TLDR (summary)
Values–based investing aligns financial growth with purposeful values, emphasising positive social and environmental impact alongside profit. Islamic Wealth Management naturally complements this approach through principles like shared risk, transparency, and community responsibility, across all stages of one’s Islamic Wealth Management journey. While Islamic Wealth Management may present some challenges, such as less varied investment options, its focus on transparency and meaningful impact makes it an appealing strategy for those looking to harmonise financial success with broader societal contributions.Institutions like Maybank have also actively addressed these gaps, by providing Islamic solutions that are competitive and accessible to a broad range of investors.
1. Introduction
In recent years, investing with purpose has seen a rise in popularity globally, as investors increasingly consider the impact of their investments on society and the environment alongside their financial goals. Values–based investing, aligns profits with principles, prioritising the ‘3Ps’: People, Planet, and Prosperity. This model, often referred to as the Triple Bottom Line (a term coined by John Elkington in 1994), encourages financial success while upholding social responsibility and environmental stewardship.
Islamic Wealth Management (IWM) naturally embodies these principles, integrating Shariah-compliant financial guidelines that emphasise social equity, ethical integrity, and sustainable practices. By addressing both individual prosperity and communal welfare, IWM provides a balanced investment approach.
2. Understanding Value-Based Investing
Values–based investing may often be confused with value investing—a distinct approach that identifies undervalued securities based on financial performance metrics. In contrast, values–based investing is centred on selecting investments that resonate with personal or societal values, emphasising ethical practices, social welfare, and environmental responsibility. This model screens out industries or companies that engage in practices deemed harmful, like those involving excessive risk, unethical practices, or exploitative industries.
In the realm of Islamic finance, values–based investing is closely linked with key Islamic principles such as public good (maslahah), the prohibition of interest (riba), speculation(gharar), and gambling (maysir). This alignment results in portfolios that are not only financially sound but also socially and ethically responsible, focusing on outcomes that support societal well-being.
3. Different Approaches within Values–based Investing
The rise in values-based investment strategies reflects a broadening interest in investing with purpose. Here are some popular approaches:
• Environmental, Social, and Governance (ESG) Investing
This approach evaluates companies based on their environmental, social, and governance practices, seeking businesses that lead in sustainability and responsibility. ESG investing aims to mitigate risks associated with unsustainable practices while capitalising on opportunities for positive societal impact.
• Socially Responsible Investing (SRI)
• Impact Investing
In Singapore, the Singapore Exchange (SGX) now mandates that listed companies produce sustainability reports, making it easier for investors to assess a company’s commitment to ethical practices. For values–based investors, Shariah-compliant ESG exchange-traded funds (ETFs) offer a way to combine Islamic principles with sustainability objectives, creating opportunities to support financial growth while contributing positively to society.
4. Fundamentals of Islamic Wealth Management
IWM offers a structured approach to financial planning that aligns with Shariah principles, emphasising ethical practices, social responsibility, and the well-being of the broader community. One foundational tenet of IWM is the prohibition of riba, meaning wealth should be generated through legitimate trade and investment in tangible assets rather than through interest-based lending. This aligns with the value of maslahah, or public benefit, which seeks to ensure that economic activities contribute to societal welfare.
Additionally, IWM emphasises risk-sharing as a fair practice, where risk and reward are shared equitably among all involved parties. This principle discourages speculative or overly ambiguous activities, fostering trust and equitable partnerships. Islamic finance also requires that investments avoid certain industries—such as those involving alcohol, gambling, and unethical practices—focusing instead on Shariah lawful investments to ensure responsible wealth accumulation.
A distinctive element of IWM is Zakat (obligatory almsgiving) and Sadaqah (voluntary charitable acts such as donations), which requires individuals to dedicate a portion of their wealth to help those in need and other significant beneficiaries in society. This act purifies one’s wealth and promotes social equality by supporting the underprivileged, thereby enhancing social cohesion and community well-being.For non-Muslims looking towards philanthropic goals, such as donating or supporting a cause, this will also provide an excellent avenue for you to align your values and objectives with the offered Zakat or donation services.
5. The Five Pillars of Islamic Wealth Management
The pillars of IWM are structured around the life cycle of wealth, guiding how it is created, accumulated, protected, purified, and distributed. Each aspect is aimed at ensuring that wealth is managed responsibly and in alignment with Shariah values:
Figure 1: Five pillars of IWM
IWM brings these principles to life through a variety of Shariah-compliant financial instruments and services, such as Islamic Deposits (current, saving, and time deposits), sukuk(Islamic bonds), Takaful, and Shariah-compliant investment funds. These offerings provide pathways for investors to grow their wealth responsibly and in alignment with purposeful values.
6. Practical Insights for Values-based Investing within IWM
Values-based investing within the IWM framework merges financial objectives with a commitment to purposeful values, giving investors the means to grow their wealth while adhering to the universal values embodied in Shariah principles. Maybank, being a leader in the region, has the widest range of Shariah-compliant funds offering 15 Islamic funds in Singapore. The depth of the offerings includes Thematic funds such as the Franklin Shariah Technology fund or Index funds like the HSBC Islamic Global Equity Index fund.
Below are two Shariah funds offered by Maybank that illustrate how values-based investing are applied:
(i) Maybank Asian Growth and Income-I Fund
This fund combines capital growth and income potential through a diversified portfolio of Shariah-compliant equities and sukuk, providing a balanced investment strategy for individuals seeking both financial growth and ethical alignment. Key features include:
• Investment Scope:
The fund invests in a mix of Shariah-compliant equities, sukuk, and gold ETFs. The portfolio is allocated with 61.93% in sukuk, 15.73% in equities, and 8.77% in gold ETFs, with a strong focus on countries like Indonesia, India, and Malaysia.
• Screening Process:
The fund integrates Shariah compliance checks alongside a robust ESG research framework, ensuring ethical investment practices align with sustainability principles.
• Income Generation and Growth Potential:
Through monthly dividend distributions (e.g., a 6.74% annualised yield for Class A (Dist) SGD as of October 2023) and a strategic allocation to defensive sukuk, the fund aims to generate consistent income and long-term capital appreciation.
• Portfolio Management Strategy:
The fund employs a defensive strategy by prioritising investment-grade sukuk with a weighted average credit rating of BBB- and an average duration of less than three years. The equities portion focuses on resilient markets like Malaysia and Indonesia, especially in sectors such as real estate and consumer discretionary.
The Maybank Asian Growth and Income-I Fund demonstrates a balanced approach to ethical investing, by aiming to deliver stable returns while adhering to sustainable and Islamic principles. This positions the fund as a suitable choice for investors seeking both financial and social value in their portfolios.
(ii) MAMG Global Sukuk Income-I Fund
This fund within Maybank’s portfolio represents a strategic approach to income-focused investing, emphasising mediumto long-term capital enhancement through Shariah-compliant investments in sukuk. Key features include:
The fund invests substantially in the Master Fund, the MAMG Global Sukuk Fund, which holds Islamic securities or sukuk that align with Shariah principles. The portfolio includes holdings in sovereign, real estate, and banking sectors, with a geographical focus on markets such as the UAE (38%), Saudi Arabia (27%), and Malaysia (6%).
The fund adheres to Shariah principles and is advised by Amanie Advisors. This fund ensures compliance with Islamic financial standards, incorporating robust due diligence and ESG considerations.
• Income Generation and Growth Potential:
By integrating Shariah compliance with robust income generation strategies, the MAMG Global Sukuk Income-I Fund also provides a stable investment avenue for individuals seeking to align their financial goals with ethical and religious values. The fund demonstrates a balanced approach to managing risks while maintaining a competitive yield and robust diversification.
7. Investment Strategies for Values-basedInvestors in IWM
For investors interested in aligning their financial goals with purposeful values through IWM, there are several strategies to consider. These approaches allow for financial growth while respecting ethical considerations rooted in universal values.
(i) Understanding Shariah Screening
A foundational step is understanding Shariah-compliant investment screening. This process involves evaluating potential investments against specific criteria, such as the nature of business activities, financial ratios, and debt levels, to ensure alignment with values centred on social responsibility and integrity. By excluding industries or practices that do not meet these standards, investors can build portfolios that reflect both their financial goals and commitment to principled investing. Today, there are various reputable Shariah Screening providers that one can engage, such as the Dow Jones Islamic Market World Index Screening, the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) and the Thompson Reuters Ideal Ratings Islamic Indices. You can select the provider that best aligns with your investment objectives and requirements.
(ii) Sector Diversification
Although certain industries may be restricted, a wide range of sectors still offer lucrative, compliant opportunities. Sectors such as healthcare, technology, infrastructure, and ethical consumer goods are often well-aligned with purposeful values, providing investors with opportunities to diversify their portfolios without compromising on standards. This approach enhances both portfolio resilience and long-term value.
(iii) Sukuk Investments
As a Shariah-compliant alternative to conventional bonds, sukuk represents ownership in tangible assets or enterprises, ensuring compliance with Islamic principles of real economic activity and risk-sharing. Sukuk can offer stable income potential and serve as a viable option for investors seeking fixed income in a way that aligns with their values.
(iv) Focus on Long-Term Value
IWM emphasises a commitment to investments rooted in real economic productivity. Investors are encouraged to prioritise companies with sound fundamentals and sustainable business practices rather than speculative ventures. By focusing on long-term growth, this strategy aligns with principles that promote financial stability and responsible wealth-building.
These strategies empower investors to participate in financial markets in ways that support their values, providing a path to meaningful growth while maintaining a responsible approach to wealth management.
8. Assessing the Benefits and Addressing the Challenges of IWM
IWM, with its foundation in values–based principles, presents a unique approach to financial stewardship that harmonises economic goals with positive societal impact that is accessible to everyone. However, like any other investment framework, it offers both advantages and challenges that investors should consider.
Key Benefits of IWM
IWM prioritises investments that align with values–basedprinciples, avoiding industries considered detrimental to society, such as those associated with gambling or weapon production. This means that investors’ wealth supports enterprises that contribute positively to the community and environment, fostering a sense of purpose across the holistic stages of their IWM journey without compromising on returns.
The principles of Islamic finance emphasise a fair sharing of risks and rewards between investors and businesses. This focus on equity can lead to more stable investments, potentially safeguarding wealth during economic downturns. It provides a financial safety net by relying on fair and transparent practices rather than speculative gains.
Islamic financial products are designed with clarity and uses straightforward terms, avoiding hidden charges or complex structures. The absence of interest and the focus on tangible assets means that investors can make informed decisions, understanding exactly how their investments are structured and where their funds are allocated.
Challenges in IWM
While Shariah-compliant investments adhere to specific ethical and legal guidelines, there is a common perception that the range of available options is narrower compared to conventional investment choices. However, this perception has gradually shifted over the years. The growth of Shariah-compliant indexes has expanded the universe of eligible investments. These indexes include a wide array of companies across various sectors that meet Shariah standards, thereby enhancing diversification opportunities for investors. Maybank, for instance, offers a diverse range of Shariah-compliant investment solutions, ensuring clients have ample opportunities to diversify their portfolios while adhering to Shariah principles.
Traditionally, some Shariah-compliant investments were perceived to offer lower returns than their conventional counterparts, particularly due to their avoidance of high-risk, high-reward ventures. However, with advancements in Islamic finance, many of these investments now offer competitive returns. Islamic solutions at Maybank are positioned to offer attractive performance, demonstrating that Shariah-compliant products can provide returns comparable to, or even surpassing conventional options, while aligning with socially responsible and ethical investment practices at the same time.
While Islamic financial products and services were once less widely available, this is increasingly not the case, especially in regions like Singapore. Maybank’s extensive branch network and commitment to staff training in IWM products ensure that clients have easy access to Shariah-compliant solutions. Maybank’s front-line staff, with the support of the Islamic Wealth Specialists, are well-equipped with the knowledge to offer expert Shariah and Wealth Management guidance, making it easier for investors to find the right products that suit their financial needs and personal goals. Furthermore, Maybank has addressed previous accessibility challenges by providing comprehensive solutions that cater to a wide range of investors, overcoming many of the limitations associated with IWM in other markets.
Incorporating IWM into one’s financial strategy requires a balanced understanding of its benefits and limitations. While there are challenges, such as limited investment choices and accessibility, institutions like Maybank are committed to offering innovative solutions that not only meet Shariah compliance standards but also offer competitive returns while remaining broadly accessible. This enables investors to align their financial goals with their values, while still navigating potential constraints in the market.
9. Conclusion: Harmonising Financial Goals with Purposeful Values
Integrating values-based investing with IWM creates a balanced financial approach that merges economic objectives with positive social impact. Both frameworks emphasise financial returns that extend beyond personal gain, focusing on positive contributions to society and the environment.
Investors can engage with IWM solutions offered by Maybank to tap into the opportunities for values-based investing. Some of the solutions by Maybank’s IWM offerings include Islamic Current and Savings Accounts, Islamic Time Deposits, Shariah-compliant investment options like Islamic Unit Trusts, Islamic Bonds (sukuk), Islamic Structured Notes, Islamic Dual Currency Investments, and more.
These products empower investors to align their financial goals with ethical investing principles, fostering growth while maintaining a commitment to values-based practices.
Maybank has demonstrated a strong commitment to providing ethical and Shariah-compliant solutions through competitive and widely accessible product offerings. Moreover, by adopting values–based investing within the Islamic Wealth Management framework, investors can contribute to creating a more equitable and sustainable financial landscape.
We encourage you to explore how values–based investing can enhance your financial journey. Maybank’s IWM services provide Shariah-compliant investment products and professional guidance, offering the tools to help you achieve financial growth that aligns with your values.
To find out more about Maybank IWM solutions, get in touch with a Maybank representative or arrange an appointment with their Islamic Wealth Specialists through the following channels:
This article was brought to you in collaboration with Maybank Singapore – Islamic Wealth Management, and has not been reviewed by the Monetary Authority of Singapore.
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