Can We Trust Shari‘a-Compliant Funds That Invest in Ethically Controversial Companies?

Answered by Shaykh Muhammad Carr

Question

Many—if not all—Shariah-compliant ETFs and funds, such as MSCI Islamic ETFs, HSBC Islamic Funds, Wahed HLAL, and others, invest in companies like Microsoft, Google, Amazon, Meta, and similar tech giants. These companies raise serious ethical concerns.

Specifically, the companies mentioned are known to provide dedicated technology to Israel, which is directly used in the oppression of Palestinians. Yet, they continue to be classified as Shariah-compliant based solely on their financial metrics and primary business activities.

This raises a critical question: Is it truly halal to rely on such Shariah-compliance certifications and invest in these funds?

Although doing so requires more effort and complexity, I now feel more inclined to handpick individual stocks to avoid supporting such companies. However, this is often not feasible when it comes to a pension, as only Shariah-compliant funds are offered.

What is the recommended course of action in such a situation?

Answer

In the Name of Allah, the Most Merciful and Compassionate.

Thank you for your question.

Allah says,

“So fear Allah all you can, and hear, obey and expend: It were better for your very selves.” [Quran 64,16]

May Allah (Most High) reward you for your ethical stance. Since you cannot maintain the same moral standard regarding pension funds, you may keep the fund while consciously striving for an ideal that meets the spirit of the Law.

Letter of the Law

For a company to be considered Sharia-compliant, its core business activities must adhere to Islamic law.

NPI should not exceed 5% of the company’s total revenue to remain within the Sharia universe. If the NPI surpasses this 5% threshold, the company is typically excluded from Sharia-compliant indices unless mitigating factors exist. [Mufti Ahmad, Senior Sharia Advisor, South Africa; See also AAOIFI]

While companies like Microsoft meet all the qualitative and quantitative measures of compliance, it falls foul of the ethical considerations that you have mentioned. When Tiger Brands was involved in a bread-fixing scandal in 2007, South African Islamic asset managers divested.

In such instances, the spirit of the law has the final say, as opposed to the letter of the law.

Ownership of an Undivided Share

Owning an undivided, unallocated share in a company means that the shareholder holds a proportional interest in the company without owning any specific asset or part of it.

Mufti Taqi says,

“However, it is not permissible to purchase shares in such hotels, restaurants, and airlines [that sell wine] because a share represents an undivided common ownership in all their assets. Thus, the share embodies a portion of these impermissible elements, and it is not lawful for a Muslim to own such a portion. Moreover, the shareholder participates in their commercial activities and profits. Similarly, it is not permissible to sell their shares for the reasons mentioned.” [‘Usmani, Fiqh al-Buyu‘]

While the tech created by Microsoft is not impermissible in and of itself, an owner of Microsoft shares is complicit in funding tech that is used in genocide. This falls squarely under the ambit of the prohibition:

“But do not assist one another in sin and transgression.” [Quran, 5:2]

I pray this is of benefit and that Allah guides us all.
[Shaykh] Muhammad Carr
Checked and Approved by Shaykh Dr. Muhammad Abu Bakr Badhib

Shaykh Muhammad Carr has dedicated his life to studying and transmitting our beautiful deen. His studies have taken him around the globe, where he has benefitted from many luminaries. Under the guidance of his teachers – Shaykh Taha Karan, Shaykh Yaseen Abbas, Shaykh Muadh Ali, and many others – Shaykh Muhammad has grown to appreciate the beauty and benefits of diverse scholarship. He completed his memorization of the Qur’an at Dar al-Ulum Zakariyyah in September 1997 and received an Alimiyya Degree in 2006 from DUAI (Darul Ulum al-Arabiyyah al-Islamiyyah). He is also affiliated with Masjid Auwal in Bo Kaap, Cape Town (the oldest mosque in South Africa), where he serves as a co-imam, and Dar Al-Safa, where he has taught since 2018. As a teacher, he imparts the wisdom of our heritage and tradition by opening the door to students. As an imam, he has the unique opportunity to serve his community in daily life.

In addition to his roles as a teacher and imam, Shaykh Muhammad Carr has contributed significantly to the administrative and advisory aspects of Islamic institutions. Since 2023, he has served as the Administrative Director at The Imam Kurani Institute, contributing to the institution’s growth and development. He continues to pursue traditional Islamic Sciences, possessing a keen interest in Islamic Contract Law and Finance. Shaykh Muhammad has been a Shari‘a Board Member for Islamic Asset Management & Insurance Companies since 2001, aligning financial practices with Islamic principles.