Shariah-compliant funds and ethical issues

Assalamu Alaikum,

There are many cases where individuals would prefer to invest with a “hands-off” approach such as just choosing a halal ETF or mutual fund. However, I’ve noticed pretty much every one available to me tends to invest in some companies that are very questionable from an ethical point-of-view (many pharmaceuticals, certain companies for their political support/views, companies involved in child labor, environmental controversies, etc). I personally like to avoid investing in such companies, but when it comes to passive investing there are not much options.

I had a few questions in this regard:
1 - Would it be permissible to invest in such companies, or would it be considered assisting in and contributing towards harm?
2 - Is it okay to recommend such investments to others, with the intention that it would be the lesser of the two evils (e.g. if they are not currently investing in Shariah-compliant options)?

JazakAllah khair

Wa Alaykum Salaam,

If an ETF is certified as Shariah compliant, the Shariah board would have taken into consideration all Shariah related matters. Therefore, if it is Shariah compliant, it will be permissible to invest in and also recommend to others.

Allah knows best

Assalamu Alaikum,

Would this also hold true for pharmaceutical companies specifically? To be honest - it seems like some of them are playing games with the lives of people (especially in poor countries). There’s been controversies around price gouging, illegal marketing, hiding data from studies, testing drugs without informing people of risks, etc it seems like profits are prioritized at the expense of people’s health and well-being. But I know many of these companies are approved by Shariah boards, and if they are not, it’s usually due to debt.

Assalaamu alaykum,

A Shariah board reviews the structures, activities and agreement, it does not go down to the actual field practices. Of course, if any evidence was presented to the Shariah board, then that would most definitely be considered by the board in their audit.


I think it would be helpful to elucidate more on what ethical issues shariah boards consider when giving their approval. For example whilst oil companies are generally shariah compliant, there are wider moral/environmental concerns over whether we should be encouraging fossil fuel production due to the impact it has.

It is a similar concern in the food industry whereby certain meat may be halal in relation to how it is slaughtered, however the conditions within which the animal was raised does not necessarily make it tayyib insofar as battery farming, hormones etc.

Do shariah boards take these issues into consideration or do they simply look at whether the activity of the company is itself halal and it is for the investor to consider whether they wish to invest from an ethical/environmental/moral perspective?

Assalamu Alaikum,

I can definitely start informing Shariah boards of some of these issues and encouraging them to take this into consideration.

But back to my original question, I’m in a bit of a dilemma. If I want to do passive investing, or if I want to share halal investing options with friends/family to encourage them to switch out of haram investments, all options available to me include such companies some of which are embroiled in a long list of controversies if you simply read their Wikipedia or Google their name. Although it’s definitely not ideal, would investing in such funds still be halal until better options are available?

I also have a second question - shouldn’t these types of issues actually be more relevant in determining the halal status of a company than whether they have 32% debt (permissible) or 34% debt (impermissible)? I have noticed some companies with much better track records (much less harm!) deemed impermissible as they were slightly over the debt ratio, while companies that are engaged in severe unethical behavior over and over again are amongst the top 10 holdings in many halal ETFs because they have slightly less debt - this doesn’t seem right.

JazakAllah khair