance sectors and supporting ecosystem alongside recent UAE initiatives focused on ESG and sustain

26、able finance.The report showcases the evolution of Islamic finance in the UAE and supporting regulatory and Shariah frameworks.The report also denotes the sustainability practices and strategies are being increasingly adopted and instruments such as green financing and green sukuk are becoming avail

27、able to support the scaling of sustainable finance and to combat climate change.These are further supported by a robust ecosystem.For instance,to solidify our efforts towards developing Islamic finance,the Commercial Transactions Law(Federal Decree-Law No.50/2022)was introduced,and this will be supp

28、orted by the CBUAE and HSA by the issuance of by-laws related to the Articles of this law.This study also exclusively reports on the findings of the UAE Islamic Finance Sustainability Survey,which gives insight into the adoption and outlook of sustainability practices and strategies by Islamic finan

29、cial institutions.The survey covers responses by Islamic banks,Islamic banking windows,and Islamic financing companies that capture their ESG and sustainability strategies.Among the key findings of the survey is that 83%of Islamic banks have planned financial commitments for sustainability in the co

30、ming three to five years,while 68%of Islamic banks and Islamic windows implement an ESG impact-based risk assessment framework when deciding extending financing or investment.This indicates strong sustainability alignment and positive steps towards the future of sustainable Islamic finance.We are co

31、nfident that this report will further support the development of the sustainable Islamic finance industry in the UAE.Message from the Assistant Governor of the CBUAE,Banking&Insurance Supervision Ahmed Al QamziAssistant Governor,Banking and Insurance Supervision,Central Bank of United Arab EmiratesI

32、slamic Finance and Sustainability OverviewUAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|82000222027Projected8,8409,4109,79011,11712,79714,92216,54524,467Global and UAE Islamic Finance OverviewThe Islamic finance industry continued to grow in 2022,expanding a furthe

33、r 11%to AED 16.5 trillion.The industry has grown 69%over the past five years and 163%over the past ten,according to the Islamic Finance Development Report 2023(IFDI 2023),produced by the Islamic Corporation for the Development of Private Sector(ICD),and the London Stock Exchange Group(LSEG).Growth i

34、s being chiefly driven by Islamic banking,which accounted for around 72%of total Islamic finance industry assets in 2022,followed by Sukuk.The main Islamic finance markets are to be found within the GCC,Southeast Asia and South Asia.The UAE is the worlds fourth largest Islamic finance market.Takaful

35、328|2%Others IFIs611|4%Islamic Funds806|5%IslamicBanking11,906|72%Sukuk2,893|17%Figure 1.1Global Islamic Finance Assets in 2022(AED Billion)Figure 1.2Global Islamic Finance Assets Growth(AED Billion)Source:ICD-LSEG Islamic Finance Development Report 2023UAE ISLAMIC FINANCE REPORT 2023:The Year of Su

36、stainability|9The UAEs Islamic finance landscape and governance ecosystemSince the establishment of the first Islamic bank,the Islamic finance industry in the UAE has developed across a range of areas including Islamic banking,finance,takaful and sukuk.The industry has become an integral part of the

37、 UAEs financial industry,and is supported by a robust and conducive regulatory environment,with harmonised Shariah and legal requirements.The Islamic banking sectorconsisting of Islamic banks and Islamic windows at conventional bankscurrently accounts for 23%of the UAEs total banking assets,having g

38、rown 16%over the past five years.The UAEs sukuk market is also expanding,and the introduction of local-currency Treasury sukuk by the Federal Government has the potential to encourage the issuance from other players in the market.The industry in the UAE has witnessed a number of initiatives pertaini

39、ng to the introduction of conducive legislation and Shariah standardisation.These initiatives are aimed at enhancing the stability of the Islamic financial system and enabling the development of innovative products and services.A key development in this area was the issuance of the UAEs Commercial T

40、ransactions Law(Federal Decree-Law No.50/2022),which provided the market with the greater legal certainty it required to grow and innovate.The UAEs Islamic finance ecosystem,including the Shariah governance landscape,is discussed in further detail in Chapter 1.10Number oftakaful insurance companies

41、in 20229Number ofIslamic finance companies24Number ofIslamic banking institutions(including Islamic windows)in 2022AED 845 billionTotal Islamic banking assets in 2022AED 4 billionTotal gross written contributions in 2022AED 217 billionSukuk outstanding by H1 202317Number ofsukuk issued in H1 2023Isl

42、amicFinance CompaniesSukukIslamicBankingTakafulInsuranceFigure 1.3Islamic Finance Landscape in the UAEThese and other statistics on the growth of the Islamic finance industry in the UAE are detailed in Chapter 2UAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|10Expanding Regulatory Drive f

43、or SustainabilityGrowing global focus on sustainability:Sustainable finance and the financing of sustainable projects are vital tools for achieving the UN Sustainable Development Goals(SDGs).Governments and regulators around the world have over the past decade launched a series of national,regional

44、and international policies and regulations supporting sustainable finance.According to the United Nations Conference on Trade and Development(UNCTAD),in 2022,there were 388 such measures in force in 35 developed and developing economies and country groupingsbetween them accounting for 93%of global G

45、DPwith 50 introduced in 2022 alone and more than 50 in development.050030035040045020000212022G20 MembersOther Selected Economies758548473Figure 1.4Number of Sustainable Finance Policy Measures and RegulationsSou

46、rce:United Nations Conference on Trade and Development(UNCTAD)World Investment Report 2023UAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|11The UAEs approach towards sustainability:In 2016,a year after the signing of the Paris Agreement,the UAE hosted the UN Environmental Programme Financ

47、e Initiatives(UNEP FI)Global Roundtable,which was an important milestone in the development of sustainable finance in the region.The highlight of this event,which included a dedicated session on Islamic finance,was the launch of the Dubai Declaration on Sustainable Finance.With this declaration,11 U

48、AE financial institutions committed to support the UAE Vision 2021,Paris Climate Accord,and UN Sustainable Development Goals in line with the UAE Green Agenda 2015-2030.After this,sustainable finance working groups in Abu Dhabi and Dubai worked with local stakeholders to produce their own sustainabi

49、lity initiatives.Abu Dhabi Global Market(ADGM)hosted the first Abu Dhabi Sustainable Finance Forum in 2019 and launched the Abu Dhabi Sustainable Finance Declaration,under the auspices of the CBUAE,ADGM,Ministry of Climate Change and Environment(MOCCAE),and the SCA.The Declaration was followed a yea

50、r later by the Abu Dhabi Sustainable Finance Guiding Principles,which included explicit reference to Shariah principles and the role of Islamic finance.The UAE adopted its national Net Zero target ahead of the COP 26 conference in Glasgow in 2021.Abu Dhabi Securities Exchange and Dubai Financial Mar

51、ket also developed voluntary ESG guidance,and became part of the Sustainable Stock Exchange Initiative.COP 28 is to be hosted by the UAE in 2023.Its presidency calls for increasing the overall levels of ambition,and the UAE in July accordingly announced that it had approved under the Third Update of

52、 its Second Nationally Determined Contributions that it had raised its target for emissions to 40%below business as usual by 2030,from a previously targeted 31%.UAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|12Sustainability and Islamic finance in the UAE:The worlds environmental and soc

53、ial efforts have grown rapidly since the United Nations first introduced the concept of sustainable development in its Brundtland Report of 1987.The Islamic finance industry has been able to play an increasingly active part in this global movement because of the broad intersection of Shariah require

54、ments with the aspirations of the SDGs.One indicator of the rapid development of the Islamic sustainable finance industry is how quickly ESG-related sukuk issuance has grown,having totalled AED 120.3 billion in issuance by H1 2023.Sustainable finance has also seen rapid growth in the UAE since the c

55、ountrys first green sukuk was issued in 2019,whether through Islamic capital markets or Islamic financing.A breakdown of key transactions and Islamic sustainable finance initiatives by UAE institutions is detailed in Chapter 3.In addition,Chapter 1 of this report outlines the supporting Islamic fina

56、nce environment for enabling sustainability as it looks into initiatives towards encouraging digital innovation,enabling Emiratisation,and developing human capital.Chapter 3 presents a comprehensive picture of the UAEs sustainable finance efforts and initiatives.In Chapter 4,we present the findings

57、of an industry-wide survey on sustainability,which show a clear commitment to sustainability from Islamic banks and Islamic banking windows.Figure 1.5Global ESG Sukuk Issuance5,00010,00015,00020,00025,00030,00035,000AED MILLION20171,7801,6925,43214,66917,85522,39830,69227,47420021202211,8

58、9415,57917,85816,6038,4921,2778843712,8345,7959,36213,3924,995H1 2023GreenOther ESGTotalSource:LSEG Islamic Sustainable Finance Monitor H1 2023UAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|13The role of the UAE Higher Shariah Authority:The CBUAEs Higher Shariah Authority has encouraged

59、Islamic finance institutions to play an active role in sustainable finance through a balanced approach looking at both its environmental and social aspects.In 2023,the HSA issued guiding principles on the application of sustainability within Islamic financial institutions.The document underlines the

60、 Shariah foundations of Islamic sustainable finance and the Fiqh approach towards it.The guiding principles integrates the responsibility for action on environmental and social matters within the requirements and the responsibilities assigned to ownership of property rights.The HSAs central message

61、for Islamic financial institutions in the UAE is that achieving sustainability goals is not only recommended(Mandoob)by Shariah;it may be a matter of obligation(Wajib).Therefore,the HSA stated that preventing environmental and social issues is not only recommended,but doing otherwise is highly disco

62、uraged or forbidden(Makrooh or Haram).In order to meet these objectives,the CBUAE is actively working with the Islamic finance industry in the UAE to develop Islamic sustainable finance through HSA directives and other means.In the final quarter of 2022,the UAE Banks Federation established a sustain

63、ability steering committee composed of CEOs of Islamic financial institutions and Islamic windows.The Federation will lay out practical and strategic foundations for Islamic sustainable finance and devise a general framework as a basis for a unified and common approach to sustainability and its init

64、iatives among Islamic financial institutions.Establishment of a Sustainability Steering Committee by the UAE Banks FederationCreation of Sustainable Activities within the Existing Business Lines by Islamic Financial Institutions and Islamic WindowsPriority for Compliance with Shariah in Products and

65、 ServicesAdoption of Shariah Legal Maxims in the Decision-Making Process and Granting of Financing,Especially Those Related to SustainabilityEstablishment of a Sustainability LinkedInvestment AccountsHighlight of Sustainability Initiatives Such as Zakat and Charity and Link to Sustainable Developmen

66、t GoalsAccuracy,Transparency and Clarity in All Transactions,Including Sustainable Islamic Finance TransactionsSpread Awareness and Develop Skills and Capabilities in Islamic Sustainable finance.Directing Islamic Financial Institutions to have a Plan for Islamic Sustainable Finance with Clear Financ

67、ial GoalsPromotion of Sustainability and Adherence of Shariah Values in Internal Environment of Islamic Financial InstitutionsTranslation of This Guidance into More Detailed Plan in Cooperation with UBF and the HSA Secretariat Figure 1.6Summary of the Guiding Principles Regarding Sustainability in I

68、slamic Financial InstitutionsSource:Guiding Principles Regarding Sustainability in Islamic Financial Institutions,2023AEDCHAPTER ONE:DEVELOPMENT OF THEISLAMIC FINANCE SECTOR IN THE UAEUAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|15Evolution of the Islamic Finance Industry in the UAEThe

69、 UAEs Islamic finance journey:Islamic finance in the UAE started almost 50 years,with the establishment of the worlds first Islamic commercial bank in 1975.This was followed by the launch of the first takaful insurance company in the country four years later.Since then,The UAE saw a number of indust

70、ry firsts,with recent years being characterised by new initiatives in Islamic sustainable finance.1975:UAE and worlds first Islamic commercial bank established:Dubai Islamic Bank(DIB).Launch of UAEgovernment domestic Treasury sukuk to develop domestic sukuk market.Securities and Commodities Authorit

71、y exempts registration fees for green or sustainabili-ty-linked sukuk.1979:UAEs first takaful insurance company,Islamic Arab Insurance Company(SALAMA),established.1970s2002:UAEs second takaful insurance company,Dubai Islamic Insurance and Reinsurance(Aman),established.Establishment of first Islamic

72、bank,through conversion of conventional bank:Sharjah Islamic Bank.2004:Sovereign sukuk issued by Government of Dubai and corporate issue by Emaar Properties.2000s20232018:DP World receives firstsustainability-linked financing in the Middle East to include an Islamic facility.Establishment of Higher

73、Shariah Authority.2019:First corporate green sukuk issuance in the Middle East,by Majid Al Futtaim.DFM Launces DFM Shariah Index(DFMSI),the first of its kind in the UAE.First Abu Dhabi Bank issues first local curren-cy green sukuk.1980s1985:UAE Islamic banking law and Higher Shariah Authority introd

74、uced under Federal Law 1985.2020:Consolidation between two Islamic banks:DIB and Noor Bank.Also,merger between different Islamic finance compa-nies including takaful insurers.Etihad becomes first airline to issue transition sukuk globally.1988:Establishment of UAEs second Islamic bank:Abu Dhabi Isla

75、mic Bank(ADIB).-20222010:Issuance of CBUAEs Certificate of Deposit.2014:Government of Sharjah debuts sukuk.2022:Debut sustainable sukuk by Islamic bank in the UAE,DIB.Enactment of Commercial Transactions Law.2015:Conversion of Arabian Scandinavian Insurance to a full-fledged takaful ins

76、urance company.2016-2019Higher Shariah Authority issues guidance for sustainability at Islamic financial institutions.Figure 2.1UAE Islamic Finance Key MilestonesIslamic Sustainable Finance MilestonesUAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|16Islamic Finance Regulatory LandscapeReg

77、ulatory oversight for Islamic finance:Islamic finance industry began with the 1985 Federal Law on Islamic Banks,Financial Institutions,and Investment Companies.This was the countrys first law to introduce the concept of centralised Shariah oversight via the HSA and to allow Islamic financial institu

78、tions to take part in commercial and real economy activities that differentiated them from their conventional counterparts.The current regulatory scope for Islamic financial institutions covers several different areas of the industry in the UAE,including Islamic banking,Islamic finance companies,tak

79、aful insurance companies and asset managers,along with sukuk and Islamic funds.These sectors and asset classes are regulated and supervised by the CBUAE as well as others as outlined below:Table 2.1Milestones in the UAEs Regulatory Journey for Islamic FinanceTable 2.2Islamic Finance Regulators in th

80、e UAE*Islamic banks,takaful insurance companies,and other Islamic financial institutionsRegulatorCentral Bank of the UAE(CBUAE)Securities and Commodities Authority(SCA)Dubai Financial Services Authority(DFSA)ADGMs Financial Services Regulatory Authority(FSRA)Regulated SectorsIslamic banks,takaful in

81、surance companies and Islamic finance companies as well as Islamic windowsSukuk and Islamic fundsIslamic finance entities*and Islamic fundsScope of RegulationOnshore RegulationRegulation of DIFC,the Financial Free Zone in DubaiRegulation of Abu Dhabi Global Market(ADGM),the Financial Free Zone in Ab

82、u Dhabi2004200202022Law Regulating Islamic Financial BusinessBy Dubai International Financial Centre(DIFC)Promulgation of Resolution No 4 of 2010 concerning takaful insurance by UAE Insurance Authority BoardSukuk regulations introduced by Dubai Financial Market and Securities and Commodit

83、ies Authority Adoption of Accounting and Auditing Organization for Islamic Financial Institutions(AAOIFI)Shariah standards by the CBUAEIssuance of Shariah Governance Standard and the first independent standard for Islamic windows by the CBUAEEnactment of Commercial Transactions LawUAE ISLAMIC FINANC

84、E REPORT 2023:The Year of Sustainability|17Federal Law 50 of 2022 enhances the UAEs regulatory landscape in Islamic finance:A key milestone for the Islamic finance industry in the UAE was the Commercial Transactions Law(Federal Law 50 of 2022)issued on October 3,2022.The legislature took into consid

85、eration several industrial and technological developments affecting commercial transactions and commerce.It was the first commercial law to recognise and govern Islamic financial transactions in a chapter dedicated to the subject.To further enhance the legal certainty,the law requires reference to t

86、he standards and resolutions issued by the HSA for interpreting the articles within that particular chapter of the law(Chapter VI of Book 3-Banking Operations).The CBUAE and HSA will issue by-laws related to the articles of the law.The law in meant to provide legal ground for innovative products and

87、 services while safeguarding the interests and rights of different concerned parties.It includes several provisions around the main structures used in Islamic finance,such as murabaha(cost-plus financing),istisna(construction and manufacturing financing),salam(forward sale),and ijara(Islamic lease).

88、Table 2.3Islamic Finance Areas Covered by Federal Law 50 of 2022*Toll manufacturing is a manufacturing contract where the seller sells a described item to the purchaser to be manufactured against a fixed total price and a determined term for future delivery.Source:Federal Decree Law 50 of 2022,The U

89、AEs Ministry of EconomyChapter 1:General ProvisionsArticles 474-468Articles 496-475Chapter 3:Islamic Banking OperationsChapter Some Areas CoveredArticlesChapter 2:Special Provisions of Certain Types of Contracts and Obligations to Which the Islamic Financial Institutions are a Party Recognition of S

90、hariah controls issued or adopted by the HSA as per Federal Law 14 of 2018.This will serve as reference for interpretation of provisions outlined in the Commercial Transactions Law.The board of directors of the CBUAE shall issue regulations that include controls of the commercial transactions of the

91、 Islamic financial institutions that transact their business according to Islamic Shariah provisions,having been approved by the HSA.Covered transactions are:deposits,investment accounts,takaful insurance,finance forms,investments,and any transactions governed by Shariah principles.Promise of Contra

92、cting Sale in Instalments Murabaha Toll Manufacturing*Forward Sale LeaseCBUAE will issue decisions on Islamic banking operations,administrative sanctions and penalties in case of breach of regulationsArticles 497UAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|18Establishment of Higher Sha

93、riah Authority:The HSA was established to harmonise and standardise the Shariah practices of Islamic financial institutions within the UAE.The Authority determines the rules and principles applicable to Islamic finance activities and supervises the internal Shariah supervisory committees(ISSCs)of Is

94、lamic financial institutions.It also approves monetary and financial tools to manage Shariah-compliant monetary policy operations.Table 2.4Shariah Governance Key MilestonesTable 2.5UAEs Shariah Governance Landscape in 2022Table 2.6Comprehensive Shariah Governance Standards and Resolutions by HSASour

95、ce:CBUAESource:CBUAESource:CBUAE720182022HSA introduced under Federal Law No6 of 1985UAE Cabinet approves establishment of the HSAAppointment of HSA members by Cabinet Resolution No(31/6)of 2017HSA commences workTakaful included as part of HSAs Charter51416Number of Members in Shariah Com

96、mittees of Islamic Financial InstitutionsNumber of Islamic Financial Institutions with Shariah CommitteesNumber of Higher Shariah Authority MembersOverarching StandardExample Regarding Type of InstitutionsExample Regarding DisclosureStandard Re Shariah Governance for Islamic Financial InstitutionsSt

97、andard on Regulatory Requirements for Financial Institutions Housing an Islamic WindowGuidance Note on Annual Shariah Report of Internal Shariah Supervision CommitteeThis standard requires Islamic financial institutions to have Shariah governance policies covering all their operations and objectives

98、 It should incorporate three lines of defence comprising the business line,support and control functions,and internal Shariah audit functionThis standard articulates the minimum requirements for financial institutions with Islamic windows to ensure strong governance for Islamic activities and to con

99、tribute to financial stability and consumer protectionThis guidance outlines the general requirements for issuing an annual Shariah report,including its submission to the HSA for approval The guidance also provides a template for the reportUAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|1

100、9Governance and Shariah-compliance:The CBUAE has introduced initiatives and regulations to promote harmonisation and standardisation of Shariah-compliant practices within the Islamic finance industry.The CBUAE and HSA align the UAEs regulatory and Shariah requirements with internationally recognised

101、 standards such as IFSB prudential standards and AAOIFI Shariah standards,which serve as a minimum requirement for Shariah compliance among Islamic financial institutions.The HSA has also addressed several issues impacting Islamic financial institutions through its guidance regarding the Shariah asp

102、ects of sukuk,syndicated financing,and repo transactions.It has also provided guidance on innovative products and services offered by Islamic financial institutions and targeted guidance on the transition from Libor to risk-free rates.One standard issued by the CBUAE to strengthen the prudential asp

103、ects of Islamic finance is the risk management standard for Islamic banks,which elaborates on aspects that were not already covered in other regulations issued by the CBUAE.Specifically,the risk management standard for Islamic banks lists the types of risk that are associated with the operations of

104、Islamic banks,such as displaced commercial risk*,rate of return risk,and Shariah non-compliance risk.The CBUAE also issued its Profit Equalisation for Islamic Banks regulation in 2022 in order to set appropriate risk management and governance requirements and safeguard the interests of investment ac

105、count holders.Table 2.7Number of CBUAE Regulations*Table 2.8Number of Regulations Issued by Other Regulatory Authorities*Source:CBUAE*Displaced commercial risk is a risk where an Islamic bank may be under pressure to voluntarily pay a market return on funding that is higher than the rate earned on a

106、ssets financed by Investment Account Holder when the return on assets is under-performing compared to competitors rates.*This does not cover guidance,notices issued by the CBUAE and resolutions issued by the HSA and other regulations and standards issued for other LFIs(e.g.Finance Companies,Exchange

107、 Houses etc.).*SCA,DFSA,and ADGMs FSRABankingInsuranceRegulations and standards for Islamic financial institutions only32Shariah standards for Islamic financial institutions71Regulations and standards for both conventional and Islamic financial institutions2622524Regulations forIslamic financialinst

108、itutionsRegulations for bothconventional andIslamic banksUAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|20Collaboration with standard-setting bodies:The UAE adopted AAOIFI Shariah standards in September 2018 following an HSA resolution.AAOIFI Shariah standards are considered the referenc

109、e point for the Islamic finance industry worldwide.They can be adopted voluntarily by Islamic financial institutions and jurisdictions or be enforced by a regulator.There are currently 17 jurisdictions which have adopted AAOIFI standards whether fully,partially,or as guidance,along with three financ

110、ial centres(including Dubai International Financial Centre)and Islamic Development Bank Group(IsDB).With the adoption of AAOIFI Shariah standards,all Islamic financial institutions in the UAE are required to review their products and services to ensure that they are in compliance.In addition,the HSA

111、 builds on these standards and modifies them based on the needs and practices of the UAE market.Given the UAEs substantial share of the worlds Islamic finance assetsthe country is ranked fourth globally in this respect,according to the Islamic Finance Development Indicator 2023CBUAEs efforts towards

112、 standardisation will help reduce fragmentation within Islamic finance markets.The CBUAE is also a full member of the Islamic Financial Services Board(IFSB),which promotes the soundness of the Islamic financial services industry through its role as an international standard-setting body for regulato

113、ry and supervisory authorities.The CBUAE has voting rights as a member of the IFSB Council.The Dubai Financial Services Authority(DFSA)is also a full member,while ADGM is an associate member.As of December 2022,11 UAE-based financial institutions were observer members.Both AAOIFI and IFSB are workin

114、g on standards covering Islamic sustainable finance as outlined in the table below.Table 2.9AAOIFI and IFSBs Contribution to Islamic Sustainable FinanceSource:AAOIFI and IFSBCollaboration with other Islamic finance organisations:Apart from adopting AAOIFI and IFSB standards,the HSA continues to work

115、 with other Islamic finance standard-setters and organisations such as the General Council for Islamic Banks and Financial Institutions(CIBAFI)to advance Islamic sustainable finance.The role of sustainability and collaboration in achieving sustainability goals was among the key themes addressed duri

116、ng the meeting of Centralised Shariah Authorities in October 2022.This was hosted by the CBUAE and the HSA,with the participation of AAOIFI,IFSB,CIBAFI and the IsDB,as well as the International Fiqh Academy.The meeting also discussed strategies to adopt green and sustainable finance standards for Is

117、lamic financial institutions,with a specific focus on social aspects.Governance Standard 7:Corporate Social Responsibility,Conduct and Disclosure for Islamic Financial InstitutionsIFSB-25:Disclosures to Promote Transparency and Market Discipline for Takaful/Retakaful UndertakingsIFSB-22:Revised Stan

118、dard on Disclosures to Promote Transparency and Market Discipline for Institutions Offering Islamic Financial ServicesGN-4.12:8 Integrating Sustainability into Legal and Regulatory Frameworks for ICM Considering the Associated Risks and OpportunitiesTN-3:Technical Note on Financial Inclusion and Isl

119、amic FinanceGovernance Standard:Responsible FinancingAAOIFIIFSBIssuing BodyStandardUAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|21Supporting the Islamic Finance Environment in the UAE to Enable SustainabilitySustainable development of Islamic finance human capital in the UAE:An importa

120、nt consideration for sustainability development in the UAE Islamic finance industry is human capital.For example,there is often a gap between what graduates have studied and the skills they will need once they enter the industry.This issue is being actively addressed by Islamic financial institution

121、s in the UAE.Apart from professional training and development,the UAE provides a comprehensive education landscape for preparing upcoming and existing human capital for the Islamic finance industry.The country has 56 Islamic finance education providers,the third highest number in the world,according

122、 to the ICD LSEG Islamic Finance Development Indicator 2023.Other aspects considered by Islamic financial institutions with regard to the development of human capital include:Table 2.10Training and Development by Islamic Financial Institutions in the UAE in 2022Source:CBUAESource:Annual and Sustaina

123、bility Reports of the Largest Fully Fledged Islamic Banks in the UAE,2022Diversity&InclusionEmiratisationDisability InclusionGender DiversityGrievance ProceduresTraining and DevelopmentPerformance Management SystemStructured Development ProgrammesTalentManagementWork/Life Balance Support including H

124、ajj LeaveTakaful and Parental Leave PoliciesStaff Finance PoliciesHealth&SafetyHealth&WellbeingFigure 2.2Human Capital Considerations by Islamic Financial Institutions3320,15682,877662351,847Number of workshops for senior management and boards of directorsNumber of training courses for employeesTota

125、l number of hours spent on training courses&workshopsNumber of training courses delivered to students and academicsNumber of training courses or workshops for other participants(technical assistance)Number of e-learning coursesUAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|22Talent devel

126、opment through Emiratisation initiatives:One way in which the Islamic banking industry is investing in local talent is through compliance with the CBUAEs Emiratisation requirements.Aligning with the UAEs Projects of the 50 economic development initiatives,the requirements are aimed at boosting Emira

127、tisation within the private sector.Accordingly,UAE-based institutions have developed internal Emiratisation plans and initiatives to not just retain talent but provide meaningful job opportunities that can serve the Islamic finance industry.In addition,the HSA has issued a resolution to support Emir

128、atisation within Islamic finance,especially in relation to Shariah governance at financial institutions.The resolution requires one third of Shariah board members to be Emirati.The HSA has also issued a resolution to appoint Emirati trainee members to the ISSCs of Islamic financial institutions.The

129、results of these initiatives are reflected in the growing proportion of Emiratis working in internal Shariah control and internal Shariah audit departments and similar functions.Figure 2.3Initiatives by Islamic Financial Institutions to Support EmiratisationTable 2.11Employment in Islamic Financial

130、InstitutionsTable 2.12Employment in Shariah Control and Shariah Audit Departments in UAE-Based Islamic BanksSource:Annual and Sustainability Reports of the Largest Fully Fledged Islamic Banks in the UAE,2022Source:CBUAESource:CBUAE*June 2022Emirati graduate programmes to develop needed skillsSpecial

131、ised development journeys for UAE nationals for future critical rolesTargeted recruitment programmes and participation in career fairsPartnerships with the Ministry of Human Resources and Emiratisation and the Emirates Institute of Finance(EIF)Islamic BanksTakaful*Number of Employees7,8021,410Emirat

132、isation40%9%Number of Employees175Emiratisation29%UAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|23Islamic banks embracing digital innovation:Innovation and digitalisation are having a major impact on economies and are an essential tool for achieving the transformations needed to reach s

133、ustainability goals.Following the global lockdown caused by the Covid-19 pandemic,the financial industry looked much more urgently to digital innovation to find ways to better serve its customers.Islamic banks in the UAE have similarly looked to digitally transform their services.Figure 2.4Customer

134、Service-Related Digital Initiatives Reported by Islamic Banks in the UAE in 2022OTHER MECHANISMS USED IN DIGITAL TRANSFORMATIONSource:Annual and Sustainability Reports of the Largest Fully Fledged Islamic Banks in the UAE,2022Artificial Intelligence(AI)and RoboticsE-LearningBlockchainAI can be used

135、for facial recognition in account openings and used in Know Your Customer(KYC)identity verification,while robotics allow all kinds of processes to be automatedEmployees can have access to custom-curated content with a library of thousands of courses on topics spanning business and technology,as well

136、 as certifications.Use of blockchain is being seen in trade finance,where it can allow transparency,privacy and trust between organisationsConsumers can chat with agents on a banks website or use other digital channels such as WhatsApp.Customers can easily approve and sign financing contracts withou

137、t the need to visit branches.Contactless technology allows payments to be made through devices such assmart watches.A digital umbrella brand allows a bank to offer all its digital offerings under one roof,such as opening an account,applying for cards,or sending remittances.Social media channels allo

138、w banks to engage better with clients,create awareness,and acquire new customers.Customers can bank in a simple manner using apps and other digital channels.Upgrading existing ATMs and CDMs allows customers to update their information without visiting physical branches.REPORTED OBSERVED IMPACT BY IS

139、LAMIC BANKSOnline Finance and Contactless PaymentsDedicatedApplicationOnline ChatUpgrading Automatic Teller Machines(ATMs)and Cash Deposit Machines(CDMs)Social MediaDigital Umbrella BrandIncrease in the Number of Onlineand Mobile TransactionsIncrease in Share of Digitally-Active CustomersIncrease in

140、 Number ofCustomers OverallIncrease Uptake ofMobile Wallets2AEDCHAPTER TWO:ISLAMIC FINANCE LANDSCAPE AND FINANCIAL PERFORMANCEUAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|25Islamic BankingIslamic banking sector in the UAE:The UAE is the worlds fourth largest Islamic banking market,acco

141、rding to the Islamic Finance Development Report 2023(IFDI 2023).The country has a dual banking sector in which Islamic bankscomprising standalone Shariah-compliant banks and Islamic banking windows of conventional banksoperate alongside conventional banks.In 2022,there were a total 24 Islamic bankin

142、g institutions in the UAE,eight of which were standalone and 16 were Islamic windows of conventional banks.Breaking these numbers down,there were six locally incorporated standalone Islamic banks and two branches of foreign Islamic banks,and 11 local and five foreign banks with Islamic windows.These

143、 numbers were down from nine standalone Islamic banks and 18 Islamic windows in 2018 due to the acquisition of Noor Bank by Dubai Islamic Bank in 2020 and other mergers.Asset growth driven by investments and financing:Assets held by the UAEs Islamic banking sector totalled AED 845 billion in 2022,ha

144、ving grown a compound annual growth rate(GAGR)of 3%over the previous five years.Assets held by Islamic banks totalled AED 631 billion while Islamic windows held AED 214 billion,showing respective growth of 8%and 49%from 2018.Islamic windows now account for 25%of total Islamic banking assets in the U

145、AE.Islamic banking assets accounted for 23%of total banking assets in the UAE in 2022.Number of standalone Islamic banksNumber of Islamic banking windows5%582800400500600700200212022Total Assets of Islamic BanksTotal Islamic Banking Assets in Windows.816Sh

146、are of Islamic banking assetsin total banking assetsShare of Islamic windowsin total Islamic banking assets5%23%25%Figure 3.1Islamic Banking Assets(AED BILLION)Figure 3.2Islamic Banking in the UAE Snapshot(2022)Source:CBUAEUAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|26Continued growth

147、 in financing consistent with post-pandemic economic:Financing to the corporate sector and individuals makes up a large part of Islamic banks portfolios,at 43%and 35%,respectively.Financing extended to the corporate sector has decreased since 2020 while financing to government and individuals has ed

148、ged up from the onset of the Covid pandemic in 2020.The personal consumer segment was the main growth driver of retail financing,followed by mortgage and vehicle financing.Overall growth in financing extended by the Islamic banking sector points to a continued rise in economic activities for both re

149、tail and corporate consumers post-pandemic,despite increases in benchmark rates.According to the CBUAEs quarterly Credit Sentiment Survey Q2 2023,strong economic conditions are offsetting the impact of higher rates on financing demand.Growth in financing was also supported by strong funding capaciti

150、es at Islamic banks.Ijara and murabaha were the most employed financing asset structures by Islamic banks in the UAE.Ijara is a lease contract used for fixed assets such as homes,other real estate,and equipment and machinery financing.Murabaha financing is a structure that works as a sales contract

151、used to purchase goods such as vehicles at a pre-agreed profit margin.The profit and loss-sharing mechanisms that were most used for financing asset structures were wakala,mudharaba and musharaka.Figure 3.3:Financing Extended by the Islamic Banking(AED BILLION)Source:CBUAE2022202186004002

152、0005352279250649325845155478GovernmentPublic Sector(GREs)Private SectorIndividualsTotal Financing476260751926454742Share of Islamic bankingfinancing in total bankingloans and financing28%CAGR in financing extended by theIslamic banking sector since 20182%UAE ISLAMIC FINANCE REP

153、ORT 2023:The Year of Sustainability|27Growth of Islamic banks funding base:In 2022,the UAEs Islamic banking industry posted its highest growth in deposits since 2019.This was in line with the macroeconomic recovery in the UAE two years after the onset of the pandemic.Deposits increased in parallel w

154、ith financing,by 4%in 2022,and this continued to improve Islamic banks credit capacity while supporting liquidity.On the liabilities side,deposits account for 66%of total liabilities for Islamic banks,followed by Islamic capital market funding at 5%.Individuals and the corporate sector contributed t

155、he largest shares of deposits,at 38%and 33%,respectively.While making up a large proportion of total deposits,the private corporate sector contribution was 9 percentage points lower than in 2021.At the same time,Islamic banks saw growth in government sector deposits.As reported by Islamic banks in t

156、he UAE,profit-sharing investment accounts such as mudharaba and wakala deposits accounted for most of the deposits.Mudharaba is a profit partnership between a bank and client for an agreed period,while wakala is an agency contract under which the account holder appoints the bank to carry out investm

157、ent activities on the clients behalf.Figure 3.4:Deposits in Islamic Banking(AED BILLION)Source:CBUAECAGR in Islamic banking depositssince 20182%2022202053903759163478Government SectorPublic Sector(GREs)Private Corporate SectorIndividualTotal Dep

158、osits53606358.Share of Islamic banking depositsin total banking deposits24%AED6869747699UAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|28Sukuk dominate investments for Islamic Banks:Following growth of 52%in investments by banks in the Islamic banking sector in 2021,when there was a part

159、icularly sharp rise in investment in sukuk,growth moderated to 14%in 2022,to AED 127 billion.The rise in rates of return from the middle of 2022 boosted investment in sukuk during the second half.While sukuk dominate investments,Islamic banks have sought to ensure there is sufficient risk management

160、 for these exposures as they watch for signs of global financial market volatility following a rapid series of increases in global benchmark rates.A large proportion of sukuk are held to maturity.Equity holdings accounted for just a 2%share of investments by the Islamic banking sector.There has been

161、 strong growth in sukuk supply,whether locally or from international issuers outside of the UAE.The introduction of local-currency Treasury sukuk by the UAE Federal Government in 2023,which was reviewed and approved by the HSA prior to its issuance,can support the mid-term yield curve development.Th

162、is will be a key enabler for further growth in sukuk issuance.Given their role as investors as part of their liquid assets portfolio,this has the potential to further increase the sukuk holdings of the UAEs Islamic banking sector.Figure 3.5:Investments by Islamic Banking Sector(AED BILLION)Source:CB

163、UAECAGR in investments inIslamic banking sectorsince 2002020212022SukukEquitiesTotal Investments.12%Share of Islamic bankinginvestment in totalbanking investment24%-2040608092127UAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|29UAE Islamic banki

164、ng shows resilience across different metrics:The UAE Islamic banking sector performed relatively well across all key financial stability metrics in 2022.The capital adequacy ratios of Islamic banks averaged 17.7%.This was well above CBUAE requirements,which are based on the Basel III capital standar

165、ds.The figure compares to 17.4%for the UAE banking sector as a whole.The slight decline in capital adequacy ratio(CAR)since 2020 is due to an increase in credit losses caused by higher defaults in the corporate and retail sectors following the Covid pandemic.In terms of liquidity,Islamic banks held

166、the same average eligible liquid asset ratio(ELAR)*of 19.1%as the overall UAE banking sector.This is markedly higher than the CBUAEs requirement of 10%.In terms of profitability,the average return on asset ratio(ROA)improved by 0.5 percentage point to 1.8%,largely due to an increase in net financing

167、 income,improved cost efficiency and lower impairment charges.This is slightly higher than the overall banking ROA of 1.4%.The asset quality of the financing portfolio improved with a reduction in net non-performing financing to 3.6%in 2022 from 4.0%in 2021.This compares with 3.0%for the overall ban

168、king sector.The net non-performing financing ratio(NPF)continued to drop from 2020 as the overall economy recovered following the pandemic and despite the increase in benchmark rates.Source:CBUAE15.5%16.0%16.5%17.0%17.5%18.0%18.5%19.0%19.5%20.0%20.5%200212022CAPITAL ADEQUACY RATIO OF ISLA

169、MIC BANKSLIQUID ASSETS RATIO OF ISLAMIC BANKS*NET NON-PERFORMING FINANCING RATIO OF ISLAMIC BANKS17.3%17.9%17.7%20.1%18.1%17.5%18.0%18.5%19.0%19.5%20.0%20.5%21.0%21.5%22.0%22.5%20021202221.2%21.6%19.1%22.1%20.3%0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%4.5%2002120221.6%2.6%4.1%4.0%3.6%

170、Figure 3.6:Key Financial Stability Metrics for Islamic Banking in the UAE*ELAR calculation excludes domestic systemically important banks.UAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|30Share of takaful gross written contributions intotal insurance gross written premiums in UAENumber of

171、 takaful insurance companies in UAE9%4,426 4,595 4,328 4,351 4,170 3,9004,0004,1004,2004,3004,4004,5004,6004,7002002120212022Total Gross WrittenContributions10Source:CBUAE Figure 3.7:Takaful Growth in the UAE(AED MILLION)Takaful InsuranceUAE takaful sector landscape is reshaping due to co

172、nsolidation:Out of the 62 insurance companies in the UAE in 2022,10 are takaful operators.Takaful insurance companies are fully Shariah-compliant.Unlike the equivalent in banking,conventional insurance operators are not permitted to operate Islamic windows in the UAE.In addition,there are two retaka

173、ful insurance companies in the UAE,both operating from the DIFC.UAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|31Property and liability drive takaful gross written contributions in the UAE:The property and liability sector was the largest takaful business line in 2022,contributing 45%to

174、gross written contributions(GWC),compared with 31%in 2021.Motor business line was the biggest contributor to the business,accounting for 47%of the total property and liability.Motor contributions have been increasing since 2020 due to heavy Covid discounts allowed on insurance operators since that y

175、ear by the Insurance Authority.With regard to annual growth,marine and aviation lines saw the biggest increase,by 75%,on 2021,following the travel industrys return to pre-pandemic activity.A potential contributor to the growth of the property and liability line is the Unemployment Insurance Law intr

176、oduced in September 2022.The new law provides an insurance scheme under which private and federal government employees receive compensation payments in case of unemployment,in exchange for a contribution.This was signed with nine insurance companies,including two takaful insurance companies.Health t

177、akaful was the second largest business line by GWC,holding a 38%share.Family takaful accounted for 16%in GWC,down from 32%in 2021.In terms of net written contributions(NWC),health takaful recorded 43%of such contributions.It is followed by property and liability which accounts for 41%.This is mainly

178、 driven by the motor business line,which makes up 76%of contributions to property and liability.Source:CBUAE1,794 1,695 1,580 1,666 1,891 1,738 1,934 1,794 1,896 1,621 894 965 807 789 659 4,426 4,595 4,328 4,351 4,170 1,0002,0003,0004,0005,000200212022Property and LiabilityHealthFamily894

179、 844 754 807 978 904 1,168 1,195 1,182 1,043 721 779 357 479 385 2,520 2,792 2,305 2,468 2,406 5001,0001,5002,0002,5003,000200212022Property and LiabilityHealthFamilyTotal Net Written ContributionsTotal Gross WrittenContributions Figure 3.8:Gross Written Contributions by Type of Business(

180、AED MILLION)Figure 3.9:Net Written Contributions by Type of Business(AED MILLION)UAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|32911 837 784 774 903 1,3421,4121,5361,5821,43484 74 198 185 129 2,337 2,323 2,518 2,542 2,466 05001,0001,5002,0002,5003,0003,500200212022Property an

181、dLiabilityHealthFamilyTotal Gross Paid Claims5834654244674626327,227 1,197 1,303 1,367 1,333 02004006008001,0001,2001,4001,6001,800200212022Property andLiabilityHealthFamilyTotal Net Paid ClaimsClaims paid decline by takaful insurance companies in the UAE:For General

182、 Takaful,total gross claims paid(GCP)and net claims paid(NCP)each dropped 3%from 2021.The highest share of claims paid in 2022 was in the health takaful business line,at 58%for GCP and 64%for NCP.Health takaful has paid out the most in claims in the 2018 2022 period.The second-highest contributor to

183、 claims is the motor and transportation businesspart of the property and liability sectorwhich accounted for 27%of total overall takaful GCP and 33%of NCP.With vehicle activity on the roads returning to pre-pandemic levels,there has been an increase in both frequency and severity of claims on motor

184、insurance.In addition,the high inflation environment has contributed to the increased costs,for example new vehicle parts,related to such claims.Family Takaful saw an annual decrease of 30%in GCP and 8%in NCP following a rise in family cover claims during the pandemic.The biggest segment driving suc

185、h takaful claims in 2022 was group credit life takaful,which covers the outstanding principal amount to a lender in case of death or disability of the borrower.Source:CBUAE Figure 3.10:Gross Written Paid Claims by Type of Business(AED MILLION)Figure 3.11:Net Paid Claims by Type of Business(AED MILLI

186、ON)UAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|3312,493 13,750 14,901 14,831 14,179 9,068 10,075 11,575 12,207 11,614 3,425 3,675 3,326 2,624 2,565-2,000 4,000 6,000 8,000 10,00012,00014,00016,000200212022Total AssetsTotal LiabilitiesTotal Equity114 72 150 3 205 109 148 275

187、 93-14-50-500300200212022Net Underwriting Income/LossNet Profit/LossProfits impacted by a drop in gross investment income:Takaful insurance companies posted an overall loss of AED 14 million in 2022,contrasting with a profit of AED 93 million in 2021.They reported an overall in

188、crease in net underwriting income to AED 205 million in 2022 from AED 3 million in 2021.However,gross investment income dropped 32%in 2022,due mainly to a decrease in net unrealised gains on investments and weaker stock market performance while investment expense rose 32%over the same period.Total a

189、ssets of takaful insurance companies have reduced by 4%since 2021 to AED 14.2 billion.Invested assets accounted for 53%of total assets in 2022,down 10 percentage points since 2021.Similarly,liabilities reduced by 4%since 2021 to AED 11.6 billion.Technical provisions accounted for 55%of total liabili

190、ties in 2022,down 9 percentage points since 2021.Source:CBUAE Figure 3.12:Balance Sheet Structure of Takaful Insurance Companies(AED MILLION)Figure 3.13:Profitability by Takaful Insurance Companies(AED MILLION)UAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|34AED 215 BillionAmount of suku

191、k outstanding by H1 2023.UAE share of globalsukuk issuance in H1 202310%38 45 22 24 29 18 23 13 15 17-5022H1 2023Number of Sukuk IssuedSukuk Issuance Amount(AED Billion)Sukuk Issuance Amount(AEDBillion)Number of Sukuk IssuedSource:LSEG Workspace PlatformFigure

192、3.14:Sukuk Issuance in the UAESukukSukuk issuance in the UAE sees strong growth in first half of 2023:The UAE is the worlds fourth largest market in term of sukuk issuance and outstanding,according to LSEG data,supported by the presence of its Islamic financial institutions.The UAE saw more active s

193、ukuk issuance in the first half of 2023 than in each of the full years 2021 and 2022.Issuance reached AED 28.7 billion in the first half of 2023,compared with AED 24.6 billion over the whole of 2022.Sukuk outstanding grew 15%from AED 187.0 billion in 2022 to AED 215.24 billion in the first half of 2

194、023.The Government of Sharjah issued the highest amount of sukuk over the past five years,followed by Dubai Islamic Bank and Abu Dhabi Islamic Bank.Collectively,these three entities accounted for 74%of total sukuk issuance in the UAE.UAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|3587134

195、151981218-36 612384115 1816-1-1-0022H1 2023UAE DirhamUS DollarOther Currencies-10 20 30 40 5020022H1 2023 Sovereign Financial Institutions Other Corporate Quasi-SovereignDomestic sukuk issuance gaining traction with introduction of UAE Treasury sukuk:Most

196、of the UAEs sukuk issuance over the past five years has been in US dollars.However,locally denominated issues are growing in popularity.One reason for this is the debut issuance of a local-currency Treasury sukuk,in the second quarter of 2023,by the Federal Government with approval from the HSA.The

197、domestic dirham-denominated sukuk aimed to diversify funding structures while supporting growth of the local Islamic capital markets through the development of its mid-term yield curve.The issues were in 3,5 and 10-year tranches.Other issuers of AED sukuk during the first half of 2023 included Emira

198、tes Islamic Bank(EIB),which was the first bank in the UAE to issue a local-currency sukuk.Other currencies in which UAE-issued sukuk have been denominated over the past five years include the Malaysian ringgit,Kuwaiti dinar,and Saudi riyal.Corporate and sovereign issuers are both active in the UAE.C

199、orporate issuers in the past five years have been mostly banks,both conventional and Islamic.Active corporates from other sectors include business conglomerate,logistics,airlines,and real estate development.Source:LSEG Workspace Platform Figure 3.15:Sukuk Issuance in the UAE by Currency(AED BILLION)

200、Figure 3.16:Sukuk Issuance in the UAE by Issuer Type(AED BILLION)AEDAEDAEDCHAPTER THREE:SUSTAINABILITY DEVELOPMENTS AND INITIATIVES IN THE UAEUAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|37Sustainability Agenda by the Government of the UAESustainability is embedded within the UAE gover

201、nment agenda:The primary governmental framework for sustainable finance in the UAE is the Ministry of Climate Change and Environments(MOCCAE)Sustainable Finance Framework 2021-2031.The Framework includes three pillars:mainstreaming sustainability in financial decision-making;enhancing the supply and

202、 demand of sustainable finance products;and strengthening the enabling environment for sustainable finance practices.This strategy interlinks with the UAE Green Agenda 2015-2030,the National Climate Change Plan of the UAE 2017-2050,and the UAE Net Zero by 2050 strategic initiative.Source:UAE Sustain

203、able Finance Framework 2021-2031Figure 4.1MOCCAEs UAE Sustainable Finance FrameworkPillar 1:Mainstream sustainability in financial decision-making and risk management y Embed sustainability in policies,legislation and directives y Supervisory oversight of climate-related risks by existing supervisor

204、y authorities y Regulatory guidelines relating to ESG-and climate-related risk exposures y Environmental stress-testing tools y Standardised guidance on ESG-and climate-related disclosures in line with TCFDPillar 2:Enhance supply and demand for sustainable finance products and green investment proje

205、cts y Establish a nation-wide,common taxonomy for sustainable finance y Incentives for green finance including tax,refinance schemes,guarantees,and other risk-sharing instruments y Incentivise financial institution by development of green finance products y Assess readiness for sovereign green bonds

206、 y Develop climate and green investment product pipeline and support implementation of pilot projectsPillar 3:Strengthen enabling environment for promoting sustainable finance practices y Forge partnerships for research and development of green finance,technology and innovation y Skills development

207、in sustainable finance for next generation of financial professionals y Accreditation schemes for sustainable finance training programmes,with incentives for professionals and project developers y Promote entrepreneurship and innovation through concessional funding,venture capital,grants,and technic

208、al assistanceUAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|3820223 y Guiding Principles on Sustainable Finance adopted as voluntary guidelines for the development of policies to encourage financial institutions to incorporate ESG in their business decision-making and risk fra

209、meworks,and to identify new opportunities.y Recognition of the importance of sustainability taxonomies and referencing several international taxonomies and processes relevant to capital markets issuance.y Explicit incorporation of considerations relating to Islamic finance for financial institutions

210、,investors and issuers with specific reference to AAOIFI accounting and Shariah standards in the Guiding Principles on Sustainable Finance.y SFWG issues its first high-level statement on sustainable finance following national announcement of 2050 Net Zero ambition.y The high-level statement outlines

211、 a roadmap to progress the Guiding Principles via the three key deliverables:examining sustainability disclosure standards in the UAE,with a view to promoting standards aligned with best practice,reviewing corporate governance practices and helping embed sustainability in them;and agreeing to develo

212、p a UAE taxonomy of sustainable activities.y Reiteration of the roadmap to implement the Guiding Principles on Sustainable Finance and progress update on the three workstreams relating to ESG disclosure,sustainability-focused corporate governance,and designing the UAE Sustainable Finance Taxonomy.y

213、Extensive benchmarking and fact-gathering exercises of best practice from regulators,international organisations,industry standards-setting bodies.This included developments at the Basel Committee on Banking Supervision,International Sustainability Standards Board,and IOSCO,as well as the G20 Sustai

214、nable Finance Roadmap.y The SFWG issues the“Principles for the Effective Management of Climate-related Financial Risks”,which are designed to apply to all UAE-based financial services firms.y HSA produces guiding principles regarding sustainable Islamic financial institutions.y The UAE Banking Feder

215、ation forms the Steering Committee on Islamic finance to define a unified vision on sustainability for Islamic financial institutions.UAE declares 2023 Year of Sustainability:As host of the COP 28 climate conference,the UAE government has declared 2023 as the Year of Sustainability,with the country

216、drawing on its heritage and the legacy of its Founding President,the late Sheikh Zayed bin Sultan Al Nahyan,to promote sustainability practices under the theme of Today for Tomorrow.The aim of the Year of Sustainability is to make a positive impact to ongoing work in this area through initiatives in

217、volving both the public and private sectors.It aims to build awareness across the three themes of sustainable consumption,conservation,and climate action.This will be promoted through media campaigns and the release of a Sustainability Guide by the Sustainability Experts Network for individuals and

218、businesses wishing to play their part in wider sustainability goals.UAE Sustainable Finance Working Group advancing sustainability in capital markets:The Sustainable Finance Working Group(SFWG)was established in 2019 to bring together a core group of UAE authorities support the development of sustai

219、nable finance and facilitate regulatory cooperation on frameworks that can enable the financial institutions to deliver on identified needs in this area.Its work follows national policies relating to sustainability,the green agenda,action on climate change,and the Net Zero by 2050 strategic initiati

220、ve.The SFWG now includes representatives of the CBUAE,SCA,ADGM,DIFC,the Ministries of Finance and Economy,and the UAEs Special Envoy for Climate Change.The working group also includes the Abu Dhabi Exchange,Dubai Financial Market and Nasdaq Dubai.The SFWGs first deliverable was its Guiding Principle

221、s on Sustainable Finance.These were complemented by two public statements that covered three specific deliverables for the Working Group relating to the consistency of ESG disclosure;strengthening corporate governance to support the sustainability agenda,and the development of the UAE taxonomy of su

222、stainable activities.Figure 4.2UAE Sustainable Finance MilestonesUAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|39The SFWG launched the Principles for the Effective Management of Climate-related Financial Risks in November 2023.The Principles constitute a declaration of common understand

223、ing among the SFWG members,including the CBUAEs and the other financial sector regulatory bodies in the UAE,on the minimum expectations for the management of climate-related financial risks by financial sector institutions operating in the UAE.The Principles set the expectations for governance and r

224、isk management of climate-related financial risks,and firms will be expected to establish and maintain appropriate oversight and allocation of responsibilities for these risks,and integrate them within the processes and systems for strategy-setting,risk management framework,capital and liquidity pla

225、nning,and scenario analysis exercises.The Principles currently apply to all banks and insurance companies within the CBUAEs purview,including Islamic banks and takaful insurance companies.Other parties have also been implementing steps to progress sustainability within the domains they oversee,such

226、as SCA in capital markets.The SCAs sustainable capital markets initiative,which follows the Master Plan for Sustainable Capital Markets issued in 2019,seeks to enhance sustainability disclosures and the use of ESG considerations within risk management and decision-making processes in order to improv

227、e capital allocations.The DFSA has also provided market guidance on ESG capital markets products and disclosures using a voluntary approach to drive adoption of best practice.The guidance is supported by DFSAs rules concerning deceptive marketing practices such as greenwashing.The Financial Services

228、 Regulatory Authority at ADGM has issued regulations in 2023 which cover requirements for investment funds and capital markets issuance,including for green,social,sustainability,and sustainability-linked(GSSS)bonds and sukuk.Securities and Commodities Authority(SCA)Dubai Financial Services Authority

229、(DFSA)ADGMs Financial Services Regulatory Authority(FSRA)Sustainable Capital Markets Plan 2019 y Taxonomy y Legal framework y Market platform and investment instruments y Corporate governance y DisclosureDFSA Best Practice Guidelines on ESG Bonds y ESG bond guidelines y Additional guidelines for sus

230、tainability-linked bondsSustainable Finance Regulatory Framework y Green and Climate Transition funds label y Green and Climate Transition portfolio y Requirements for green,social,sustainability and sustainability-linked debentures and sukukTable 4.1Initiatives on Sustainability by Regulatory Autho

231、rities in the UAE*The CBUAEs sustainability initiatives are covered on the following pageUAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|40Central Bank of the UAE Sustainability AgendaSustainability and sustainable finance commitments implemented by the CBUAE:The CBUAE in 2021 produced a

232、new strategic plan for the years 2023-2026 that incorporate sustainability as one of five strategic focus areas.The CBUAE also undertook a range of operational sustainability initiatives to reduce its own environmental footprint and to practise sustainability as an employer.It also took proactive st

233、eps during the 2023 HSAs annual meeting to highlight the importance of sustainable finance,which served as a prelude to the guidelines issued by the HSA to Islamic financial institutions.The CBUAE added green and sustainable financial assets as eligible reserve assets in its own investment policy an

234、d holds ESG financial assets as part of the capital market tranche of its reserve portfolio.It began conducting climate risk-risk stress-testing and scenario analysis.The CBUAE also commenced with the supervision of climate-related financial risks in banks and insurance companies.The CBUAE promotes

235、green and sustainable finance in the UAE,advances Islamic sustainable finance,and conducts in-depth surveillance of sustainability factors in financial markets and institutions.The CBUAE is a member of the Network for Greening the Financial System(NGFS),a network of central banks and financial super

236、visory bodies that advocates a more sustainable financial system.Embed sustainability criteria in reserve managementSupport digitalisation in the financial systemInternal sustainability transformationCommenced supervision of climate-related financial risksIn-depth surveillance of sustainability fact

237、ors within financial industryIssued Principles for the Effective Management of Climate-Related Financial RisksAdvancing Islamic sustainable financeConducting climate risk stress testFigure 4.3Selected CBUAE Initiatives on Sustainability and Sustainable Finance UAESource:CBUAEUAE ISLAMIC FINANCE REPO

238、RT 2023:The Year of Sustainability|41HSAs Shariah-based approach to sustainable finance:The regulatory approach of Islamic financial institutions has been largely characterised by treating them on an equal footing with conventional financial institutions while increasing consistency within the Shari

239、ah governance process through the HSA.The HSA is the main body within the UAE tasked with providing a consistent Shariah governance framework and providing Shariah rules for Islamic financial institutions operations that are supervised under the CBUAE.The HSA has also issued guidelines for decision-

240、making processes that embody sustainability considerations.The supervisory structure for Shariah governance in Islamic finance is extensive and well established.Islamic finance has had decades of development in relation to standardisation,regulation,and ecosystem development,starting with the format

241、ion of AAOIFI in 1990.Governance structures have been designed to ensure compliance of all of an institutions operations with Shariah.To the extent that this responsibility includes sustainability,ISSCs must include sustainability aspects in their decision making by applying Shariah legal maxims tha

242、t weigh harm and benefits and by taking into consideration the consequences of financing projects.In addition,although it does not provide oversight for all financial institutions activities,the HSA has required that sustainable financial activities should be segregated from other assets in order to

243、 provide greater transparency and lessen the possibilities of greenwashing.UAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|42Sustainable Finance and Sustainability at Islamic Financial Institutions in the UAE:Sustainable capital markets in the UAE have grown rapidly since the debut of the

244、 first green sukuk issuance in 2019.The market has expanded and diversified as businesses recognise the opportunities such instruments present,particularly within the Islamic capital markets.Along with a growing number of issuers,there has been an array of new types of issuance such as green sukuk,s

245、ustainability sukuk,sustainability-linked loans and Islamic financing,as well as transition sukuk.Much of the development in Islamic capital markets follows the introduction of international guidelines and principles covering green,social,sustainable and sustainability-linked(GSSS)issuance.Added to

246、this are localised guidelines such as the UAE taxonomy of sustainable activities to be delivered by the SFWG.Alignment with international guidance such as Green Bond Principles by the International Capital Market Association will result in greater mobilisation of financial resources for companies an

247、d projects that are not only Shariah-compliant but also have positive impact on the environment and society.The international guidance,principles and frameworks reduce market friction and increase the ability of issuers and their advisors to mobilise funding internationally,including from dedicated

248、green or sustainable investors who do not typically invest in sukuk.327-272 163 204 272 30%12%9%30%0%5%10%15%20%25%30%35%-0500600201920202022H1 2023Share of Global ESG Sukuk Issuance(%)ESG Sukuk Issuance(AED Million)GreenSukukOther ESG SukukShare of Global ESGSukuk IssuanceFigure 4.4UAE E

249、SG Sukuk(Issuance and Arrangement)2022AED 218 Million124H1 2023AED 413 Million287Proceeds Amount+Over-allotment Sold Market Share of Total Proceeds(%)Number of UAE-based Managing Underwriters12 2428 87UAE-based Lead Arrangers for International ESG Sukuk*The table covers UAE-based banks arranging for

250、 ESG sukuk which include arrangements for sukuk issued by local and foreign issuers that are not based in the UAE.Amount of ESG SukukOutstanding by H1 2023AED 1,239 Million UAEs Share of Global ESGSukuk Outstanding in H1 202315%Source:LSEG Workspace PlatformCHAPTER FOUR:OUTLOOK ON SUSTAINABILITY ADO

251、PTION BY ISLAMIC FINANCIAL INSTITUTIONS IN THE UAEUAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|44This chapter covers the UAE Islamic Finance Sustainability Survey.It has been developed to assess the strategies,practices and outlook for sustainability within the Islamic financial system

252、 of the UAE.The responses were collected and aggregated to build a broad market perspective.The survey covers responses by Islamic financial institutions consisting of both Islamic banks and Islamic banking windows,whether of domestic or foreign banks.The survey also sought input from Islamic financ

253、e companies on their ESG and sustainability strategies.Meanwhile,similar information from takaful insurance companies was collected as part of the UAE Takaful Sustainability Survey presented in the CBUAE Takaful Insurance Report 2022The survey was conducted in the third quarter of 2023 by the CBUAE.

254、Responses were collected from 19 Islamic banking institutions,six Islamic banks,and 13 conventional banks with Islamic windows.Five Islamic finance companies also participated.The survey covers a number of areas considered key for sustainability development by Islamic financial institutions in the U

255、AE:y Sustainability Strategy and Governance y Sustainability/ESG Criteria y Sustainability Roadmap y Sustainability Financial Goals y Sustainability in Product Offerings y Opportunities and Challenges in Implementing Sustainability y Sustainability DisclosuresThe CBUAE requires Islamic financial ins

256、titutions to adhere to the highest degree of disclosure and transparency regarding the sustainability and ESG standards they adopt.However,adopting a particular sustainability or ESG standard is the responsibility of Islamic financial institutions and the CBUAE does not interfere in their choices as

257、 long as they disclose them in a transparent manner to their clients.Outlook on Sustainability Adoption by Islamic Financial Institutions in the UAEUAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|4579%Share of Islamic banks and Islamic windows with a sustainability strategy or approach74%

258、Share of Islamic banks and Islamic windows with board approval for their sustainability strategyConduct sustainability awareness capacity-building sessionsImplement an ESG impact-based risk assessment framework for financing and investment decision-making68%68%Make a clear priority for sustainabilit

259、y in bank budgets37%All full-fledged Islamic banks in the UAE have sustainability strategies:A survey of the UAE Islamic banking sector,covering local and foreign full-fledged Islamic banks and Islamic banking windows of conventional banks,revealed that 79%have a sustainability strategy,while 74%rep

260、orted that their strategy has been approved at the board level.All of the Islamic banks said they have sustainability strategies in place,however this was not the case for conventional banks with Islamic windows,where some strategies were under development or waiting to be formalised for publication

261、 in the coming year.In addition,more than half of respondents said they were conducting sustainability awareness campaigns or implementing an ESG risk-assessment framework.Also,37%of respondents said they have a dedicated budget for sustainability,although this proportion drops to 17%when considerin

262、g Islamic banks only.Figure 5.1:Sustainability StrategyFigure 5.2:Directions to Strengthen Sustainability Strategy and GovernanceSustainability Strategy and GovernanceUAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|46The role of governance bodies in overseeing and enabling sustainability:

263、Although ultimate responsibility and oversight for sustainability lies with boards of directors,79%of the Islamic banking entities in the survey indicated that executive committees and senior management are a vital part of ensuring implementation of banks sustainability strategies while 74%have indi

264、cated that the board of directors is part of the main parties responsible for this.Driving sustainability can take the form of building awareness or of improving the integration of sustainability within business functions.One mechanism used by boards is to devise a multi-year ESG plan with their str

265、ategy committees,under which objectives are set out and updates on material developments are provided on a quarterly basis.The survey showed that 63%of Islamic banks and Islamic windows look to their risk management committees to incorporate ESG within their enterprise risk management frameworks.Som

266、e Islamic banks also reported having both a sustainability committee and a sustainability officer.Figure 5.3:Main Parties Responsible for Driving Sustainability Strategy79%74%68%63%63%Executive CommitteeBoard of DirectorsSenior ManagementSustainability OfficerRisk Management CommitteeUAE ISLAMIC FIN

267、ANCE REPORT 2023:The Year of Sustainability|47Environmental considerations given priority by Islamic financial institutions:The UAE Islamic banking sector considers ESG criteria in its strategies,with resource management such as energy efficiency,water consumption,and waste management cited as the m

268、ost widely adopted Environmental criteria.These criteria are considered by all fully-fledged Islamic banks with respect to the efficiency of their business operations.Social and Governance criteria,which are covered by 100%of Islamic banks,focus on human capital development,charity,product quality a

269、nd marketing,financial inclusion,board independence and diversity,data privacy,and customer relationship management.Other criteria considered by Islamic banks and Islamic windows include transparency,accountability and reporting under Governance;green building standards under Environmental;and finan

270、cial literacy and attention to special needs under Social.Sustainability and ESG Criteria Figure 5.4:Selected ESG Criteria by Islamic Banking Sector ESG StrategiesEnvironmentalSocialGovernance95%Resource Management89%Human Capital Development 89%Data PrivacyOther Criteria84%21%16%Climate Changeand E

271、missionsOtherFood Security89%84%79%63%32%26%Financial InclusionEmiratisationCharity andPhilanthropyProduct Qualityand MarketingAffordable HousingOther79%79%74%16%Customer Relationship ManagementCybersecurity and InformationSecurityBoard Independence and DiversityOtherMostSelectedCriteriaEnvironmenta

272、lSocialGovernanceMMMo os s stS Se ele e ect t ted d d dC Cr rit ter r riaO Ot the e er C Crit ter r ria aUAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|48Risk management and compliance are chief drivers of sustainability:Most Islamic banks and Islamic windows reported that regulatory req

273、uirements and risk management are the key drivers of their sustainability agenda.These drivers are followed by the desire to meet consumer demand and ensure alignment with Shariah principles.The latter factor was cited by 67%of full-fledged Islamic banks.In terms of policy considerations for impleme

274、nting ESG,79%of Islamic banks and Islamic windows identify ESG issues such as emissions by their borrowers in their financing and investment models in a way that is sector-or country-specific.In addition,63%of respondents have considered UN Sustainable Development Goals in their sustainability frame

275、works.For Islamic banks,this proportion rises to 83%.However,there is room for greater incorporation of metrics in policies.Only 53%of the Islamic banking sector discloses ESG portfolio metrics and just 37%use ESG impact-measured metrics of their product offerings when making decisions.Sustainabilit

276、y RoadmapRegulatory RequirementRisk ManagementConsumer Demand and Market GrowthAlignment with Shariah PrinciplesOperational BenefitsOther74%74%68%53%42%37%21%5%Top Management InterestReputational Benefits79%Take sector-or country-specific approach to identifying ESG issues37%Have impact-measured met

277、rics for decision-making63%Consider UN Sustainable Development Goals53%Disclose ESG portfolio metrics Figure 5.5:Key Driving Force in Embracing the Sustainability Agenda in the Islamic Banking SectorFigure 5.6:ESG Policy Considerations for Islamic Banking SectorUAE ISLAMIC FINANCE REPORT 2023:The Ye

278、ar of Sustainability|49Over half of Islamic banks have made funds available for sustainability uses:Looking ahead,58%of Islamic banks and Islamic windows have specified funds dedicated to sustainability in their medium-term plans.Of these institutions,83%of full-fledged Islamic banks have made such

279、commitments.Also,53%of Islamic banks and Islamic windows apportion a defined share of their assets for sustainability.This increases to 83%for full-fledged Islamic banks.Most UAE Islamic banks plan to allocate up to a 5%of their assets to sustainability linked projects within the next 3-5 years.Sust

280、ainability Financial GoalsFigure 5.7:Planned Financial Commitment to Sustainability by Islamic Banking Sector in the Coming 3-5 Years 58%Plan to commitspecified funds58 8%Plan to commitspecified funds53%Target a certain percentageof assets to be sustainablePlanned Specified FundsAboveAED 20 Billion1

281、4%AED 1 to 3Billion15%AED 3 to 5Billion14%AED 5 to 10Billion57%Percentage of Assets to be SustainableLess than 2%12%2%to 5%38%5%to 10%25%10%to 15%25%UAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|5089%68%68%68%47%16%Financing ActivitiesInvestment ActivitiesCredit AssessmentProduct Develo

282、pmentDeposit OfferingsOther63%58%21%21%Green FinancingSocial FinancingSustainability-linked Deposit ProductOther Sustainable Financing ProductsSustainable products offered by the Islamic banking sector are mostly in financing activities:By product offering in the Islamic banking sector,89%of banks t

283、ake into account sustainability considerations in their financing activities while 100%of full-fledged Islamic banks do the same.For instance,some Islamic banks indicated that they are developing an ESG Due Diligence Toolkit to be used by credit,wholesale banking and investment business lines to ass

284、ess the ESG performance of projects.Most of the Islamic finance banks offer green products such as electric and hybrid vehicle financing,home financing that can be discounted for green-certified properties,green sukuk,or sustainability-linked financing,which is an arrangement where the borrowers cos

285、ts are tied to the borrower meeting a certain set of green targets.The second-most chosen sustainable finance product offering is financing to SMEs,which could be in the form of working capital,small business financing,or financing for female entrepreneurs.Other sustainable products include social f

286、inancing in the form of government housing schemes,liability settlement financing,education,and Qard al Hasan financing.As for sustainability-linked deposits,these can be in the form of accounts used for sustainable projects aligned with a banks sustainability framework.Other sustainable financing p

287、roducts include carbon trading and carbon derivatives.Sustainability in Product Offerings Figure 5.8:Product Offerings with Sustainability ConsiderationsFigure 5.9:Sustainable Finance Product OfferingsUAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|51Data is the biggest challenge for UAEs

288、 Islamic banking sector:Most of the banks operating within the UAEs Islamic banking sector cite Board and management support as the chief enabler of sustainability.Other enablers highlighted by a smaller number of banks include support from the UAE Banks Federation and internal Shariah departments.A

289、vailability of data and measurement is both the second-most important enabler and,where there is a lack of such data,the biggest challenge to enabling sustainability.As we have seen,few banks are incorporating metric-driven considerations within their policies.Another challenge,although reported by

290、a smaller number of banks,is conflicting internal policies.Opportunities and Challenges in Implementing Sustainability Figure 5.10:Opportunities and Challenges in Implementing Sustainability by Islamic Banking SectorEnablersChallengesTop Selection79%Management Support74%Lack of Suitable or Poor ESG

291、DataOthers74%63%32%32%26%Data and MeasurementRegulatory SupportTechnologyStrategic PartnershipsTalent58%58%37%16%16%Slow Adoption/Awareness ofESG Agenda inWider SocietyLimitedBudget Associatedwith Achieving OutcomeLackof CommonSustainability StandardsShortage of ExpertiseLackof Regulatory SupportT T

292、op pS Se ele e ect tion n n nO Ot th he ersUAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|52Majority of Islamic banks align disclosure with internationally recognised ESG reporting frameworks:85%of banks in the UAE Islamic banking sector report their sustainability activities.These banks

293、 either produce a separate sustainability report,include sustainability reporting in their annual financial reports,or do both.Sustainability reports by Islamic banks for 2022 included sections covering initiatives towards governance,customers,employees,and the wider community.In addition,79%of Isla

294、mic banks and Islamic windows align their reporting with internationally recognised ESG reporting frameworks such as Global Reporting Initiative(GRI)standards.All Islamic banks surveyed follow this method,though fewer Islamic banking windows.Some of the Islamic banks include in their sustainability

295、reports an appendix covering a GRI table of information or GRI Content Index,which lists all applicable GRI standards and where this information is covered in the reportSustainability Disclosures Figure 5.11:Disclosure of Sustainability Activities53%16%16%16%0%10%20%30%40%50%60%Published as aSeparat

296、e Sustainability ReportPublished as aSection withinAnnual ReportBoth(Separateandas a Section)Not DisclosedConfirm their reporting is aligned with internationallyrecognised ESG reporting framework or standard79%.UAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|53UAE takaful markets approach

297、 towards incorporating sustainability:Takaful is not unique among forms of insurance that can benefit from a developed approach to sustainability and climate risk.The CBUAE has been assessing the types of climate-related risks that could affect both conventional and takaful insurers.In 2022,the CBUA

298、E surveyed nine takaful insurance companies on their sustainability practices and found significant progress had been made across a number of areas,although more work remains to be done to deal with market challenges.Seven takaful insurance companies said they had a sustainability strategy and of th

299、ose,four had been approved by the Board.The survey also showed seven companies had sustainability disclosure policies,with most such reporting included as a section within their annual reports.Five of the takaful insurance companies surveyed already integrated ESG into their investment operations an

300、d underwriting processes,while two were preparing to do so.Many institutions are now able to incorporate ESG,including climate-related risks,into their core operations in certain ways,but they still face challenges stemming from the lack of sustainability guidelines specific to the takaful business

301、model.Takaful Insurance Companies Figure 5.12:UAE Takaful Sustainability Survey Insights Sustainability Strategies by Takaful CompaniesSustainability Disclosure by Takaful Operators4732Relevant StrategyApproved by BoardHave Sustainability/ESG StrategyYesNo552222UnderwritingInvestmentYesNo,notin the

302、planNo,but it is planned612Yes,it ispublished as a section under theannual reportYes,it is published as a separate reportNo,the reporting is notmature enoughto be communicated externallySustainability Criteria Consideration in OperationsSource:CBUAE Takaful Insurance Report 2022.To read the report:V

303、isit:CBUAE|Takaful Insurance Report 2022(centralbank.ae)UAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|54Islamic finance companies approaches for sustainability:The survey reveals that fewer Islamic finance companies based in the UAE have sustainability agendas than do Islamic banks and

304、Islamic windows.These companies rely on senior management and their boards of directors to drive sustainability,but none has appointed a specific sustainability officer.Islamic finance companies sustainable products mostly comprise financing channelled to SMEs such as financing related to solar powe

305、r and energy projects dedicated for SMEs.Compared to banks,a lower percentage40%-of Islamic finance companies said they published separate sustainability reports and 20%included sustainability reporting within their annual reports.Islamic Finance Companies Figure 5.13:Sustainability Survey Results f

306、or Islamic Finance Companies 60%share of Islamic finance companies have sustainability strategy or approach60%have their sustainability strategy approved by their board60%have committed funds on sustainability and a targeted share within next 35 yearsSenior managementBoard of directorsRisk managemen

307、t committeeHuman resources departmentTechnologyManagement supportStrategic partnershipsSlow adoption/awareness of ESG agenda in wider societyConflicting internal prioritiesLack of common sustainability standardsLeading Selected ESG CriteriaResourceManagementHuman CapitalDevelopmentCustomer Relations

308、hip ManagementCybersecurity and Information SecurityEmiratisationData PrivacyChief Parties Responsible for DrivingSustainability StrategyLeading EnablersMain ChallengesUAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|55Figure Appendix Figure 1.1Global Islamic Finance Assets in 2022(Page 8)

309、Figure 1.2Global Islamic Finance Assets Growth(Page 8)Figure 1.3Islamic Finance Landscape in the UAE(Page 9)Figure 1.4Number of Sustainable Finance Policy Measures and Regulations(Page 10)Figure 1.5Global ESG Sukuk Issuance(Page 12 2)Figure 1.6Summary of the Guiding Principles Regarding Sustainabili

310、ty in Islamic Financial Institutions(Page 13)Figure 2.1UAE Islamic Finance Key Milestones(Page 15)Figure 2.2Human Capital Considerations by Islamic Financial Institutions(Page 21)Figure 2.3Initiatives by Islamic Financial Institutions to Champion Emiratisation(Page 22)Figure 2.4Customer Service-Rela

311、ted Digital Initiatives Reported by Islamic Banks in the UAE in 2022(Page 23)Figure 3.1Islamic Banking Assets(Page 25)Figure 3.2Islamic Banking in the UAE Snapshot(Page 25)Figure 3.3Financing Extended by Islamic Banking(Page 26)Figure 3.4Deposits in Islamic Banking(Page 27)Figure 3.5Investments by I

312、slamic Banking Sector(Page 28)Figure 3.6Key Financial Stability Metrics for Islamic Banking in the UAE(Page 29)Figure 3.7Takaful Growth in the UAE(Page 30)Figure 3.8Gross Written Contribution by Type of Business(Page 31)Figure 3.9Net Written Contribution by Type of Business(Page 31)Figure 3.10Gross

313、Written Paid Claims by Type of Business(Page 32)Figure 3.11Net Paid Claims by Type of Business(Page 32)Figure 3.12Balance Sheet Structure of Takaful Insurance Companies(Page 33)Figure 3.13Profitability by Takaful Insurance Companies(Page 33)Figure 3.14Sukuk Issuance in the UAE(Page 34)Figure 3.15Suk

314、uk Issuance in the UAE by Currency(Page 35)Figure 3.16Sukuk Issuance in the UAE by Issuer Type(Page 35)Figure 4.1MOCCAEs UAE Sustainable Finance Framework(Page 37)Figure 4.2UAE Sustainable Finance Milestones(Page 38)Figure 4.3Selected CBUAE Initiatives on Sustainability and Sustainable Finance UAE(P

315、age 40 0)Figure 4.4UAE ESG Sukuk(Issuance and Arrangement)(Page 42)Figure 5.1Sustainability Strategy(Page 45)Figure 5.2Directions to Strengthen Sustainability Strategy and Governance(Page 45)Figure 5.3Main Parties Responsible for Driving Sustainability Strategy(Page 46)Figure 5.4Selected ESG Criteri

316、a by Islamic Banking Sector Strategies ESG(Page 47)Figure 5.5Key Driving Force in Embracing Sustainability Agenda(in the Islamic Banking Sector)(Page 48)Figure 5.6ESG Policy Considerations for Islamic Banking Sector(Page 48)Figure 5.7Planned Financial Commitment to Sustainability by Islamic Banking

317、Sector in the Coming 3-5 Years(Page 49)Figure 5.8Product Offerings with Sustainability Considerations(Page 50)Figure 5.9Sustainable Finance Product Offerings(Page 50)Figure 5.10Opportunities and Challenges in Implementing Sustainability by Islamic Banking Sector(Page 51)Figure 5.11Disclosure of Sust

318、ainability Activities(Page 52)Figure 5.12UAE Takaful Sustainability Survey Insights(Page 53)UAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|56Table Appendix Table 2.1Milestones in the UAEs Regulatory Journey for Islamic Finance(Page 16)Table 2.2Islamic Finance Regulators in the UAE(Page 1

319、6)Table 2.3Islamic Finance Areas Covered by Federal Law 50 of 2022(Page 17)Table 2.4Shariah Governance Key Milestones(Page 18)Table 2.5UAEs Shariah Governance Landscape in 2022(Page 18)Table 2.6Comprehensive Shariah Governance Standards and Resolutions by HSA(Page 18)Table 2.7Number of CBUAE Regulat

320、ions(Page 19)Table 2.8Number of Regulations Issued by Other Regulatory Authorities(Page 19)Table 2.9AAOIFI and IFSBs Contribution to Islamic Sustainable Finance(Page 20)Table 2.10Training and Development by Islamic Financial Institutions in the UAE in 2022(Page 21)Table 2.11Employment in Islamic Fin

321、ancial Institutions(Page 22)Table 2.12Employment in Shariah Control and Shariah Audit Departments in UAE-Based Islamic Banks(Page 22)Table 4.1Initiatives on Sustainability by Regulatory Authorities in the UAE(Page 39)UAE ISLAMIC FINANCE REPORT 2023:The Year of Sustainability|57References ADGM(2023,J

322、uly)Supplementary Guidance Sustainable Finance Regulatory Framework Retrieved September 15,2023,from ADGM:https:/ Annual Report of Central Bank of the UAE Retrieved September 15,2023,from CBUAE:https:/wwwcentralbankae/media/lo1hqqbj/cbuae-annual-report_2022_a4_epdfCBUAE(2023,February)Takaful Insuran

323、ce Report 2022 Retrieved September 15,2023,from CBUAE:https:/wwwcentralbankae/en/news-and-publications/publications/cbuae-annual-reports/takaful-insurance-report-2022/CBUAE and ADGM(2020,January 16)CBUAE joins landmark Working Group and commits to UAEs Guiding Principles on Sustainable Finance Retri

324、eved September 15,2023,from CBUAE:https:/wwwcentralbankae/media/a4wciu4w/cbuae-commits-to-uae-guiding-principles-16jan2020pdfCBUAE and ADGM(2022,November 9)The UAE Sustainable Finance Working Group Issues Second Public Statement Retrieved September 15,2023,from CBUAE:https:/www.centralbank.ae/media/

325、amdbolcy/20221109-uae-regulators-and-exchanges-issue-second-public-statement-on-sustainable-finance-eng.pdfDFSA(2022,November)DFSA Best Practice Guidelines on ESG Bonds Retrieved September 15,2023,from DFSA:https:/365343652932-web-server-storage.s3.eu-west- Sustainable Finance Framwork 2021-2031 Ret

326、rieved September 15,2023,from MOCCAE:https:/wwwmoccaegovae/assets/24b84d14/UAE_Sustainable_framework_21pdfaspxSCA(2019,January)The Securities&Commodities Authority Master Plan for Sustainable Capital Markets Retrieved September 15,2023,from SCA:https:/www.sca.gov.ae/Content/Userfiles/Assets/Document

327、s/29e6ef1d.pdfSFWG(2021,November 5)UAE regulators and exchanges issue High-Level Statement on Sustainable Finance to advance national net-zero goal Retrieved September 15,2023,from CBUAE:https:/www.centralbank.ae/media/5shftpwe/sfwg_high-level-statement-on-sustainable-finance_press-release_eng.pdfUA

328、Es Ministry of Economy(2022,October 3)Federal Decree-Law No 50/2022:Issuing the Commercial Transactions Law Retrieved September 15,2023,from UAEs Ministry of Economy:https:/wwwmoecgovae/documents/20121/0/DecreeLaw_50_2022_pdfpdf/d34d9209-b407-6e73-9acb-3b01522e94e6?t=87UAE ISLAMIC FINANCE REPORT 2023THE YEAR OF SUSTAINABILITY