Thursday, January 20, 2022
ReportIslamic ESG universe expands with addition from Shariah robo-advisor

Islamic ESG universe expands with addition from Shariah robo-advisor

Islamic robo-advisor Wahed has become the first Halal digital investment manager to debut NASDAQ’s first Shariah compliant environmental, social and governance (ESG) exchange-traded fund (ETF), expanding the universe of Islamic ESG investment instruments.

The ETF, which began trading on the 7th January 2022, is known as the Wahed Dow Jones Islamic World ETF (ticker: UMMA), investing in international ex-US stocks. It is the second ETF Wahed has launched, the first being the Wahed FTSE USA Shariah ETF which was launched in 2019. There are two notable developments for this new launch: it provides Wahed with global exposure, as the fund will benchmark the Dow Jones Islamic Market International Titans 100 Index, and also expands the robo-advisor’s screening beyond Halal stocks to include an ESG filter, an investment stream which is gaining phenomenal traction internationally.
“We believe our new fund provides investors a highly personalized investing experience that is more true to their theological beliefs,” said Samim Abedi, the chief investment officer at Wahed.

“The line between ethical, socially responsible and ESG investing has appeared to blur, and we are excited to seek to provide investors a vehicle to diversify their portfolio with international investments that align with even more of their beliefs. By bringing these values-based investment principles together, we believe we are addressing a clear gap in the market for an international Shariah compliant fund managed through an ESG investing lens.”

UMMA was launched in partnership with the US Bank’s Listed Funds Trust and Dow Jones. The Dow Jones Islamic Market International Titans 100 Index is an index of the largest Shariah compliant non-US companies in emerging and developing markets. With an expense ratio of 0.65%, constituents are screened using RepRisk, an ESG data science solution combining machine learning and human intelligence.

The Islamic ESG sector is a fast-growing area with Islamic financial institutions as well as agnostic players making a bid in this game: apart from governments such as Indonesia and Malaysia issuing green and sustainable responsible investment (SRI) Sukuk, there have also been Islamic ESG/SRI funds as well as other developments including the formation of the High Level Working Group on Green Sukuk at COP26 [2021 United Nations Climate Change Conference] last year and the Turkish government mandating the design of a sustainable finance framework to facilitate ESG Sukuk and bonds.


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