Halal investing
Are halal and ethical investing the same thing?
Where the two approaches overlap, where they do not, and why an ethical label is not a substitute for a Shariah check.
The short answer
Halal and ethical investing can have similar exclusions, but they are not the same. An ESG fund can still use holdings, debt or cash practices that do not meet a particular Shariah method.
Shared values, different tests
Both approaches may avoid some sectors or seek better governance. Ethical policies focus on environmental, social and governance issues chosen by the manager.
A Shariah method also looks at business activity, financial structure and the source of returns. So a fund labelled ethical may still need a separate Shariah review.
Shariah-compliance considerations
Use the fund's documents to find its screens and holdings. Check if it has a named Shariah methodology, who oversees it, how cash is handled and whether it uses derivatives or securities lending.
Treat 'ethical', 'responsible' and 'Islamic' as starting points for due diligence, not as the final answer.
What this means in practice
- 1Read the fund's exclusions list and investment policy.
- 2Compare top holdings, methodology and cash policy with your own needs.
- 3Check for a named Shariah board or methodology when Shariah compliance is claimed.