A more sophisticated approach to ESG is helping pension providers develop better faith-based solutions, particularly for Muslim members.
In a presentation at Corporate Adviser’s Master Trust & GPP Conference, Aviva’s investment proposition workplace lead Umar Yaqoob unveiled the provider’s new glidepaths: Shariah Consolidated glidepath and Shariah Drawdown.
Yaqoob told the audience that Muslim members had traditionally been “underserved” by the pension industry. While most providers will offer a self-select option to a single fund this has typically been a 100 per cent equity only offering.
Yaqoob said Aviva wanted to ensure Muslim members also had access to a solution that offered a comparable risk and return profile throughout their retirement journey. Aviva’s new glidepaths invest across a range of HSBC Shariah-compliant funds: Shariah Long Term Growth, Shariah Growth, Shariah Consolidation and Shariah Drawdown.
Yaqoob said that as well as looking at risk, and risk-adjusted returns, the glidepaths should also address the different ways that people access their pension, hence the launch of the Shariah Drawdown option. He says: “As DC comes to the fore and people retire with large pots this will skew members access through to drawdown.”
Yaqoob explained some of the key terms relating to Shariah investment strategies. As he pointed out, on its most simplistic level this is based on two simple principles: Halal and Haram.
“These are Arabic terms used in Islam to describe what is permissible and what is forbidden under Islamic law. Haram includes things that are forbidden or unlawful.” He pointed out that this includes a ban on interest (Riba), speculation and gambling (Maisir) and uncertainty (Gharar).
He added: “If you screen out all Haram activities, one one level you could say it is basically good to go, but it is important to know more.” He gave the example of one Chinese retailer manufacturing sportswear. “Such activity is not deemed haram. But when we looked in more detail there were issues arising from the supply chain, for example poor working conditions. In many ways this is similar to ESG investment strategies, it is not all about exclusion and screening out stocks, but investing to deliver positive outcomes, looking at issues of fairness, community welfare and sustainability.” Such issues were important to many pension savers he said, including Muslim members.