By: Farida Ahmed
There has been a rapid recent rise in awareness of the Environmental, Social, and Governance (ESG) effects of business and investment decisions. The World Economic Forum has even projected that the global sustainable investment market will reach $53 trillion by 2025.
This is part of a global investor trend towards ethical values and principles. What is not widely known is that since its introduction more than 60 years ago, Shariah investing has helped to lead this move towards responsible investing.
Long before ESG became an investing buzzword, the Shariah investment sector was offering financial products that allowed investors to achieve healthy, ethical returns. Shariah Compliant investing offers lucrative outcomes and peace of mind.
These are some of the advantages of choosing Shariah-compliant investment products:
Invest in the real economy
Because Shariah investment products tend to be based on private equity and project-investment products, they usually involve investing in real-world businesses and generating returns from owning shares in successful business ventures.
As opposed to complex, highly financialised investments that generate interest from stocks, bonds, currencies, and market indexes, a Shariah investment is based on a specific business that is easily understood. This might be a cattle farm, a rental property, a vehicle-finance business, or a construction company.
Impact investing
In line with the rise of corporate responsibility and ESG awareness, impact investing has gained prominence in the investment community. This approach looks to achieve positive business and social outcomes as a direct result of specific investments. Projects look to generate a social as well as a financial return.
Shariah projects are a good example of impact investments.
Many of our projects have an uplifting social purpose, as well as achieving good returns. Our property investments focus on medical care, as well as frail care facilities. Our agriculture projects help create jobs and provide food security in a highly food-insecure country, and our renewable-energy investments help the move towards carbon neutrality.
Generate positive returns
The goal of Shariah investments is to help investors secure their future through innovative financial products. As such, these products need to generate returns to remain viable and to continue serving their social and financial purpose. Fortunately, the Shariah investment approach can generate extremely healthy returns.
Comply with the values of Islam
For Muslim investors, choosing Shariah investments is an effective way to ensure their financial interests adhere to the requirements of their religion. Shariah funds are a type of socially compliant investing, in that they are certified by Islamic scholars and muftis from the local Muslim community as being in line with the precepts of the Quraan.
These laws include requirements that no interest should be paid and that no proceeds should come from the sale of alcohol, pork products, pornography, gambling, or military equipment or weaponry. Beyond the certification by religious leaders, Shariah investment products have healthy, developmental impacts.
Ultimately, certified Shariah investment products can generate returns well beyond those offered by traditional banking products, while also providing the peace of mind of socially positive outcomes. Any responsible investor – Muslim or not – should consider the Shariah-compliant option.
* Ahmed is the head of customer relations at Al Mabroor.
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