Ethical investment policy
This criterion assesses whether the organization has established and implements a comprehensive policy governing ethical investment of its funds in accordance with Islamic principles. It evaluates the organization's commitment to ensuring that all investments, particularly those of waqf (endowment) assets, avoid prohibited elements while promoting positive social and environmental impact alongside financial returns. Ground policy in Qur’an 4:58 (trusteeship), Qur’an 4:29 (prohibition of unjust consumption), and the preservation of wealth (ḥifẓ al-māl), demanding prudent, transparent, and Shariah-compliant investment. It ensures donor expectations are met per the Code of Fundraising Practice.
- Does the organization have a formal, documented policy for ethical and Sharia-compliant investment approved by the Board?
- What is the defined Shariah screening methodology (ratios, thresholds, data sources) and how are breaches handled?
- When was purification last calculated, approved by the Shariah advisor, and paid out to eligible charities?
- How does the treasury policy set liquidity buffers by fund type (especially for Zakat) and how is compliance monitored?
- Do investment manager mandates include specific Shariah and ESG stewardship clauses, and is there evidence of voting/engagement?
- How are the financial and ethical performance of the investments regularly reviewed, reported, and used to improve the policy?
- The official, board-approved Ethical/Sharia-compliant Investment Policy document.
- Shariah screening reports and investable universe files.
- Shariah non-compliance/breach register with remediation actions.
- Purification calculation working papers, Shariah advisor approval, and proof of payment.
- Treasury dashboard showing liquidity buffers and counterparty exposures.
- Investment manager IMA/mandate clauses covering Shariah + ESG + stewardship.
- Annual reports detailing financial, social, and environmental performance (SORP aligned).
| Level | Rating | Description |
|---|---|---|
| 5 | 5/5 | Recognized leader: External verification (e.g., PRI), public case studies, open-source sharing, and evidence of engagement outcomes. |
| 4 | 4/5 | Advanced implementation: Annual Shariah assurance, purification reporting, ESG KPIs, and documented policy reviews. |
| 3 | 3/5 | Defined governance: Investment Committee with ToR meets quarterly; policy implemented with evidence of screening and purification. |
| 2 | 2/5 | Basic policy: Documented negative screening exists but implementation is inconsistent; lacks formal purification or liquidity controls. |
| 1 | 1/5 | No ethical investment policy, significant non-compliance, or ad-hoc approach only. |
Discussion (1)
📋 **Version updated: 1.0.0 → 2.9.7** **Changes:** Updated islamic_references from mizan-297.json
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