Johns Hopkins event promotes Islamic finance, SRI

3/10/2014 4:00:35 PM

On Tuesday, February 25th, a group of government officials, academics, professionals, and students crowded into Rome Auditorium at 6:00 pm on the Washington, DC campus of Johns Hopkins University’s School of Advanced International Studies. They were there to hear panelists explore the interplay between Islamic finance and socially responsible investing, or SRI. The event, sponsored by the DC Interfaith Network and the Student Middle East and North Africa Club at Johns Hopkins University, aimed to demystify the sometimes misunderstood concept of Islamic finance and investing.

“The original title of the event was, ‘Islamic Finance and Socially Responsible Investing: What we can learn from each other,’” said a representative from Azzad Asset Management, one of the expert organizations presenting at the event. “We prevailed upon the organizers to change the second part of the title to ‘An evening of dialogue and learning’ because Islamic finance is already part and parcel of SRI investing. Faith-based investing of many varieties has always been a part of the movement. It speaks to the important and long-standing tradition of social justice.”

(Left to right)
Jeremy Pearce, Progressive Asset Management Group, the Socially Responsible division of Financial West Group
Ambereen Mirza, University of Maryland College Park
Joshua Brockwell, Azzad Asset Management

Indeed, modern SRI investing in the United States traces its roots to the Quaker and Methodist denominations of Christianity. But more generally, religion from its very beginning has been an important catalyst for social reform, often taking on vested economic and financial practices that exploited the underprivileged. That was the focus of comments made by the Azzad representative, who also presented the way in which his firm applies the principles of Islamic finance to mutual fund management. In 2010, Azzad Asset Management launched the Azzad Wise Capital Fund (NASDAQ: WISEX), the Shari’ah-compliant equivalent of a conventional short-term bond fund. The Fund, which invests primarily in Islamic bank deposits and Sukuk, is the first Islamic, socially responsible fixed-income mutual fund in the United States.

Other panelists included representatives from the University of Maryland – College Park and Progressive Asset Management, a Washington, DC-based socially responsible financial services firm.

Those speakers took on the thorny issue of the performance of SRI strategies and what sort of return investors might expect from SRI investments going forward. They cited academic research demonstrating that companies with good corporate policies often make sound investments. And they went on to say that by excluding companies that expose themselves to social and environmental risks, investors can contribute to their overall investment success without compromising their values.

SRI Growth in America
Over the past few decades, SRI investing has grown faster than the broader universe of professionally managed investments in the United States. According to data compiled by the Forum for Sustainable and Responsible Investment and outlined during the panel discussion, between 1995 and 2012, professional SRI-managed assets increased 486 percent, while total assets under professional management grew at a more modest, though notable, rate of 376 percent. SRI assets currently represent 11.3 percent of the $33.3 trillion in total assets under management tracked by Thomson Reuters Nelson. 

 

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Investments in smaller and medium sized companies involve additional risks such as limited liquidity and greater volatility. Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. Investments in lower rated and non-rated securities present a great risk of loss to principal and interest than higher rated securities.

The Azzad Wise Capital Fund is non-diversified with a high concentration of securities in the financial sector which can expose the Fund to more volatility and/or market risk than diversified funds. The Fund may not achieve its objective and/or could lose money on your investment in the Fund. The Fund mainly invests in securities issues by foreign entities which expose the Fund to country specific risks such as market, economic, political, regulatory, geographical, and other risks. The Fund intends to invest in certain instruments that may be illiquid. As a result, if the Fund receives large amount of redemptions, the Fund may be forced to sell such illiquid investments at a significant loss to be able to meet such redemption requests. See the prospectus for more details about risks.