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New research from CFA Institute Identifies the Ethical Bridge between Islamic Finance and Sustainable, Responsible, and Impact Investing

11 December, 2019
Abu Dhabi United Arab Emirates

CFA Institute, the global association of investment professionals, has released new research examining the commonalities, differences and shared challenges of Islamic finance and SRI (Sustainable, Responsible and Impact) investing. Sustainable, Responsible, and Impact Investing and Islamic Finance, traces the origins of both schools of finance, and identifies their historial connections and primary concepts. 

The research offers a timely interpretation of these separate, yet related financial approaches which have a common concern for society and stewardship. The focus of these issues reflects the interests of a global investment profession increasingly active in integrating ESG (environmental, social and governance) factors into the investment decision-making process. 

William Tohmé, CFA, Senior Regional Head of Middle East and North Africa for CFA Institute said: “Sustainable, responsible, and impact investing shares similar origins and aspirations to Islamic finance, and yet for the most part, these two modes of finance have existed in parallel worlds. Today, both approaches are attempting to address societal issues such as economic instability, worsening inequality, and more. Through this new research, we hope to broaden the horizons of investment practitioners by providing a lens through which to explore the potential of both. In doing so, we aim to build institutional awareness, knowledge, and professional expertise in our MENA markets and beyond.” 

Analysis includes:

  • SRI Investing and ESG methods, from exclusionary screening, to best-in-class selection, active ownership, thematic investing, impact investing, and ESG integration
  • The principles of Islamic finance and its historical connection with SRI investing 
  • Conceptual differences between the two schools of thought
  • The shared challenges of authenticity, the prevailing economic narrative, rising levels of debt and the dominance of debt-favoured taxation and regulatory systems 
  • Examples of financial services products and firms which meet the criteria of both 
  • A consideration of studies into whether financial performance is compromised by use of SRI investing or Islamic finance principles
  • The outlook for greater convergence of ESG issues in Islamic finance

Sustainable, Responsible, and Impact Investing and Islamic Finance has drawn on the contributions of the CFA Institute Islamic Finance Working Group whose members comprise CFA charterholders across the MENA region including Bahrain, the United Arab Emirates, Qatar, Kuwait and Oman, as well as Pakistan.