Ramesh Kana Chairman of the UN Global Compact for Malaysia and Brunei talks to Crescent Leaders about the underlying connection between sustainability and Shariah ethical framework.
Could you tell us a bit more about your career path thus far and your quest for freedom to put pursue sustainability first?
I grew up in a very average, middle class household - Sri Lankan Tamil descendants, born in Malaysia, and it was a different world. You wasted nothing, you recycled everything, and I don't think it was peculiar to my culture. I think it happened all over the world. We didn't waste, we used things, and we recycled them. Subconsciously it was a way of life, it was just how people lived.
Then we all developed a sort of throwaway kind of society. There really wasn’t a lot about sustainability back in the early 80s, but by the early 90s at Shell [where I was working] it really started to kick in. I became involved very early on with a forestry project in Chile, where Shell had acquired this land and planted trees. We're talking 1993/94, and they were already talking about things like carbon credits. That was a game changer for me, it all seemed very consistent with some of the values that I'd grown up with. Shell went on to divest their huge coal mining portfolio in Australia, and though this would have been under-pinned by sound economics, there was a huge environmental aspect that was not lost on the leadership at that time. This early recognition with the launch of Shell Renewables really resonated with me. All of these things that we now call ESG, I become acquainted with in my formative years with that group.
I later went on to become an investment banker in Sydney, and found myself developing renewable energy plants - we built a renewable plant in Johannesburg and worked on a plant in Sri Lanka. And we looked at crops like Jatropha back then - which never worked out in the end, for various reasons. But we looked, we spent money and we evaluated stuff consistent with the renewable agenda. And this was a real opportunity for me to do something I enjoyed. But of course this doesn’t always pay all the bills for an investment banking firm. And so I also did a lot of other deals that were the other extreme, the dichotomy, you've got renewables and everything sustainable on one side, and then you've got mining on the other side.
It made me come to the realisation that life isn't binary. It isn't as black and white. That if you are mining you're bad or If you're doing renewable energy, you're good. I learned about compromise, I realised at that point you have to engage with, let's call them the bad actors, in order to effect change. We need to very quickly say to ourselves, yes, I'm all for sustainability, but I recognise there's a need to put a hole in the ground, so we're going to work together and see what we can do. Later I went on to be the CEO of a multinational chemicals group. I then had an opportunity to do the things I wanted to do from an ESG perspective. I started off looking at the supply chain and demanding traceability on the feedstock we used, which was palm kernel oil. I wanted to identify every molecule of oil right down to the plantation where it originated. This meant I could go and audit those farms to confirm they didn’t use child labour or slave labour. My mission was to meet any number of the Sustainable Development Goals.
Looking more at your role with the UN Global Compact, as chair for Malaysia and Brunei. I imagine that there have been struggles along the way, but have you seen an appetite to be a part of this?
In 2016, they [the UNGC] approached me and said, we need corporate style leadership because the UNGC is the only body that's not funded by New York. They survive on sponsorships, and donations and membership fees and the like, and it's the only branch of the UN that deals with the private sector. I got this tap on the shoulder and they asked me if I'd be interested to take this on. And, you know, I was genuinely pleased and took it on and spent 12 months trying to effect change. But change wasn't easy. One example where I looked at the plight of fishermen got paid a pittance for their catch but by the time it made its way to the supermarket shelf, consumers were paying sort of 10/15 times what the what the fisherman got paid. And I said there's some inequity here, right? because the logistics costs and refrigeration cannot possibly be that expensive. Even with the margins you'd expect the supermarket to make. And I did an interview on radio and I announced that we would be looking into this, as one of my early projects, and following that I received a bullet in the mail.
Do you see a connection between appetite for sustainability and Muslim majority markets?
I really like this question, because this underpins a lot of my thinking. Sustainability for me is not a journey and it's not a destination. When I get asked what sustainability is, I say I see it as a state of mind, a consciousness. A consciousness that should pervade our very existence. It may sound silly but it should be as natural as breathing, it should be something you do without having to think about, it needs to be second nature. Everything I do at UNGC and in my firm, and in every speech I ever make, I always give a plug to this concept of consciousness, because I think if you have this consciousness, everything else will fall into place. It has been relatively easy to connect with the Muslim community, because the Sharia principles are just so consistent with all of this. You have large tracts of the Muslim community. I won't say all, but large tracts that already practise these things in the way they live life day to day. Islam is a way of life and so the Muslim community have demonstrated a robust appetite for the whole ESG agenda. It's not foreign. It is familiar and comfortable.
Banks are increasingly playing a large role in the sustainability agenda, offering financial incentives, more competitively priced loans to the good actors and penalising or withdrawing support from bad actors. I can't think of a single bank, whether they're a foreign bank or a Malaysian bank, that are not only talking the talk, but walking the talk on sustainability. I say this, because they are talking to my team at the UNGC and they're asking us for help. They aren't all there yet. But they're showing the right attitude. And they are genuine about wanting to make a difference.
People no longer want to just work for a profitable company anymore. They want a more holistic thinking employer, they want to see a CEO showing this ESG consciousness around leaving the planet, a better place, with a more holistic definition of success.
How do you think that multinational companies will be forced to address sustainability because of the demand from the small and medium sized enterprises?
In Malaysia and Brunei, the biggest constituency that we work with are the small and medium enterprises (“SME”). We have about 5000 SMEs who we try to support. It's about making the SMEs understand that there's no one size fits all solution to becoming “sustainable”. We work with them on creating roadmaps, charting a realistic course, understanding the needs of the global buyers and requirements to participate in green clean supply chains. We have them effectively do an audit of where they are today. And what are the 1,2,3 quick wins that they can do to demonstrate a commitment to sustainability. It's not to say you've got to spend $100,000, that you can't afford, and do A, B and C. It's about doing what you can do whilst remaining competitive and profitable. What we're trying to promote across with the multinationals who deal with the SMEs is to say, you can't be harsh on them. If they're demonstrating this consciousness, and reaching out for help from people like us, they are ok to work with. Supply chains clearly are the biggest issue. We all want a clean, green, and transparent supply chain, but we must recognize there exists a myriad of policies and government issues which can make this journey challenging’.
This has obviously inspired your own corporate choices. Tell us a bit more about the organisation you have developed - the Insha Group.
After I left as Group CEO of a multinational natural chemicals company, I took a year off and spent time asking myself - what am I passionate about? and where did I think I'd have something to add. The whole idea of private equity is something I've worked in before and it appealed to me and I thought, well, Sharia compliance and ESG consciousness, as I call it, it's not that difficult. They're so consistent. And you know, it's not as complex and difficult, because I use the Sharia framework as the ethical framework for the company. When we launched a subsidiary in Australia, I had interest from local, non-Muslim investors, who came to me to say, ‘we're really interested because though we're not Muslims, you have an ethical framework.’ And that's an important thing. Because there's really no other ethical framework in the world today that's as long standing and tried and tested. I can talk about ESG consciousness, I can talk about doing the right thing, but the Sharia framework has been around for 2000 years, and I just find it really interesting.
I also don't find it limiting at all to work within it. We went out there and assembled a really strong, but small board of directors, a couple senior ex-bankers, (one of them today runs his own Sharia advisory business), and we marketed this investment opportunity. We offer a non-conventional PE product, it's not a give me $1 and I'll give you back $3 In five years kind of thing. It's investing $1 and I'll give you back $1 in 36 months, but in between I'm going to give you a guaranteed 10% return each year. You’ve got a guaranteed 30% on your money over three years, and I give you your initial money back. It's been successful. It's attracted a certain class of investor with a certain risk profile. They're happy, we're happy. We're continuing on our journey to raise capital, and we deploy a lot of money into Sharia lending, into things like project financing, mezzanine, trade financing, factoring, those sorts of things in a Sharia compliant way. We're working on a health and wellness portfolio of products for the over 50s as well. The other sector we're looking at is actually Art, in particular abstract local and foreign. And that's not as much about making money but about giving a profile and presence to artists who otherwise have little means to express themselves publicly. And we won't lose money. It's just about doing your bit for society.
We're actually just about to finalise a Euro and Pound Sterling version. Singapore dollar and Australian dollar versions are already there, and we welcome international investors to join our venture and make a healthy return in the right way.