KUALA LUMPUR: A joint research report by global investment manager, Schroders and Maybank Islamic Berhad, the largest Islamic bank in Malaysia and Asia by assets size, launched today, is advocating that investors who embrace Shariah principles when investing, should also be open to the ideas of sustainable investing.

The research shows 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 Southeast Asia and Head of Institutional Business Asia Pacific Lily Choh.

The thought paper 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 per cent.

It further found that 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, Choh added, will pave the way for the asset management industry to explore and develop more innovative solutions for the global Muslim community.

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

But despite these numbers, 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.

“The findings of this report 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,” said Maybank Islamic CEO Dato’ Mohamed Rafique Merican.

He said Maybank Islamic is pleased with the findings of its collaborative report with Schroders and he is hopeful that this would encourage the industry to explore products and offerings that comply with the principles of both Shariah and sustainable investing.

This thought paper is also part of Maybank Islamic’s Centre of Excellence (COE) initiative where it aims to be the reference point on Shariah matters and best practices for industry players, regulatory authorities and academic fraternities.

The report is now available on http://schroderstalkingpoint.com