Islamic Banking and Finance in the European Union
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Islamic Banking and Finance in the European Union

A Challenge

Edited by M. Fahim Khan and Mario Porzio

This timely book examines the authorization of Shari’ah-compliant intermediaries as either credit institutions or as investment companies in the European Union.
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Chapter 8: Investing with Values: Ethical Investment versus Islamic Investment

Celia de Anca


Celia de Anca ETHICAL INVESTMENT/SOCIALLY RESPONSIBLE INVESTMENT (SRI) Background Ethical investment can be found with other denominations, including sustainable investment and probably the most popular term socially responsible investment (SRI). Some experts place more emphasis on negative elements in the ethical funds, and a stronger focus on the positive criteria in SRI. Recently, investors have tended to include corporate governance along with social and environment issues, and thus the term ESG (environment, social and governance) investment has also become frequent. However, generally speaking all denominations refer to a particular investment in which, in addition to financial criteria, social, ethical and environmental criteria are also considered. According to the Social Investment Forum, socially responsible investment can be defined as ‘An investment strategy that takes into account a company’s ethical, social and environmental performance as well as its financial performance when selecting and managing investment portfolios’ (Social Investment Forum, 2006). SRI can be traced back to its origins in the Quaker and Methodist religious movements of the nineteenth century. Religious investors have traditionally shied away from being involved in investing in enterprises that produced weapons, or which were in the alcohol, tobacco or gambling industries. In more recent times, in the USA in the 1970s, as a way to oppose the Vietnam War, ethical investment began to take shape. In 1971 the first modern ethical fund was born, the Pax World Fund, founded by a group of university students opposed to financing the war industry with their savings. In this fund all...

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