According to RHB Research analyst Alexander Chia, Shariah investing will go beyond compliance in the future, taking into account social and environmental impacts.
He claims that socially responsible investing with an Islamic perspective has additional benefits, such as reducing business uncertainty, maintaining stability by removing speculation, and promoting sustainable businesses that improve society’s welfare.
“It should no longer be viewed solely from an Islamic legal perspective, according to Chia, because shariah makes no distinction between legal and moral imperatives,” he says.
Bursa Malaysia’s recently launched FTSE4Good Bursa Malaysia Shariah Index, he said, is a good place to start. It will meet the investment community’s sustainable and shariah-compliant investment needs.
“Shariah and ESG investing are beginning to converge, as shariah investment moves toward adopting ESG principles, narrowing the investment scope even further.”
In a report released today, he says, “This is also likely to result in screening for good quality investible companies that will outperform in the long term.”
Based on the Sustainable Investment Review 2021, global ESG investment increased 3.5 times in the last decade to US$35.3 trillion, representing a 13.5 percent compounded annual growth rate (CAGR).
In 2020, total assets under the management of Islamic funds grew by 31.9 percent globally.
“Because of the selection criteria for their underlying investments, both Shariah and ESG promote ethical considerations and social responsibility.
“As a result, given their shared principles, we believe there are opportunities for shariah investment to profit from the growing popularity of ESG investing,” he added.
