Ruling on Investing in Companies Located in Controversial Countries #

Original Question: What is the ruling on investing in companies which are located in a specific country that is publicised to have harmed the general public?

According to the six screening methodologies (AAOIFI, MSCI, DJI, S&P, SC and FTSE), there are no Shariah screening filters based on a company’s geographical location. Also, it is not obligatory for an individual to boycott certain countries’ companies or products unless a decree is issued by those in authority or by the government.

Nevertheless, all the Shariah screening methodologies filter out companies whose business and financial activities are involved in unlawful and unethical activities under the Shariah lens. Such as the tobacco and arms industries.

Nowadays, with the advent of Environmental, Social, and Governance (ESG) screening that can be embedded into Shariah screening principles, we can rank Shariah-compliant stocks based on their positive attributes before selecting and investing in these companies. Such as the Maybank Asian Growth & Income Islamic fund does.

Therefore, as Muslim investors, we should always strive for excellence (ihsan) and try to embed ESG criteria in the Shariah screening of our investment choices.

All in all, investment is one form of “cooperating” with certain entities or business activities in the current modern world context. The general principle is that Muslims should always be mindful not to cooperate and assist in any kind of unlawful acts or transgressions.

Allah Subhanahu Wa Ta’ala has said in Surah al-Maidah verse 2:
“…Cooperate with one another in goodness and righteousness, and do not cooperate in sin and transgression.”