A few months later, I took on a new Shariah-compliant mandate. I’d managed conventional funds across emerging markets for over 15 years, but this was my first chance to manage a Shariah mandate and I was excited at the prospect. As I glanced through the companies included in the MSCI Islamic Index, one company in particular jumped out at me: the same sportswear company we had recently divested in. And that got me thinking – why wouldn’t Islamic investing consider labour rights too?
Looking at ‘how’, not just ‘what’
Most typical Shariah-compliant equity funds focus solely on exclusion. They use a mechanical screening process to identify and exclude companies that produce forbidden products like alcohol, tobacco, weapons, pork, gambling, and adult entertainment, as well as conventional banking, finance and insurance. Shariah funds rarely go beyond this initial screening process, neglecting to additionally consider, for the companies which remain investable, how their products or services are produced. So naturally this sportswear company made it through – no questions asked.
While I’m no scholar of Islam, I happen to be Muslim, and this screening seemed like a low bar to me. Is that really all God wants from us? It also occurred to me that I might not be the only one feeling this way.
Shariah funds struggling to gain traction – unlike sustainable investing
Reflecting the true values of Islam
It’s not just labour rights. There are many other companies included in major Shariah-compliant equity indices that could be viewed as problematic, including several oil & gas companies. As these companies are ‘Halal’, they are automatically included in Shariah indices, though they can have serious negative impacts on the planet. By including these companies without question, we could risk overlooking the fact that of course God wants us to take care of the planet too: ‘Walk gently upon the earth’ (Quran 25:63); ‘The earth is green and beautiful, and God has appointed you his stewards over it’ (Hadith).
So, my team and I set about creating a Shariah mandate where we try our best to be good stewards, investing in not just what is permissible (Halal) but also good (Tayyib).
Our team’s approach
Only through direct engagement are we able to build a clearer picture of a company. Through ongoing discussions with the companies we’re invested in, we can encourage positive change, while avoiding businesses that do not align with our beliefs.
And to me, this approach makes perfect sense for Shariah investing too. That’s why our Shariah mandate goes beyond a simple exclusions screen, to look closely at the companies we hold to understand their social and environmental impact as well. By considering whether a company is not only Halal but also Tayyib, an approach like ours can better reflect the values and principles of Islam.
2 Source: Broadridge, 12 months to Sept 2021
3 Source: Schroders & Maybank Islamic, November 2019
The value of active minds: independent thinking
A key feature of Jupiter’s investment approach is that we eschew the adoption of a house view, instead preferring to allow our specialist fund managers to formulate their own opinions on their asset class. As a result, it should be noted that any views expressed – including on matters relating to environmental, social and governance considerations – are those of the author(s), and may differ from views held by other Jupiter investment professionals.
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