Madina to Wall Street: World's first Shariah-compliant ESG Index launches

Business Recorder

22-04-2025

During the 45th AlBaraka Islamic Economics Symposium in Madina, two organizations – the AlBaraka Forum for Islamic Economy and Spectreco LLC, a U.S.-based sustainability and technology firm – signed an agreement to launch what they call the world's first Shariah-compliant ESG Index, the firm announced in a press release on Tuesday.
The initiative, announced in the presence of Prince Faisal bin Salman Al Saud, Governor of Madina, and senior figures in Islamic finance, marks a significant step in the evolution of values-based investing.
Faraz Khan MBE, CEO of Spectreco and a long-time advocate for sustainable finance, described the collaboration as a 'powerful intersection of tradition, innovation, and global impact.'
'The world is becoming regulated through ESG laws and frameworks and Islamic economy works through shariah,' Khan told Business Recorder.
'In the space of sustainability the fundamentals of both world regulations are the same. So we become a bridge in the space of sustainability and ESG laws between two worlds and developed an index that aligns the investor, business and regulators from both worlds together,' he added.
The agreement merges Islamic finance principles with contemporary Environmental, Social, and Governance (ESG) standards – an intersection that stakeholders believe is long overdue.
'Islamic finance weaves together responsibility, sustainability, and transparency,' Sheikh Yousef Hassan Khalawi, Secretary-General of the AlBaraka Forum, was quoted as saying in the press release. 'Through this partnership, we are building a legacy that values both people and the planet.'
A platform rooted in faith and technology
Unlike conventional ESG indices, this new framework will incorporate Maqasid al-Shariah – the ethical objectives of Islamic law – into its screening and reporting processes. It also promises to use AI-driven analytics, developed by Spectreco, to provide real-time ESG data aligned with Islamic financial requirements.
The platform will screen investments based on sectoral exclusions, financial ratio thresholds, and environmental and social performance. It aims to serve institutional investors, regulators, and Shariah-compliant asset managers looking to integrate ESG considerations into their portfolios without compromising religious obligations.
Responding to a Global shift
The move comes at a time when ESG investing is gaining traction across both developed and emerging markets. According to industry estimates, ESG assets could surpass $50 trillion by the end of 2025 – but until now, there has been no index offering a faith-based ethical filter for Muslim investors at a global scale.
The Islamic ESG Index will initially target markets in the Gulf Cooperation Council (GCC), Europe, and Southeast Asia – regions with sizable Muslim populations and growing ESG mandates.
By offering dynamic transparency, active monitoring, and automated Shariah screening, the platform is being positioned as a transformative tool for Islamic finance institutions navigating a rapidly changing investment landscape.
'It's not just about meeting global standards,' Khan was quoted as saying in the press release. 'It's about raising them – by showing that faith and sustainability are not mutually exclusive, but deeply compatible.'
'Collaboration through technology for Impact in the space of ESG & sustainability and creating sources of Climate finance drives us as an institution and as team,' he told Business Recorder.
A significant turning point
Observers say the setting of the launch – Madina, one of Islam's holiest cities – was as symbolic as it was strategic. While financial innovation is often associated with hubs like New York, London or Dubai, the message from Madina was clear: ethical finance grounded in spiritual values can originate from the very foundations of faith.
The initiative is still in its early stages, with further announcements expected on implementation timelines and partnerships. But for now, the message is resonating: as the world looks for financial systems that are resilient, transparent, and just, Islamic finance may have more to offer than ever before.