Part 8: Building a Portfolio That Reflects You — Values, Beliefs, and Sharia-Compliant Investing
You’ve built a diversified portfolio. But something still feels off.
You hold certain values. You may care about environmental impact. You may want to invest in line with your faith. You may prioritise social responsibility.
Many investors want their portfolio to reflect their values rather than contradict them.
The Power of Values-Based Investing
This isn’t only about ethics. It’s also about long-term business quality.
Research and market experience often suggest that companies aligned with strong values may benefit from:
- Attracting and retaining talent
- Stronger brand trust
- Lower exposure to regulatory or reputational risk
- More sustainable business practices
That said, outcomes vary, and values alignment does not guarantee performance. Values-based investing is about alignment first, with potential financial implications over time.
Sharia-Compliant Investing
For many Muslim founders, Sharia-compliant investing is a requirement. Islamic finance follows defined principles.
Commonly excluded activities include:
- Alcohol, tobacco, gambling, pork
- Conventional banking and interest-based lending
- Weapons and defence manufacturing
- Companies with excessive leverage
Commonly favoured areas include:
- Healthcare
- Technology
- Renewable energy
- Ethical business practices and strong governance
nsave’s Sharia Rating
When browsing stocks and ETFs on nsave, a Sharia rating is displayed.
This rating provides informational guidance on:
- Whether an investment may align with Sharia principles
The degree of alignment based on available data
For example, a company may be rated 85% Sharia-compliant if most of its activities are halal, with limited non-compliant revenue. These ratings are not religious rulings, but tools to support informed decision-making.
ESG Investing (Environmental, Social, Governance)
ESG investing is a broader framework used by many investors. Companies are often assessed on:
- Environmental: emissions, resource use, climate impact
- Social: labour practices, community impact, diversity
- Governance: board structure, ethics, executive oversight
Historically, some ESG-focused funds have shown resilience during periods of stress, though performance varies by fund and time period.
Building a Values-Aligned Portfolio
The following framework is illustrative only, not a recommendation.
Step 1: Identify your values
What matters most to you?
- Environmental impact
- Social responsibility
- Faith-based alignment
- Specific sectors such as healthcare or technology
Step 2: Identify ETFs that align
ESG-focused examples:
- iShares MSCI USA ESG Optimized ETF (ESGU)
- iShares MSCI USA ESG Select ETF (IUSG)
Climate-focused examples:
- iShares Global Clean Energy ETF (ICLN)
- VanEck Global Climate Leaders ETF (CLIN)
Sharia-compliant examples:
- SP Funds S&P 500 Sharia Industry Exclusions ETF (SPUS)
- Wahed FTSE USA Shariah ETF (HLAL)
- iShares MSCI World Islamic ETF (AISLX)
Socially responsible examples:
- iShares MSCI USA Socially Responsible ETF (DSI)
Step 3: Build your core around values
Some investors choose to replace broad market ETFs with values-aligned equivalents. For example: Instead of a standard S&P 500 ETF, some choose an ESG-optimised or Sharia-compliant version.
These funds track similar markets but apply additional screening criteria. Performance may be similar, higher, or lower depending on the period.
Step 4: Avoid conflicting holdings
Values-aligned investing often involves reviewing overlap.
For example: Owning a clean-energy ETF alongside a fossil-fuel-focused ETF may conflict with stated goals.
Some investors simplify by prioritising alignment over breadth.
The Performance Question: Do Values Hurt Returns?
This is a common question. Historical data shows:
- Many ESG-focused funds have broadly tracked traditional indices over long periods
- Sharia-compliant funds have often shown comparable market behaviour
- Sector-specific funds (e.g. climate) can outperform or underperform depending on market cycles
There is no guarantee of outperformance. Values-based investing is primarily about alignment.
Sample Portfolios (Illustrative Only)
Sharia-Aligned Example:
- 50% SPUS
- 20% IEMG (screened for Sharia compliance)
- 15% BND
- 10% AISLX
- 5% ICLN (subject to individual interpretation)
ESG-Focused Example:
- 50% ESGU
- 20% IUSG
- 15% BND
- 10% ICLN
- 5% individual stocks with strong ESG characteristics
These examples are for educational purposes only.
The Conviction: Values and Alignment
Many investors find that aligning investments with their values helps them stay committed over the long term. Rather than choosing between beliefs and participation in markets, values-based investing aims to integrate both.
Your Values-Aligned Action Plan
- Define what matters most to you
- Explore ETFs aligned with those values
- Build your core with alignment in mind
- Review for contradictions
- Hold with a long-term perspective
Alignment can support discipline, clarity, and long-term engagement.
This content is provided for informational and educational purposes only and does not constitute financial advice. Investments involve risk, including the potential loss of capital, and past performance is not indicative of future results. Any examples or data are for illustrative purposes only. Before making any investment decisions, consult a licensed or qualified financial advisor who can assess your individual financial circumstances and objectives.
