SRI: Muslim Investing Proves Profitable

An interesting article in the SF Chronicle recently described how in spite of the dismal current economic situation, investors adhering to certain Muslim principles have somewhat insulated themselves from the markets’ suffering and have actually made a profit. The article points to many reasons for why this might be, and one in particular really got my attention: “Islamic compliance also precludes investing in things Muslims are expected to avoid, like pornography, tobacco, alcohol and gambling.” So, Muslim investing basically applies social criteria to screen out companies that are involved in industries in disagreement with the Muslim faith. Furthermore, that strategy has proved profitable.

I’m really becoming interested in socially responsible investing, or SRI, and this example of Muslim investing complements what a growing number of investors have realized over the last several years: socially responsible investing allows people to invest according to their values and does not sacrifice financial performance; in fact, studies show that SRI actually outperforms the market (see: The SRI Advantage: Why Socially Responsible Investing Has Outperformed Financially;  essential reading for anyone interested in SRI.).

Whether you are adhering to your faith or simply don’t want to invest in companies with histories of environmental or human rights abuses, a growing body of data shows that this strategy isn’t just good for your conscience, it’s good for your wallet. The SRI market has grown tremendously over the last few decades, and I’m sure will continue to grow as more people become concerned about the environment and other social issues and apply those concerns to their investing habits.