Friday 29 Mar 2024
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KUALA LUMPUR (Nov 13): Schroders and Maybank Islamic Bhd, the country's largest Islamic bank by asset size, is advocating that investors who embrace Shariah principles when investing, should also be open to the idea of sustainable investing.

In a joint statement yesterday, Maybank Islamic CEO Datuk Mohamed Rafique Merican said findings of a joint research report by the two investment firms indicate that Muslims do not have to compromise their religious beliefs and their desire to invest in a sustainable manner, given that the underlying principles of both Shariah and sustainable investing are very closely aligned.

The research showed that the incorporation of sustainability considerations is both complementary in philosophy to Shariah investing, and has the potential to improve investment outcomes.

“As the paper has found, formal integration of sustainability within a Shariah portfolio recognises that sustainability principles are at the core of Islamic beliefs, a fact which has failed to receive the prominence it deserves among traditional Shariah investment products,” said Schroders head of distribution for Southeast Asia, Lily Choh.

Choh said if investors were to start with a blank slate using Shariah principles as the anchor for their portfolio construction, sustainability considerations are likely to feature strongly — implying that this singular focus of the Shariah investment industry is all set for an alignment with sustainable investing.

This, she added, will pave the way for the asset management industry to explore and develop more innovative solutions for the global Muslim community.

Schroders and Maybank Islamic said the thought paper also noted that traditionally, Shariah investing tend to exclude companies which do not comply with Shariah principles due to their harmful effects to society.

These companies involve those engaging in activities that include alcohol, gambling, adult entertainment and non-Shariah compliant finance and when the revenues they derive from these activities exceed 5%.

There are around 1.8 billion Muslims globally, representing a quarter of the world population.

"Still, Muslims have been underserved by the asset management industry, with limited innovation in product offerings and low growth in assets. As of June 2019, only US$3 billion was invested globally in Shariah global equity funds," said Schroders and Maybank Islamic.

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