This article first appeared in The Edge Malaysia Weekly on July 15, 2024 - July 21, 2024

Ficus Capital, in collaboration with INCEIF University, has released an ESG-i framework, which combines ESG and Islamic principles, for micro, small and medium enterprises (MSMEs) that are looking to expand into a bigger market and seeking investments to grow their businesses.

Abdullah Hidayat Mohamad, co-founder and managing partner of Ficus Capital, says companies with better governance tend to be more sustainable and perform well, and that there is a big overlap between shariah and ESG principles.

Ficus Capital is a Malaysian venture capital firm that focuses on the convergence of Islamic and ESG values.

“If you are able to take care of the environment and social [aspect of your business], you will have more opportunities to [expand to new] markets to sell your product and services,” says Abdullah Hidayat.

The framework revolves around the quadruple bottom line (QBL) concept that consists of four pillars: people, planet, profit and principle.

“Under [the] principle [pillar] is where we look into governance issues, as well as the most important aspects of shariah principles,” says Marjan Muhammad, director of research quality assurance and publications of ISRA research management centre at INCEIF University.

MSMEs that would like to gauge where they stand in terms of their ESG-i compliance can visit the portal to take an assessment to identify areas of improvement. After answering questions centred on the QBL, a report will be sent to the registered email, detailing the scores for each pillar.

Based on the scoring, the company will be placed into one of four categories that reflects its current practices. For a report with more in-depth information, a fee is required to access the package.

The questionnaire has been made simple to understand. This is the result of INCEIF University’s efforts to strike a balance for MSMEs that may be unfamiliar with the concept of ESG.

“If only 3% of SMEs were previously aware of, or used, ESG in their practices, we hope that this framework will increase the percentage in terms of their readiness and sustainability practices,” says Marjan.

This is only the starting point of the framework, as the two parties plan to dive deeper into other aspects.

“We’re working with many Islamic financial institutions to develop this [framework] with more data,” says Abdullah Hidayat.

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