Investment Advice?


are there any investments suitable for Islamic investors?

Islamic finance and investment is based on the principles established by the Shari'ah (Islamic law as revealed in the Qu'ran and Sunnah). Shari'ah aims to maximise social welfare (Maslahah) by protecting the 5 'pillars' of an Islamic society - faith, life, wealth, intellect and posterity. For this reason Islamic investment seeks to screen out companies whose activities conflict with these 5 'pillars'. In particular the screening process will exclude companies involved in: alcohol, tobacco, pork, gambling, armaments, pornography and interest (riba) based financial institutions. One consequence of applying Islamic investment principles is the exclusion of interest-based activities. All wealth creation should result from a partnership between the investor and the user of capital in which rewards and risks are shared. Returns on invested capital should be earned, (ie tied to the profits generated by the capital), rather than pre-determined, (as in interest-based returns provided by bank deposits). This means that interest-based securities (bonds, bank deposits etc.) are not acceptable as Shari'ah-compliant investments, because these securities provide returns that are pre-determined, and unrelated to the underlying performance of the asset that is generating the returns. By the same logic, equity securities/shares are considered permissible because the profits an investor makes on equity securities are tied to returns of the underlying company and hence are risk related. There are several Islamic funds available. The following companies offer Islamic financial services:


* Citibank International
* Dresdner Kleinwort Benson
* ANZ International
* National Commercial Bank
* United Bank of Kuwait
* Riyadh Bank Europe

* Al Rajhi Banking
* Standard Chartered Bank


iHalal Financial Services ( is an independent provider of Islamic financial products and services. The Institute of Islamic Banking and Insurance is an independent academic and research organisation dedicated to the promotion and implementation of Islamic finance. Their website,, offers a wealth of information on Islamic banking and insurance, as well as offering courses in Islamic finance.


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ethical and socially responsible funds:
how do I choose an ethical fund?

1. To choose a socially responsible fund you first have to identify the ethical issues which are most important to you. click on Work out your ethical profile for a questionnaire to help you clarify your own ethical profile and a free assessment of the type of funds that may reflect your personal values (Important note - This should not be taken as financial advice). You may also wish to visit , the website of EIRIS (Ethical Investment Research Service) which has detailed information on this area.
2. You will notice considerable differences in the investment strategies of the funds available. Some funds use negative screening to actively avoid companies, others use positive screening to actively invest in companies committed to responsible business practices. Other funds have an engagement approach, which excludes no companies but instead uses the fund's shareholder influence to encourage better business practice, or combine screening with engagement. Cause based investments allow you to support a particular cause or activity but may give a lower rate of return. You have to decide on the fund best suited to your ethical preferences and risk profile. For more information see Ethical investment approaches
3. Each fund should clearly state the ethical, social and environmental criteria which they use and provide information on the companies in which they invest.
4. You may also wish to take the performance or cost of the fund into consideration.


To view site plans and for further information on our available sites, click on one of the links below.

5. If you are unsure about any investment you should seek advice from an authorised Financial Adviser. We recommend that you choose one with specialist knowledge of socially responsible investment. Find an SRI Financial Adviser


how do SRI funds decide which companies are 'ethical'?

Each fund will have a different idea of what is 'ethical', and indeed ethical investing has been described as being more of an art than a science. In fact a fundamental problem with ethical investment is that it is very subjective and what may be ethical for one person may not be so for another. Ethical fund managers usually choose their portfolio of investments from an approved list created by a specialised research team.

* Most management groups use external consultants such as EIRIS, the Ethical Investment Research Service, to guide them. EIRIS is the leading independent provider of research into the ethical performance of companies in the UK and helps many management groups with their investment choices. It was originally set up in 1983, backed by churches and charities who found they needed a research organisation to advise them on their investment decisions.
* In addition to external research many management groups, such as the Friends Provident Stewardship funds, also have an in-house research team as well as a panel (a 'council of reference') which set criteria and establish or monitor the approved list of companies.
* In 2001, the Financial Times Stock Exchange, with the help of EIRIS created a series of ethical indices called FTSE4Good which includes companies with good social and environmental records (the US equivalent is the Domini index). As a result some management groups have launched tracker funds based on these indices which require minimal ethical research by the groups themselves.


what are the investment criteria?

Some SRI funds use an 'engagement' approach which 'overlays' the fund and does not affect investment choices in any way. In this case the only criteria applied to investment choices are financial and geographical. Rather than screening companies in or out, the fund manager uses their power as a shareholder to encourage companies to adopt socially responsible business practices. However, most UK SRI funds do not use the engagement approach, instead utilising a combination of positive and negative investment criteria. Funds can differ greatly in their objectives, their emphasis on positive or negative screening, and the criteria they use.

Fund managers may screen out companies using any or all of these negative criteria:

* The arms trade
* Nuclear power
* Oppressive regimes
* Animal testing (cosmetic or medical)
* The fur trade
* Factory farming
* Alcohol promotion
* Tobacco promotion
* Environmentally damaging practices
* Poor employment practices
* Genetic engineering
* Gambling
* Pornography
* Third world debt/exploitation

Fund managers may screen in companies using any or all of these positive criteria:

* Environmental protection
* Pollution control
* Energy conservation
* Use wind, wave or geothermal energy
* Recycling
* Waste management
* Manufacture environmentally friendly/energy conservation products or recycling equipment
* Education and training
* Fair trade
* Strong community involvement
* Ethical employment practices
* Health and safety
* Family-friendly employment practices
* Openness about activities
* Equal Opportunities Policy
* The sale or manufacture of 'basic necessities'
* Providing drugs to developing countries at a substantial discount
* Products/services that directly benefit developing countries eg water purifiers, education, AIDs research







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