Our Methodology A holistic approach to screening stocks
To determine the Halal Investors' comfort level investing in a particular asset, the following screens are used to create a Halal Report Card:
1. Business Screen
Does a material part of the company’s revenue come from haram (ex. alcohol, pork, interest)?
2. Financial Screen
Does the company rely on interest to remain solvent?
3. Environmental, Social, Governance (ESG) Screen
We strongly believe in the need for companies to do good for the world, or at least not do harm, in order to be considered comfortable investments. As such an increasingly popular way for investors to evaluate companies in which they might want to invest is ESG criteria:
Environmental criteria considers how a company mitigates risks related to greenhouse gas emissions & air quality, energy & fuel management, water & waste management, and biodiversity impacts.
Social criteria considers how a company mitigates risks related to human & employee rights, access & affordability, customer welfare & data privacy, fair disclosure & marketing, and labor relations & practices.
Governance criteria considers how a company mitigates risks related to business ethics, critical incident & systemic risk management, product design & lifecycle management, and management of legal and regulatory environment.
In practice, we do this by reviewing a company's performance and producing a scorecard using the following criteria:
| Score | Business Screen | Financial Screen | ESG Screen | HI Comfort Level |
|---|---|---|---|---|
| A relatively insignificant (<0.5%) of the business's revenue comes from haram. | Riba is not used while running the company. (Debt/Market Cap ratio less than 1%) | The company has a substantial positive impact on the environment, society and governance. Sustainalytics score less than 10** |
If lowest score across all screens is 5,
HI Comfort Rating is
Entirely Comfortable
| |
| A non-material portion (<5%) of the business’s revenue comes from haram. | Riba is used but is not relied on too heavily to run the company. (Debt/Market Cap ratio less than 33%) | The company has a net positive impact on the environment, society and governance. Sustainalytics score between 10 and 20** |
If lowest score across all screens is 4,
HI Comfort Rating is
Comfortable
| |
| It is questionable (or insufficient information) whether a material part of the business’s revenue comes from haram. | It is questionable (or insufficient information) whether Riba is relied on to run the company. | It is questionable whether the company’s net impact is positive on at least one of the following: environment, society or governance. Sustainalytics score between 20 and 30** |
If lowest score across all screens is 3,
HI Comfort Rating is
Questionable
| |
| A material part (>5%) of the business’s revenue comes from haram. | Riba is relied on to run the company. (Debt/Market Cap ratio greater than 33%) | The company has a net negative impact on at least one of the following: environment, society or governance. Sustainalytics score between 30 and 40** |
If lowest score across all screens is 2,
HI Comfort Rating is
Uncomfortable
| |
| A substantial part (>10%) of the business’s revenue comes from haram. | Riba is relied on very heavily to run the company. (Debt/Market Cap ratio greater than 66%) | The company has a substantial negative impact on at least one of the following: environment, society or governance. Sustainalytics score greater than 40** |
If lowest score across all screens is 1,
HI Comfort Rating is
Entirely Uncomfortable
|
Frequently Asked Questions
How do we determine our ESG ratings?
Our ESG analysis leverages the Sustainability Accounting Standards Board’s (SASB) conceptual framework of sustainability issues which include the following areas: Environment, Social Capital, Human Capital, Business Model & Innovation, and Leadership & Governance.
Environment
- Greenhouse Gas Emissions
- Air Quality
- Energy management
- Fuel management
- Water and wastewater management
- Waste and hazardous materials management
- Biodiversity impacts
Social Capital
- Human rights and community relations
- Access and affordability
- Customer welfare
- Data Security and customer privacy
- Fair disclosure and labeling
- Fair marketing and advertising
Human Capital
- Labor relations
- Fair labor practices
- Diversity and inclusion
- Employee health, safety, and well being
- Compensation and benefits
- Recruitment, development, and retention
Business Model & Innovation
- Product Design and Lifecycle Management
- Business Model Resilience
- Supply Chain Management
- Material Sourcing and Efficiency
- Physical Impact of Climate Change
Leadership & Governance
- Business Ethics
- Competitive Behavior
- Management of the Legal and Regulatory Environment
- Critical Incident Risk Management
- Systemic Risk Management
Are reports considered fatwas?
Our reports are not meant to be understood as a religious ruling (fatwa). Rather, they represent our best effort in trying to identify whether the company in question is engaged in anything forbidden (haram) and to what extent. Based on our analysis, we assign our own comfort level to investing in the company in question. We encourage readers to let us know if we missed anything in the comments or voice their agreement/disagreement by leaving a thumbs up/down.