What are Sharia investments?
Sharia investment is sometimes thought of as being an extension of ethical and ESG options but there are a number of additional investment requirements and overlays that investors still should make themselves aware of what they are potentially investing in. Few Sharia investment options are available, and even fewer managers as there are specific requirements desired by followers of the Muslim religion.
The concept of investing in a Sharia-compliant manner takes considerable effort to implement since managers must pay additional attention to their portfolios and funds becoming, and staying, compliant with the comprehensive set of rules and requirements laid out in the law. For example, Sharia investments must exclude investment opportunities or funds that derive a majority of their income from selling alcohol, pork products, pornography, gambling, military equipment or weapons. There can also be other requirements such as having a Sharia ‘audit’ and purifying certain types of income, such as interest income, by donating them to a charity.