SOCIALLY REPONSIBLE INVESTMENTS

Shawal 1422 - January 2002

The principle objective of The Islamic Economics Research Centre is clearly to promote research in the theory and application of the philosophy of Islamic economics as founded in the Holy Quraan and Teaching of prophet Muhammad (peace and Blessing on him). 

Being one of the three major monotheistic divine religions of the world, Islamic principles are in many ways harmonious with the basic (undistorted or blemished) teachings of the two other religions.  We therefore find it quite exciting and interesting to trace and monitor Western financial philosophy and movements, which bears similarity to our own.  Outstanding among these are socially responsible investments in the West.       

In this regard we find the most recent report issued by The Social Investment Forum titled 2001 SRI Trends Report quite encouraging.  Compounded by the September 11^th incident, the U.S. equity market had incurred immeasurable losses during 2001. The report reveals that socially responsible investments were unfazed by this major slump, by rather achieved truly impressive results within the course of the year.  

According to the report, “Assets in socially screened investment portfolios under professional management rose by more than a third from 1999 to 2001 to top the $2 trillion mark for the first time ever.   During these two years, conventional assets managed by professional U.S. institutions rose by 22% while social funds climbed by a surprising 36%.

In absolute terms, the report shows that the total number of funds invested according to social values climbed from $1.49 trillion in 1999 to $2.03 trillion in 2001.  This remarkable performance had instigated the admiration and amazement of many pundits and experts in the field.  The executive director of the U.S. consumer and investor education remarked that, “Social investing is a powerful concept – investors can invest for their futures and for a better world at the same time”.

It is important to point out that socially responsible investments in the West normally utilize one or more of the three strategies that define this whole category of asset management. These strategies are namely; screening, shareholder advocacy, and/or community investing.  The screening procedure simply filters out unapproved investments such as tobacco or environmental hazards. The shareholder advocacy encourages shareholders’ influence on company policies, while community investing promotes investments, which cater for the general welfare of the community.

At the Islamic Economics Research Centre, we find this innovation in western asset management quite interesting and exciting. In our plight to promote the application of Islamic Economics in the global financial field, we must acknowledge our appreciation and good will towards socially responsible investments worldwide.