Sustainable, Responsible, and Impact Investing and Islamic Finance: Similarities and Differences

Although Islamic finance and SRI investing appear unrelated, they share key similarities. Emerging trends may enable financial services providers to develop products that satisfy criteria of both approaches. This publication analyzes points of convergence that favor the inclusion of ESG principles in Islamic finance.

Islamic finance and sustainable, responsible, and impact (SRI) investing may appear to be completely unrelated approaches. Islamic finance prohibits riba (lending at risk) and excessive gharar (sale of risk). SRI investing has environmental, social, and governance (ESG) considerations at its core, but it still depends on conventional financial concepts of investing. Surprisingly, however, Islamic finance and SRI investing have profound similarities.

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