Ethical and Sustainable Investing Principles
Expert-defined terms from the Professional Certificate in Islamic Finance and ESG Investing course at London School of Business and Administration. Free to read, free to share, paired with a globally recognised certification pathway.
Ethical and Sustainable Investing Principles #
Ethical and Sustainable Investing Principles
Ethical and sustainable investing principles refer to an investment approach tha… #
This approach is increasingly popular among investors who want to align their investment decisions with their values and beliefs.
Ethical Investing #
Ethical Investing
Ethical investing, also known as socially responsible investing (SRI), involves… #
These criteria may include environmental, social, and governance (ESG) factors, as well as specific values such as avoiding investments in companies involved in tobacco or weapons production.
Sustainable Investing #
Sustainable Investing
Sustainable investing aims to generate long #
term value by considering environmental, social, and governance (ESG) factors in investment decisions. This approach recognizes that companies with strong ESG practices are more likely to be successful and resilient in the long run.
Environmental, Social, and Governance (ESG) Factors #
Environmental, Social, and Governance (ESG) Factors
ESG factors are criteria used to evaluate the sustainability and ethical impact… #
Environmental factors assess a company's impact on the environment, social factors consider its relationship with employees, customers, and communities, and governance factors look at the company's leadership, risk management, and transparency.
Impact Investing #
Impact Investing
Impact investing aims to generate positive social or environmental impact alongs… #
Investors in impact investing seek to address specific challenges such as climate change, poverty, or inequality by supporting companies or projects that contribute to positive change.
Corporate Social Responsibility (CSR) #
Corporate Social Responsibility (CSR)
Corporate social responsibility refers to a company's commitment to operating in… #
CSR initiatives may include philanthropy, environmental stewardship, and responsible business practices that benefit society and the environment.
Stakeholder Theory #
Stakeholder Theory
Stakeholder theory posits that companies should consider the interests of all st… #
This approach recognizes that businesses have a broader impact beyond just financial returns.
Divestment #
Divestment
Divestment is the process of selling off investments in companies or industries… #
Investors may choose to divest from fossil fuel companies, for example, to protest against climate change or support renewable energy alternatives.
Greenwashing #
Greenwashing
Greenwashing refers to the practice of misleading consumers or investors by prom… #
Investors need to be cautious of greenwashing and conduct thorough research to ensure that their investments align with their values.
Carbon Footprint #
Carbon Footprint
A carbon footprint measures the total greenhouse gas emissions produced directly… #
Investors may consider a company's carbon footprint when evaluating its environmental impact and sustainability practices.
ESG Integration #
ESG Integration
ESG integration involves incorporating environmental, social, and governance (ES… #
This approach helps investors make more informed decisions that align with their values and financial goals.
Positive Screening #
Positive Screening
Positive screening involves selecting investments based on specific ESG criteria… #
For example, investors may choose to invest in companies with strong diversity and inclusion practices or renewable energy initiatives.
Negative Screening #
Negative Screening
Negative screening involves excluding investments in companies or industries tha… #
For instance, investors may avoid investing in companies involved in tobacco, weapons, or fossil fuel production to align their portfolios with their values.
Thematic Investing #
Thematic Investing
Thematic investing involves focusing on specific themes or trends that align wit… #
Themes may include clean energy, water scarcity, gender equality, or other social and environmental issues that investors want to support through their investment choices.
Proxy Voting #
Proxy Voting
Sustainability Reporting #
Sustainability Reporting
Sustainability reporting involves disclosing a company's environmental, social,… #
Investors use sustainability reports to evaluate a company's sustainability practices and transparency.
ESG Ratings #
ESG Ratings
ESG ratings assess a company's environmental, social, and governance (ESG) perfo… #
Investors use ESG ratings to compare companies and make informed investment decisions that align with their ethical and sustainable values.
Carbon Disclosure Project (CDP) #
Carbon Disclosure Project (CDP)
The Carbon Disclosure Project is a global non #
profit organization that works with companies to measure and disclose their environmental impact, particularly on climate change. Investors may use CDP data to evaluate a company's carbon footprint and environmental performance.
United Nations Principles for Responsible Investment (UN PRI) #
United Nations Principles for Responsible Investment (UN PRI)
The United Nations Principles for Responsible Investment is a set of six princip… #
Signatories to the UN PRI commit to promoting responsible investment globally.
Environmental, Social, and Governance (ESG) Investing #
Environmental, Social, and Governance (ESG) Investing
ESG investing integrates environmental, social, and governance (ESG) factors int… #
This approach considers not only financial performance but also the broader impact of investments on society and the environment.
Islamic Finance #
Islamic Finance
Islamic finance refers to financial activities and products that comply with Isl… #
Islamic finance promotes ethical and responsible financial practices that benefit society.
Shariah #
Compliant Investments
Shariah #
compliant investments adhere to Islamic principles and guidelines as outlined in Shariah law. These investments avoid interest-based transactions, speculative activities, and investments in prohibited industries such as alcohol, gambling, and pork products.
Islamic Social Finance #
Islamic Social Finance
Islamic social finance encompasses charitable giving (zakat), endowments (waqf),… #
Islamic social finance promotes ethical and sustainable practices that benefit society.
Environmental, Social, and Governance (ESG) Criteria in Islamic Finance #
Environmental, Social, and Governance (ESG) Criteria in Islamic Finance
ESG criteria in Islamic finance incorporate environmental, social, and governanc… #
These criteria focus on promoting ethical and responsible practices that align with Islamic principles and benefit society and the environment.
Islamic ESG Investing #
Islamic ESG Investing
Islamic ESG investing combines Islamic finance principles with environmental, so… #
Investors in Islamic ESG investing seek to generate financial returns while supporting socially responsible practices.
Sukuk #
Sukuk
Sukuk are Islamic financial instruments that represent ownership in a tangible a… #
Sukuk comply with Islamic principles and do not involve interest payments or speculative activities, making them a popular choice for Shariah-compliant investors.
Halal Investing #
Halal Investing
Halal investing refers to investments that comply with Islamic principles and gu… #
Halal investments are suitable for Muslim investors seeking to align their investment choices with their faith.
Environmental, Social, and Governance (ESG) Screening in Islamic Finance #
Environmental, Social, and Governance (ESG) Screening in Islamic Finance
ESG screening in Islamic finance involves evaluating investments based on enviro… #
This screening process helps Shariah-compliant investors select investments that align with their ethical and sustainable values.
Shariah Advisory Board #
Shariah Advisory Board
A Shariah advisory board consists of Islamic scholars and experts who provide gu… #
Shariah advisory boards ensure that investments and transactions adhere to Islamic principles and guidelines.
Microfinance #
Microfinance
Microfinance refers to financial services, such as small loans and savings accou… #
Islamic microfinance follows Shariah principles and aims to promote financial inclusion and social development.
Socially Responsible Investing (SRI) in Islamic Finance #
Socially Responsible Investing (SRI) in Islamic Finance
Socially responsible investing (SRI) in Islamic finance involves selecting inves… #
SRI in Islamic finance promotes responsible and sustainable investment practices that benefit society and the environment.
Corporate Governance in Islamic Finance #
Corporate Governance in Islamic Finance
Corporate governance in Islamic finance focuses on promoting transparency, accou… #
Good corporate governance is essential for building trust and confidence in Islamic financial institutions.
Islamic Wealth Management #
Islamic Wealth Management
Islamic wealth management involves managing and preserving wealth in accordance… #
Islamic wealth managers help clients create investment portfolios that align with their values and financial goals while ensuring Shariah compliance.
Sustainable Development Goals (SDGs) #
Sustainable Development Goals (SDGs)
The Sustainable Development Goals are a set of 17 global goals adopted by the Un… #
Investors can support the SDGs through impact investing, ESG integration, and responsible financial practices.
Carbon #
neutral Investing
Carbon #
neutral investing aims to offset the carbon emissions associated with an investment portfolio by investing in projects that reduce or capture greenhouse gases. Investors can achieve carbon neutrality through renewable energy projects, reforestation initiatives, and carbon offset programs.
Gender Lens Investing #
Gender Lens Investing
Gender lens investing involves considering gender equality and women's empowerme… #
Investors may support companies that promote diversity, equity, and inclusion in leadership positions, workforce policies, and product offerings through gender lens investing.
Community Development Finance #
Community Development Finance
Community development finance provides financial products and services to unders… #
Islamic community development finance follows Shariah principles and aims to support social welfare projects in Muslim communities.
Green Bonds #
Green Bonds
Green bonds are fixed #
income securities issued to finance environmentally friendly projects, such as renewable energy, energy efficiency, and sustainable infrastructure. Investors in green bonds support climate-friendly initiatives while earning a return on their investment.
Islamic Impact Investing #
Islamic Impact Investing
Islamic impact investing combines Islamic finance principles with impact investi… #
Islamic impact investors support projects that align with Islamic values and contribute to sustainable development goals.
Responsible Ownership #
Responsible Ownership
Stewardship Code #
Stewardship Code
A stewardship code is a set of principles and guidelines that institutional inve… #
Stewardship codes encourage investors to act in the best interests of their clients and society at large.
Environmental, Social, and Governance (ESG) Disclosure #
Environmental, Social, and Governance (ESG) Disclosure
ESG disclosure involves reporting a company's environmental, social, and governa… #
ESG disclosure helps investors evaluate a company's sustainability practices and make informed investment decisions.
Carbon Pricing #
Carbon Pricing
Carbon pricing is a policy tool that assigns a cost to carbon emissions to incen… #
Investors may consider carbon pricing when evaluating the environmental impact and sustainability practices of companies in their investment portfolios.
Islamic Microfinance Institutions #
Islamic Microfinance Institutions
Islamic microfinance institutions provide financial services to low #
income individuals and communities in accordance with Islamic principles. These institutions offer interest-free loans, savings accounts, and other Shariah-compliant products to promote financial inclusion and social development.
Blue Economy Investments #
Blue Economy Investments
Blue economy investments focus on sustainable and responsible economic activitie… #
Investors in blue economy investments support projects that promote ocean conservation, sustainable fisheries, marine renewable energy, and coastal resilience.
Greenwashing Risk #
Greenwashing Risk
Greenwashing risk refers to the potential for companies to mislead investors by… #
Investors need to be aware of greenwashing risk and conduct thorough due diligence to ensure the credibility of ESG claims.
Carbon Disclosure Risk #
Carbon Disclosure Risk
Carbon disclosure risk relates to the potential financial impacts of climate cha… #
Investors need to assess carbon disclosure risk by evaluating a company's exposure to climate-related risks, such as regulatory changes, physical impacts, and market shifts.
Islamic Finance Regulation #
Islamic Finance Regulation
Islamic finance regulation encompasses laws, standards, and guidelines that gove… #
Regulatory bodies and supervisory authorities oversee Islamic finance activities to maintain market integrity and investor protection.
Islamic Socially Responsible Investing (SRI) #
Islamic Socially Responsible Investing (SRI)
Islamic socially responsible investing (SRI) combines Islamic finance principles… #
Islamic SRI investors support companies that adhere to Islamic values and ESG criteria.
Green Sukuk #
Green Sukuk
Green Sukuk are Islamic financial instruments issued to fund environmentally fri… #
Green Sukuk comply with Islamic principles and support sustainable development goals while offering investors a return on investment.
Islamic Environmental Finance #
Islamic Environmental Finance
Islamic environmental finance involves providing financial products and services… #
Islamic environmental finance promotes ethical and responsible investments that benefit the environment and society.
Carbon Trading #
Carbon Trading
Carbon trading is a market #
based mechanism that allows companies to buy and sell permits to emit greenhouse gases within a cap-and-trade system. Investors can participate in carbon trading to support emission reduction efforts and promote sustainable business practices.
Islamic Green Finance #
Islamic Green Finance
Islamic green finance combines Islamic finance principles with green finance ini… #
Islamic green finance supports sustainable projects, renewable energy initiatives, and climate resilience efforts while ensuring financial returns.
Impact Measurement and Reporting #
Impact Measurement and Reporting
Impact measurement and reporting involve assessing the social, environmental, an… #
Investors use impact measurement to evaluate the effectiveness of their investments in creating positive change and achieving sustainable outcomes.
Environmental, Social, and Governance (ESG) Risk Management #
Environmental, Social, and Governance (ESG) Risk Management
ESG risk management involves identifying, assessing, and mitigating environmenta… #
Investors integrate ESG risk management into their investment processes to enhance performance, reduce risks, and align with sustainable practices.
Islamic Crowdfunding #
Islamic Crowdfunding
Islamic crowdfunding platforms enable individuals and organizations to raise fun… #
Islamic crowdfunding follows Shariah guidelines and promotes ethical and responsible investments that benefit communities and support social causes.
Paris Agreement #
Paris Agreement
The Paris Agreement is an international treaty adopted by the United Nations Fra… #
Investors can support the goals of the Paris Agreement by aligning their investment portfolios with climate-related initiatives and sustainability practices.
Islamic Social Impact Investing #
Islamic Social Impact Investing
Islamic social impact investing combines Islamic finance principles with social… #
Islamic social impact investors support projects that address social challenges, promote community development, and create sustainable impact.
Carbon Offsetting #
Carbon Offsetting
Carbon offsetting allows individuals and companies to compensate for their carbo… #
Investors can offset their carbon footprint through renewable energy projects, reforestation initiatives, and other carbon offset programs.
Islamic Sustainable Finance #
Islamic Sustainable Finance
Islamic sustainable finance integrates Islamic finance principles with sustainab… #
Islamic sustainable finance promotes financial inclusion, social development, and environmental stewardship in accordance with Shariah guidelines.
Gender Diversity in Islamic Finance #
Gender Diversity in Islamic Finance
Gender diversity in Islamic finance refers to promoting gender equality and wome… #
Investors in gender diversity support companies that value diversity, equity, and inclusion in their operations and decision-making processes.
Islamic Green Bonds #
Islamic Green Bonds
Islamic green bonds are Shariah #
compliant bonds issued to finance environmentally friendly projects that comply with Islamic principles. Islamic green bonds support sustainable initiatives, climate-friendly investments, and green infrastructure projects while offering investors a return on their investment.
Green Technology Investments #
Green Technology Investments
Green technology investments focus on supporting companies that develop and impl… #
Investors in green technology investments support clean energy, energy efficiency, waste management, and other green solutions that benefit the environment.
Islamic Microfinance Investment Funds #
Islamic Microfinance Investment Funds
Islamic microfinance investment funds pool capital from investors to provide Sha… #
These funds support economic empowerment, financial inclusion, and social development initiatives that align with Islamic principles and values.
Carbon Disclosure Project Investor Initiative (CDP II) #
Carbon Disclosure Project Investor Initiative (CDP II)
The Carbon Disclosure Project Investor Initiative is a global platform that enga… #
Investors in the CDP II support transparency, accountability, and sustainable practices in corporate reporting.
Islamic Sustainable Development Investments #
Islamic Sustainable Development Investments
Islamic sustainable development investments focus on financing projects and init… #
Investors in Islamic sustainable development support initiatives that align with Islamic values and contribute to sustainable development goals.
Green Real Estate Investments #
Green Real Estate Investments
Green real estate investments involve acquiring, developing, or financing proper… #
Investors in green real estate support sustainable building practices, green certifications, and climate-resilient design while generating returns from rental income or property appreciation.
Islamic Socially Responsible Banking #
Islamic Socially Responsible Banking
Islamic socially responsible banking involves providing banking services that co… #
Islamic socially responsible banks offer Shariah-compliant products, support social welfare projects, and adhere to ESG criteria that align with Islamic values and beliefs.
Carbon Reduction Targets #
Carbon Reduction Targets
Carbon reduction targets set specific goals for companies to reduce their greenh… #
Investors can evaluate a company's carbon reduction targets to assess its commitment to sustainability, environmental stewardship, and climate resilience in their investment decisions.
Islamic Environmental Stewardship #
Islamic Environmental Stewardship
Islamic environmental stewardship emphasizes the responsibility of individuals,… #
Islamic environmental stewardship promotes sustainable practices, conservation efforts, and climate action initiatives that benefit the planet and future generations.
Green Supply Chain Investments #
Green Supply Chain Investments
Green supply chain investments focus on supporting companies that implement sust… #
Investors in green supply chain investments promote responsible procurement, waste reduction, and carbon footprint management throughout the supply chain while creating value for all stakeholders.
Islamic Sustainable Agriculture Investments #
Islamic Sustainable Agriculture Investments
Islamic sustainable agriculture investments aim to support farming practices, fo… #
Islamic sustainable agriculture investments aim to support farming practices, food production systems, and agricultural