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.
| Metric | Ethical Investment Scorecard |
|---|---|
| Target | 100% Compliance / 0 Breaches |
| Frequency | Quarterly |
| Method | Composite: % Screened, # Breaches, Purification Disclosed, Liquidity Adherence |
| Unit | Composite |
Level 1: Initial/Ad-hoc
No formal policy exists. Investment decisions are made on an ad-hoc basis with an informal understanding to avoid obviously prohibited (haram) activities.
Level 2: Developing
A basic, documented ethical investment policy exists, primarily focusing on negative screening (avoiding haram sectors). Implementation is inconsistent; purification and liquidity controls are absent.
Level 3: Established
A defined governance structure is in place: an Investment Committee with Terms of Reference meets at least quarterly. The policy includes clear screening and purification methodologies and is consistently implemented.
Level 4: Advanced
Advanced implementation: The organization publishes an annual Shariah compliance assurance statement, reports purification totals, and tracks ESG/impact KPIs. Policy is reviewed annually with documented improvements.
Level 5: Optimizing
Recognized leader: The organization benchmarks against global standards (e.g., PRI), shares policy templates open-source, and provides evidence of engagement outcomes driving ethical change in the market.
Organisation Types
By Organisation Size
| Size | Applicability | Notes |
|---|---|---|
| Micro | exempt | Charities of this size do not hold significant investable assets requiring complex screening methodologies or Shariah advisors. |
| Small | exempt | Unlikely to hold complex investment portfolios; any cash reserves are typically held in standard Islamic bank accounts rather than actively traded. |
| Medium | partial | A basic ethical investment policy is required if holding investments, but dedicated Shariah advisors and complex AAOIFI screening methodologies are disproportionate. |
| Large | full | |
| Major | full |
Applicable When
- Organization has a significant investment portfolio
- Organization manages waqf assets
- Organization collects and distributes Zakat or Sadaqah
Not Applicable When
- Organization holds no investable reserves or endowments
- Organization uses only current accounts for immediate operating cash with no investment activity
Discussion (1)
📋 **Version updated: 1.0.0 → 2.9.7** **Changes:** Updated islamic_references from mizan-297.json
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