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By MAHMOOD SANGLAY
The genocide in Gaza has exposed a grave fault line in Islamic finance: funds can exclude alcohol, gambling and interest yet invest in companies linked to occupation and warfare.
Can a portfolio be technically halal while enabling injustice today? The uncomfortable answer is yes – if Shariah compliance is reduced to a mechanical checklist.
Most Islamic equity screens apply two essential tests. Firstly, they exclude companies substantially involved in prohibited activities such as alcohol, gambling, pork and conventional financial services. Secondly, they apply ratios limiting interest-bearing debt, interest income and certain liquid assets.
S&P Dow Jones Indices describes Shariah screening as operating primarily at the levels of business activity and financial ratios. These tests matter, but they do not necessarily ask whether an otherwise permissible technology company enables mass surveillance, whether machinery demolishes homes, or whether cloud infrastructure supports military operations against civilians.
That omission creates a troubling result: a company may pass an established Shariah screen while remaining credibly implicated in grave injustice.
This matters to ordinary Muslim savers whose pensions, unit trusts and retirement annuities may expose them to companies they would never knowingly support with their money.
Gaza exposes the ethical gap
In July 2025, United Nations Special Rapporteur Francesca Albanese published From economy of occupation to economy of genocide. The report examined corporations in the arms, technology, construction, energy, banking and investment sectors, alleging that commercial relationships helped sustain Israel’s occupation and assault on Gaza.
The report’s claims are not judicial findings against every company named. They require fair scrutiny and corporate responses. Yet Muslim investors cannot dismiss credible evidence merely because a company’s revenue and debt ratios meet a Shariah board’s numerical thresholds.
The issue became more immediate in March 2026 when UN special rapporteurs wrote to Microsoft. They raised concerns about the company’s continuing provision of products and services to the Israeli military and the risk of corporate involvement in alleged international crimes. The communication noted Microsoft’s termination of some services to Israel’s Unit 8200, while questioning other military relationships.
In its July 2024 advisory opinion, the International Court of Justice concluded that Israel’s continued presence in the occupied Palestinian territory is unlawful. It said states must neither recognise the situation as legal nor render aid or assistance in maintaining it. Although directed at states, this finding deepens the moral questions confronting corporations, asset managers, pension funds and shareholders.
Islam demands justice, not labels
The Quran does not separate lawful commerce from moral responsibility. Allah says in the Holy Quran: “Cooperate with one another in goodness and righteousness, and do not cooperate in sin and transgression.” (Sura Al Ma’idah, 5:2)
This command interrogates more than the product sold. It asks what capital enables, whose suffering generates returns and whether an investor helps sustain wrongdoing.
Allah also commands: “O you who believe! Stand out firmly for justice, as witnesses to Allah, even against yourselves, or your parents, or your kin.” (Sura An Nisa, 4:135)
Justice is not an optional environmental, social and governance overlay imported into Islamic finance. It is a Quranic obligation, even when observing it carries a financial cost.
Nor may outrage become selective or careless. Allah warns: “Do not let the hatred of a people lead you to injustice. Be just; that is nearer to righteousness.” (Sura Al Ma’idah, 5:8) Ethical screening must therefore rely on credible evidence, transparent standards and consistent treatment – not rumour, prejudice or political convenience.
The Prophet ﷺ said: “Help your brother, whether he is an oppressor or he is oppressed.” Asked how an oppressor should be helped, he replied that one should prevent him from committing oppression. (Sahih Bukhari)
For shareholders, prevention may mean voting, engagement, filing resolutions, demanding disclosure or divesting when a company refuses to end harmful conduct.
The higher purposes of Shariah
Classical scholarship provides no basis for treating compliance as a triumph of form over justice. Ibn Al-Qayyim wrote that Islamic law is “all about wisdom and achieving people’s welfare in this life and the afterlife” and “all about justice, mercy, wisdom, and good” (Auda, 2008: 21). Jasser Auda cites this formulation in Maqasid al-Shariah: A Beginner’s Guide, drawing on Ibn Al-Qayyim’s I‘lam al-Muwaqqi‘in (vol 1, p 333). Applied to finance, it challenges an approach that certifies legal form while ignoring systemic harm.
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Imam Al-Shatibi held that the consequences of actions must be considered when rulings are applied. Drawing on Al Shatibi’s principle of ma’alat al-af‘al published in the International Journal of Islamic Thought (vol 14, 2018, pp 52–59), the author argues that an investment’s moral assessment should not stop at its contract, sector classification or balance sheet. Its reasonably foreseeable effects must also be subjected to ethical scrutiny.
Imam Al-Ghazali identified the protection of faith, life, intellect, progeny and property as fundamental objectives of Shariah (Salek, 2015: 364). A financial product that protects an investor’s wealth while contributing to the destruction of other people’s lives, homes or livelihoods contradicts that integrated vision.
A higher standard is emerging
The ethical standard within a political framework may be long overdue, but signs are emerging of an industry may be responsive. In January 2026, Wahed launched two exchange-traded funds combining conventional Shariah screening with an additional Islamic values-based ethical review. Its framework considers human rights, dignity, accountability for harm and responsiveness to injustice. Wahed specifically references the United Nations Office of the High Commissioner for Human Rights (OHCHR) Databases and Occupied Palestinian Territory (OPT) as a source for developing its filter for ethics. The development is an admission, in practice, that traditional screens alone do not answer every ethical question.
No system will eliminate difficult judgements. Divestment may surrender shareholder influence; engagement can become an excuse for indefinite inaction. Evidence may be contested, corporate supply chains opaque and indirect exposure hard to trace.
Nevertheless, Islamic asset managers should publish their human-rights criteria, controversial holdings, engagement decisions and firm escalation and divestment procedures. Shariah boards need access to expertise in human rights, international law, labour, climate and supply-chain accountability alongside jurisprudence and finance.
Investors must ask harder questions: What does this company do? Who uses its products? Has credible evidence linked it to oppression? What corrective action has it taken? What does the fund manager know, and what is it doing?
A halal certificate should begin moral inquiry, not end it. An investment worthy of Islam must be lawful in structure, responsible in consequence and aligned with universal justice. Otherwise, Shariah compliance becomes a reassuring label placed over profits that the conscience should reject.
