Values-Driven Portfolios: ESG and Shari'ah in Focus

Rising awareness of Environmental, Social, and Governance (ESG) issues has transformed the investment industry, with investors increasingly focusing on the social and environmental impact of their portfolios. Similarly, Shariah-compliant investing, rooted in Islamic principles, is gaining traction as an ethical choice.

The overlap between ESG and Shariah investing highlights shared priorities of ethics and sustainability.

What is ESG Investing & Shari’ah Investing?

Shari'ah Investing

Shari'ah investing follows Islamic principles, avoiding sectors like alcohol, gambling, and interest-based finance. It focuses on ethical, socially responsible industries and excludes excessive risk or speculation.

ESG Investing

ESG investing evaluates companies based on environmental impact, social responsibility, and governance practices. It promotes sustainable business practices while aiming for long-term financial returns.

According to SwissQuant, a study by the IFC found that Shariah-compliant companies generally outperform conventional ones in ESG metrics. This highlights the overlap between ESG and Shariah investing, as both emphasize ethical and sustainable practices.

Recently, Carel Nolte, Chief Marketing Officer at EasyEquities, had the opportunity to interview Keith McLachlan, CEO of Element Investment Managers. Together, they unpacked the principles of Shari'ah-compliant investments and explored how the Element Islamic Global Equity Fund offers ethical, global investment opportunities. The interview also touched on ESG investing.

EasyEquities offers a variety of Shariah-compliant unit trusts and exchange-traded funds (ETFs), including options like the Satrix Shariah Top 40 ETF, Camissa Islamic Equity Fund, Camissa Islamic Balanced Fund, Satrix MSCI World Islamic ETF, Sentio SCI Hikma Shariah Balanced Fund A1, and Sentio SCI Hikma Shariah General Equity Fund A1, catering to investors seeking ethical and  principled investment solutions.

ESG and Shariah investing show how ethical and sustainable investment approaches can work together. Both focus on social responsibility, protecting the environment, and making fair decisions. This combination could help investors reduce risks, diversify their portfolios, and achieve their financial goals while staying true to their values. It proves that doing good and making money can go hand in hand. Larry Fink, CEO of BlackRock, emphasized, “Sustainable investing is not just about doing good; it’s about doing well by doing good.”