The following question and answer by Sheikh Yusuf Talal DeLorenzo attendees of the Dow Jones University Courses on Islamic Investement.
Question:: What is the consensus about investing in Israeli companies, or companies that invest in Israel? Should those not be excluded by the Shari`ah screens like companies that deal with Alcohol, pork, banks, etc...? Salam R Tarek
Answer: To our knowledge there is no Shari'ah dialogue involving investment prohibition against Israeli companies or companies that invest in Israel. The Shari'ah screens do not take political background/identity or religious affiliation into account. The Prophet himself, upon him be peace, is known to have transacted with people of otherfaiths. Following his example, Muslims from that time onwards have transacted withnon-Muslim individuals, institutions, companies, and governments. In the Qur?an Muslimsare taught to abide by their contractual agreements:
O you who believe! Fulfill all contracts (5:1).
The command in this verse has been characterized by the classical scholars of law asunrestricted and comprehensive, such that it applies to all valid contracts, treaties,and covenants. Moreover, this verse is followed by a further teaching on the subject:
Do not allow your dislike of people who would prevent you from (visiting) the SacredMosque to lead you to transgress. Rather help one another in promoting virtue andheedfulness. Do not help one another to sin and enmity. And heed Allah? (5:2)
The Jews and the Christians are accorded special status in the Qur?an which refersto them as People of the Book in recognition of their monotheism and respect forrevelation. See Sura Baqarah, (2: 62).
Finally, the Dow Jones Islamic Market Index is based on criteria from the Shari`ahof Islam for the purpose of providing Muslim investors with a measure of the Shari`ah-compliant market. Considerations related to politics, culture, history, and the like are not relevant to the Index.
Having said all of this, though, it is important to note the difference between an indexand a fund. The purpose of an index is to measure the market and provide a performancebenchmark. A fund, however, is a different matter because it invests the money of Muslimsand puts it to use. Funds have the ability to embargo companies, by screening them out oftheir portfolios, or to engage them, by investing in those companies and then using corporate democracy to leverage their points of view. By means of engagement strategies, a great deal can be accomplished. This is a lengthy subject, but one that deserves further study.