American Muslim Institutions Must Divest, Too.

Muslims in the US have been supporting divestment efforts at universities, but they should also look much closer to home.

Disclaimer: I am in no way providing investment advice in this article 

Over the past few months, students across the United States have demanded that their universities divest from the occupation of Palestine—a move that would withdraw investment in companies and institutions that profit from the dispossession of Palestinians. Muslims throughout the country have been uncharacteristically unified in their support for these important efforts. But why haven’t institutions much closer to home—Masajid, Islamic charities, and other Muslim organizations—also been subject to scrutiny?

One reason for such oversight might be that Muslims and their organizations often invest in “Shariʿa-compliant” mutual funds (including exchange traded funds). Individual Muslim investors often hear about such ‘halal’ investment opportunities from Islamic conferences, booths at fundraisers, or events held at Masajid about religiously permissible investing. For many investors, this approach shifts the burden of ethical decision-making from themselves to investment professionals. 

Standards for Islamic Investing

A significant governing body for Islamic Finance is the Bahrain-based, Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), which has published standards for the industry. Under the standards, haram or prohibited activity must constitute less than 5% of the total income of the company from things like pork, gambling, alcohol and interest to be eligible for investment. While not explicit, the restrictions have been interpreted in the United States to prevent defense industry investments. There is a “purification” requirement where investors are supposed to give away a portion of wealth derived from haram activities. The standards avoid mention corporate complicity with human rights abuses, though some of them, like theft, are plainly prohibited in Islam. However, any company that does prohibited activities, including say, aiding in the theft from Palestinians, would be “halal” if the activity constitutes less than 5% of total income for a company.  

 As the US-sponsored genocide of Palestinians continues to unfold, American Muslims have a unique obligation to hold their own institutions to account and call for divestment. 

AFSC Makes Divestment Easy 

Consumer boycotts have been a perplexing issue for Muslim consumers because of the potentially huge number of companies that could be considered legitimate targets. A discussion of these challenges and boycott criteria are beyond the scope of this article. However, divestment is an easy issue. It is not about which brand of soda one buys, but making sure you don’t invest in certain companies.

The organization that is the clear leader on this is the American Friends Service Committee (AFSC, or the Quakers), which has a list of 75 publicly traded companies that should be the target of divestment because they “consistently, knowingly, and directly enable or facilitate human rights violations or violations of international law as part of prolonged miliary occupations, apartheid, and genocide.” They made this work easy for everyone else; this list is even identified as a go-to resource on the official website of the Boycott, Divestment, and Sanctions (BDS) movement.

 Not investing in these companies should be easy enough for awqaf, masajid, Islamic organizations and family foundations. Such people and institutions can pressure funds that market to the Muslim community and nonprofits that accept sponsorships from financial services companies to divest. It should be easy for all of these bodies to adopt investment policy statements that prohibit investments in companies that profit from the obliteration of Palestine and the oppression of the Palestinian people.

How “Islamic Investing” Companies Fare

Unfortunately, express concern about Palestine appears absent in the Muslim financial sector. From my review, not one “Islamic” exchange traded fund or mutual fund has an investment policy that follows AFSC guidelines for an investment policy. 

Amana and Azzad come out okay 

Neither Amana Mutual Funds nor Azzad Funds currently invest in any companies on the AFSC list from what I have seen. However they have not been explicit about this as being a restriction.  

Even so, both funds have been managed in a way that appears to be thoughtful to the concerns of the Muslim community in ways that go beyond the mechanical screens.  

Other “Shariʿa-compliant” investment companies undeniably invest in the occupation and have ignored Palestinian civil society’s call for Boycott, Divestment and Sanctions (BDS) against those who are focused on supporting the regime of apartheid, occupation and genocide. 

ShariaPortfolio 

One surprising company that ignores the AFSC list is ShariaPortfolio. ShariaPortfolio  invests in Chevron, which extracts gas off the coast of Gaza. According to AFSC, this activity has exacerbated the blockade of Gaza and is potentially pillaging Palestinian resources. 

Sharia Portfolio's offending investment is found in its SPUS ETF, which is the S&P 500 stocks along with a “Sharia Industry Exclusions Index” which Sharia Portfolio claims was “co-developed” by S&P Dow Jones Indices LLC and SP Funds. Though Sharia Portfolio set up the process and appears to have gone through more than one check for Shariʿa compliance, including a certificate of compliance, the fund itself is “passively managed.” This means based on the parameters set by the manager, the buying and selling of securities held by the fund happens automatically.  I am informed Sharia Portfolio’s “actively managed” accounts do not contain Chevron or any other BDS offending company, but that list of investments is privately held.  

Iman Funds/ North American Islamic Trust 

Iman Funds, another Sharia-compliant fund provider, also invests in Chevron. Iman is special since the North American Islamic Trust (NAIT), a substantial waqf (endowment) in the American Muslim community that owns title deed to hundreds of Masajid in North America, also owns a “substantial portion of the shares of the fund” according to Iman’s prospectus. 

Wahed 

Wahed Investments, which I have written about previously in connection with their fine for “fraud or deceit” on its Shariʿa practices invests in both Chevron and Valero energy, another component of the S&P 500. According to AFSC, Valero provides jet fuel for planes that kill civilians and destroys the civilian infrastructure of Palestine. This does not violate any principles in Wahed’s prospectus and scholars have certified that investing with this company is somehow certified halal.  

Blackrock

For Muslims outside the United States, Blackrock has a few “Islamic” exchange traded funds (EFT), including a US ETF. Not only do these funds have zero qualms about investing in Palestinian subjugation, but the company also itself is strongly committed to the concept. Notably, not using Blackrock for investments was a key divestment demand from students at the University of California, Los Angeles.

It would be mystifying if Muslim investors had trouble with investing in a company that made more than a certain percentage of profits from selling pork products but did not worry even a little bit about how they may be invested the destruction of Muslim places of worship, schools and hospitals.  

Why no Palestine Investment Policy?

Azzad and Amana seem “clean” in the sense that they do not invest in companies that are known by AFSC to profit from the system of apartheid and genocide in Palestine. It should be easy for them to incorporate the AFSC list formally in their investment criteria.   

For investing companies that market to Muslims and for whatever reason are investing in the occupation of Palestine, it may be a good time to stop.  They should change their policies and announce they are divesting from companies on the AFSC list.  

These funds are run by for-profit companies exploiting a market for “Islamic investing.” Unless these companies also know that for Muslim investors, including Muslim institutions with investments, that there is no such thing as “Islamic investing” that disregards Palestine, they will not bother to change course. I accept that many Muslim leaders, until now, did not know their investments may be helping the occupation.  The question is, do Muslim institutions and leaders care enough to demand this state of affairs to change?  

If they do care, Muslim leaders have many tools at their disposal. They can require that financial services companies can only advertise and rent out Muslim spaces if they have a divestment from occupation policy in place.  Muslim public figures, who have been compensated to act as “advisors” or pitchmen for the funds can stop doing so, and demand that their names and likenesses be removed from current marketing materials, websites and social media until these funds have cleaned up their act. 

This is far easier than making demands of Harvard’s or the University of California’s endowments. This is our community, or wealth. Ending all investments in the occupations should not be a difficult lift.

If students demand major universities in the United States divest, maybe your Masjid’s waqf account should as well??