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RIM deemed halal investment for religious Muslims

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Halal is an Arabic term used to designate objects and actions which are permissible according to Islamic law. Just as Orthodox Jews will follow kosher laws, religious Muslims have a set of practices deemed acceptable by the religion.

For many religions, there exists an ethical debate about investing in companies that engage in practices that would not be acceptable for followers of the religion to practice. As an investor, you have a responsibility to earn revenue for your clients. Although, if earning that money conflicts with your religious beliefs, you might be inclined to change your investment strategy.

In response to this, Standard & Poor have introduced a sharia-compliant TSX index, looking to tap into the rapidly growing Islamic investor community in Canada and abroad.

The S&P/TSX 60 sharia index re-categorizes equities on the S&P/TSX 60 and excludes all those that do not comply with Islamic law, which is based on the Qur’an. These include companies involved with alcohol, entertainment, pork-related products, tobacco and financial services. As well, companies with certain ratios of cash, leverage, and involvement in non-compliant business activities do not qualify.

Banks are excluded because investors are not allowed to profit from interest, which is considered an unequal distribution of risk.

There are 25 companies on the new index with a combined market capitalization of $328.7 billion, or roughly 73 per cent of total Canadian equity market cap.

Commodities dominate the index, which is very closely tied to its parent. Top 10 holdings include EnCana Corp., Potash Corp. of Saskatchewan and Suncor Energy and of course, Research in Motion.

[Via]