Be ahead of the curve by merging ethics with sustainability through Shariah-compliant ESG investing.

Luxurious villas with expansive views of the South China Sea, the Raffles Sentosa Resort & Spa Singapore is set to become a landmark hotel when completed by the end of 2022.

But its significance goes well beyond its façade or brand. Developed and owned by Royal Group, the upcoming hotel is being financed by a Shariah-compliant green financing from Maybank Singapore that merges Shariah objectives with green and sustainability principles - the first of its kind in the world for a hotel.

For Mr Bobby Hiranandani, Co-chairman of Royal Group, the reasons were clear: "Being Shariah-compliant is not only going the sustainable route, but also being ethical in our approach in building and managing the property."

Indeed, the clarion call to back causes with the greater good in mind has become stronger than ever amid the pandemic - not just for companies but also investors. In fact, investors who practise Shariah compliance are doing more to enhance their faith-based convictions by adopting the sustainability agenda.


What does Shariah-compliant investing have to do with sustainability?

The merging of the two forms of investing is not surprising as the principles valued by both overlap.

The main principle and purpose of Islamic investing is the promotion of well-being - for mankind, the economy and the planet. A key goal is to help all members of society achieve equitable growth. Investors look for companies that promote benefits to society, avoid making unjust gains, share risks and rewards equitably, and are trustworthy, faithful, and transparent, as well as refrain from impermissible activities set by Shariah law.

Meanwhile, sustainable investing looks at environmental, social, and corporate governance (ESG) factors to assess investment choices. Investors channel funds into companies that promote good corporate governance and social responsibility, in addition to addressing climate change and biodiversity loss. A large part of ESG investing is aimed at positively impacting society through community development.

It is apparent where the common thread lies; the decision-making processes for both types of investments consider how a company interacts with society.

In fact, a Schroders Global Investor Study found that many investors in Asia, including Muslim countries, are increasingly concerned about how ESG factors such as climate change will impact their portfolios.

Observers are now calling for the Islamic investment industry to incorporate ESG principles into their Shariah-compliant products to keep up with the growing green economy. The convergence of the two is happening.

Investing with purpose

The pandemic has heightened interest among those looking to invest responsibly and with purpose.

Maybank Asset Management Singapore's Asian Growth and Income - Islamic fund (MAGI-Islamic), the first Islamic balanced fund in Singapore, offers investors one way of doing that.

Aside from being a socially-responsible investment, Islamic funds are transparent (as they are strictly supervised by Shariah advisors) in addition to characteristically featuring no interest-bearing activities. And the clincher? They have proven to be resilient. Bloomberg data showed that the Global Islamic Equity Index has outperformed the Global Equity Index by 56% over a 10-year period and 31% over a 5-year period respectively.


5-year period from 2016 to 2021

10-year period from 2011 to 2021

Annualised Return

Total Return

Annualised Return

Total Return

Global Islamic Equity Index (DJIM World Index)

20.6% p.a.


14.8% p.a.


Global Equity Index (MSCI AC World Index)

14.4% p.a.


9.2% p.a.


Source: Bloomberg data as at 28 February 2021.

When assessing a company's investment potential, the MAGI-Islamic fund studies over 20 factors, including its momentum, total capital management, intrinsic value, growth, expectations, and risks and sustainability.

It employs both quantitative assessment and qualitative expertise by combining Maybank's proprietary Quant technology with the knowledge of its experienced fund managers to build a flexible portfolio.

The fund also integrates ESG factors to meet investors' sustainability goals. Through asset allocation into Shariah-compliant global bonds (called 'Sukuks'), Asian equities that prioritise companies with better EGS scores as well as gold ETFs, investors gain both income and capital growth.


The future is convergence

With the increasing realisation that Shariah-compliance is aligned with the sustainability agenda, and taking note of the growth potential of Shariah-compliant investments, it is worthwhile for all investors who wish to diversify their holdings to consider Shariah-compliant investment solutions integrated with ESG screening when building their portfolios.

the bottom line:

Ensure the long-term success of your Shariah-compliant investments by incorporating ESG principles into your portfolio.

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