July 6 (Reuters) - Malaysia-based investment firm Saturna Sdn Bhd and the private sector arm of the Islamic Development Bank on Thursday launched a fund they say combines Islamic and sustainable investment principles.
The dual investment mandate for the new ICD Global Sustainable Fund highlights a trend among Islamic financial firms, which are gradually embracing the concept of socially responsible investing.
Islamic funds have predominantly followed passive filters that exclude sectors such as alcohol and gambling, but environmental, social and governance (ESG) criteria could see them take a more proactive investment approach.
The fund has $36 million in seed capital, with around $30 million coming from an unidentified Malaysian institutional investor. The rest is split between Saturna and the Jeddah-based Islamic Corporation for the Development of the Private Sector (ICD).
Monem Salam, president of Saturna and the fund’s portfolio manager, said it will invest in global equities screened for sharia-compliance, while integrating a proprietary ESG rating system.
He said the initial focus is distributing the fund in Malaysia, but through the ASEAN fund passport - a regional agreement on cross-border investment fund marketing - the goal is to also tap Singapore and later Thailand.
Growth in Islamic asset management may have slowed in some areas, but the new fund could help tap into a wider audience in the responsible investment sector, said Salam.
“Over the next few years, we hope the fund can reach $100 million in size, and we would like that to be majority sourced outside of Malaysia,” the manager said.
ICD will help distribute the fund in markets including the Middle East, Salam said.
Saturna is a wholly-owned subsidiary of U.S.-based Saturna Capital Corporation, which has $3.3 billion in assets under management. (Editing by Richard Borsuk)