Prudential Ethical Investing (PEI) stresses the importance of due diligence and transparency around investment structures, processes and reporting; while integrating the analysis of environmental, social and governance (ESG) criteria in the investment process, the company said.
Sedco said the strategy seeks to avoid high financial risk and aims to enhance long-term, risk-adjusted returns.
International investors can choose from over 14 Sharia-compliant investment strategies based in Luxembourg.
Shariah outperformance
Hasan al Jabri, chief executive of Sedco, said: “We have pioneered [a PEI] approach that ensures we invest in companies that have strong governance, clear structures, and a prudent level of leverage.
“In short, while we target strong returns and performance, we ensure that our investments benefit society, comply with Shariah and ESG investment principles, while avoiding excessive leverage and non-transparent investment structures.”
Al Jabri, who has been developing the PEI approach since 2013, recently oversaw the publication of a seminal White Paper, entitled ‘How can Responsible Investors Benefit from Islamic Criteria?’.
The paper looked at the performance of responsible investments, Islamic investments and unconstrained portfolios across the US, Europe and Asian equity markets.
The research showed that Shariah-compliant portfolios have outperformed unconstrained and responsible investment strategies over the last decade on an absolute return and risk-adjusted basis across all analysed markets.
Lower leverage / better cash conversion
Christian Gueckel, Sedco’s chief risk officer and author of the White Paper, said: “Our analysis has shown that sector exclusions and balance sheet constraints cause a distinct return profile for Islamic portfolios.
“The lower financial leverage and better cash conversion result in a bias to quality and growth which adds a prudence element to Islamic portfolios.
“Our results show clearly that responsible and unrestricted investors would have performed better using Islamic criteria.”
