Doha Bank to trade carbon emissions the Islamic way

The relationship between the banking sector and environmental protection is really vague. In fact, for a lot of environmentalists and bankers these are two completely isolated worlds. However, thanks to the Kyoto Protocol Clean Development Mechanisms (CDM) banks have became real pioneers in financing carbon trading deals. I have been happy to read about Qatar Bank starting to do business with Japan in a groundbreaking move. This is the full article from Japan Times Newspaper

A senior executive of Doha Bank, a major Qatari private commercial bank, sought the cooperation of Japanese companies for a planned market in Qatar to trade greenhouse gas emission rights.

Doha Bank Deputy Chief Executive Officer Raghavan Seetharaman said Thursday in Tokyo: "Doha Bank is the first bank in the entire (Middle East) region to have plans to set up a carbon market exchange by 2009. . . . I want to bring in Japanese partners on the sustainable road map of emissions trading."

He said the market will be established in Energy City Qatar, an energy business hub in the suburbs of Doha.

Seetharaman said tackling environmental problems serves not only to fulfill corporate social responsibility but could also provide a good business model for the bank because projects to conserve the environment are expected to generate high returns.

The deputy CEO also noted the rapid growth of about 20 percent a year in Islamic finance, or transactions consistent with Islamic jurisprudence. He said the size of Islamic finance is now estimated at $700 billion, including $50 billion worth of Islamic "Sukuk" bonds.

Doha Bank began providing Islamic banking services two years ago and it can share its expertise with Japanese companies to facilitate their market access, he said.

Seetharaman said that because investment in Islamic banking is often backed by real property and does not involve derivatives trading and leveraged transactions, it is less likely to suffer damage from the U.S. subprime loan crisis.

According to Islamic jurisprudence, loans to companies involved with pork products, alcohol and gambling are banned and investments that guarantee risk-free profits are prohibited.

The Qatari bank opened a representative office in Tokyo in January, partly to encourage investment in Japan from energy-rich Qatar and other Middle Eastern countries. The office is currently the only business base operated in Japan by a Middle Eastern financial institution.

The deputy CEO said there are investment opportunities for Qatari firms in Japan's real estate and "huge knowledge-based technology and knowhow."

On the merit of investing in Japan rather than emerging economies, Seetharaman said, "Japan is the second-largest world economy. China and India are emerging markets and these are attractions, but the matured market like Japan is tested and proven."

As for the trend in crude oil prices, which recently reached record-high levels above $80 a barrel in New York, Seetharaman said prices could top $100 by winter because of continuing strong demand from fast-growing emerging economies such as China.

"I don't see how the oil prices will come down," Seetharaman said, adding that he foresees a widening supply-demand gap despite plans by oil producers to boost output.