The Relationship Between Profit and Purpose


On the 5th of December in Dubai, GEFI hosted the last of the ‘Adam Smith and Ibn Khaldun at COP28’ evening lectures series at the Heriot-Watt University Climate Hub, exploring the perspectives of Scottish Adam Smith and Arab Ibn Khaldun on the relationship between profit and purpose.

Following an MC Welcome by Dr. Erika Anderson, GEFI Research Analyst, Prof. Adam Dixon, Adam Smith Chair in Sustainable Capitalism, Adam Smith’s Panmure House, Edinburgh Business School, Heriot-Watt University delivered a keynote on maintaining Adam Smith’s Legacy and Panmure House.

Dr. Frederic Samama, Head of Strategic Development, S&P Global Sustainable1, then took to the stage to deliver a presentation on Climate Macro-hedging. Dr. Frederic presentation addressed the challenge faced by investors committed to carbon neutrality, who represent $130 trillion. The proposed solution involved using IPCC-aligned equity benchmarks to implement a climate macro-hedge, minimising portfolio impacts. While carbon neutrality is currently feasible, the presentation highlighted time-sensitive issues, including the rapid decarbonisation rate, potential IPCC revisions of overall carbon budget, increased carbon tax impact, selling pressure on polluting companies, and rising physical risks. The urgency underscores the need for prompt action in macro-hedging strategies for climate.


The Ibn Khaldun Perspective

Lecture by Professor Mehmet Asutay, Professor of Middle Eastern and Islamic Political Economy & Finance; Director, Durham Centre for Islamic Economics and Finance, Durham University Business School, UK

In a world saturated with the buzzword “sustainability,” Professor Mehmet invited us to ponder a crucial question: are we all speaking the same language? Do our notions of sustainable development truly address the root causes of our most pressing challenges, from poverty and environmental degradation to social inequity?

Professor Mehmet’s analysis drew upon the insightful framework of Ibn Khaldun, a 14th-century scholar who revolutionised our understanding of human society and its economic underpinnings. Through his “ilm al-umran al-bashari wa-l-ijtima al-insani” (the science of the civilisation of mankind and human socialisation), Ibn Khaldun offers a powerful critique of economic models that prioritise profit over human well-being and environmental sustainability.

Current economic paradigms, often rooted in the understandings of Adam Smith’s theories, focus heavily on factors like capital and labor. However, as Professor Mehmet points out, this equation fails to account for the broader societal and environmental consequences of economic activity. Ibn Khaldun, conversely, emphasises the importance of factors like “Asabiyyah” (social solidarity) and “Rizq” (divine beneficence). He challenges us to expand our economic equation to include not just production and consumption, but also justice, harmony, and the ethical distribution of resources.

The Islamic moral economy, as outlined by Professor Mehmet, further distinguishes itself from the profit-driven models commonly adopted by the western hemisphere. Under the Islamic moral economy, the pursuit of “Falah” (individual and societal flourishing) takes precedence over mere profit maximisation. Mechanisms like Zakat (redistribution of wealth) and Ihsani governance (prioritising ethical resource allocation) aim to ensure equitable distribution and social responsibility.

Ibn Khaldun’s perspective also sheds light on the intrinsic value of labor, rejecting the notion of it as a mere commodity. He highlights the importance of “Kasb,” the surplus generated through effort and skill, but warns against its potential to create harmful inequality. His call for a wider distribution of “Jah” (social power and prestige) echoes the Islamic moral economy’s focus on empowering individuals and communities to share in the fruits of their collective labor.


“… and what earnings, living, sciences, crafts [and industries], etc. people acquire, by their works and efforts”- Ibn Khaldun
“farmers and traders rush to them while they sit in their home without moving an inch, meanwhile their wealth grows, and their accumulation (kasb) rises, and their riches are consolidated without effort”- Ibn Khaldun


The Adam Smith Perspective

Lecture by David Pitt-Watson, Global Steering Group, GEFI

Adam Smith, the father of modern economics, is often remembered for his championing of the free market and the “invisible hand.” However, a closer look at his work, particularly his lesser-known “Theory of Moral Sentiments,” reveals a more nuanced thinker who believed in the importance of empathy, social responsibility, and ethical considerations in economic life.

One of the most misconstrued aspects of Smith’s work is the idea that he viewed human nature as purely self-interested. While he did acknowledge the role of self-interest in economic activity, he also argued that humans are inherently social and moral creatures. The infamous quote, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner,” is often used to depict Smith’s economic vision as purely self-interested. However, David Pitt-Watson argues that this quote is a simplification of human nature and economic relations. Smith, in his Theory of Moral Sentiments, reveals a deeper understanding of human nature, recognising our inherent social and moral inclinations. He believed that empathy and concern for others, not just self-interest, play a crucial role in economic interactions.

In his “Theory of Moral Sentiments,” Smith explores the concept of sympathy, arguing that we have an innate capacity to understand and share the feelings of others. This sense of empathy, he believed, plays a crucial role in shaping our moral judgments and economic decisions. We are not only driven by self-interest, but also by a desire to act in ways that are considered fair, just, and beneficial to others. Smith believed that the ultimate arbiter of morality is not external authority, but our own internal conscience.

David criticised the reduction of economics to mere mathematical models, arguing that this ignores the crucial role of morality in Smith’s vision. David argued that Smith would be deeply uncomfortable with many of the institutions that have come to define our economy, such as limited liability companies and banks. These institutions, as David argued on behalf of Smith’s theories, shield individuals from the consequences of their actions and incentivise risky behavior.

Smith’s emphasis on empathy and moral considerations extends to his views on business and finance. He believed that businesses have a responsibility to consider the interests of all stakeholders, not just shareholders. This includes employees, customers, communities, and the environment.


“However selfish man may be supposed, there are evidently some principles in his nature which interest him in the fortunes of others and render their happiness necessary to him though he derives nothing from it except the pleasure of seeing it.” – Adam Smith, Theory of Moral Sentiments

“When I endeavor to examine my own conduct…I divide myself as it were into two persons …the first is the judge the second the person judged of.” – Adam Smith, Theory of Moral Sentiments

“What so great happiness as to be beloved, and know that we deserve to be beloved?” – Adam Smith, Theory of Moral Sentiments