Opportunities to invest in Shariah-compliant investment vehicles are expected to grow as the focus on environmental, social and governance (ESG) principles increases, according to INVESCO.

Islamic finance has seen rapid growth and investor interest in the last few years, with growth in the number of products on offer, the investment management company said.

Islamic exchange traded funds (ETFs) overall had a record year in 2021 with more than 900 new launches worldwide and over $1 trillion in global net inflows, taking assets under management to $9.9 trillion at the end of November, said Dr Chris Mellor, head of EMEA ETF Equity and Commodity Product Management.

“ETFs are reputed for being simple, relatively cost-effective and efficient investment vehicles to gain exposure to diverse products, which drives much investor appeal. 

“Beyond these favored characteristics, we can attribute the incredible demand that we’ve seen in 2021 to a handful of major trends, namely the rebound of global economies, the rise in stock market performance, and the increasing interest in environmental.”

He added: “We expect continued strong demand for ETFs with an ESG focus as investors seek investment strategies that provide exposure to companies that have a positive social and environmental impact.”

Zainab Kufaishi, head of Middle East and Africa, Invesco, said: “As investors around the world have started to factor sustainable considerations in their investment solutions, especially as we come out of the COVID pandemic, we have seen a rising demand for Shariah-compliant investment products which by their nature align with responsible, social and ethical values.”

Islamic financial assets were valued $3.374 billion at the end of 2020, up from $2.964 billion in 2019 and $2.2 billion in 2015, according to Refinitiv’s Islamic Finance Development Report 2021.

Growth in the range of Islamic ETFs from managers in the United States and Europe as well as Saudi Arabia, the UAE and elsewhere in the Middle East is contributing to growth, INVESCO said.

(Writing by Imogen Lillywhite; editing by Seban Scaria)


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