Islamic Australia Index opens doors to 'sharia-compliant' portfolios

The Thomson Reuters Crescent Wealth Islamic Australia Index is a newly launched benchmark that covers more than 140 ASX-listed stocks with a combined market capitalisation of about $160 billion. It joins other major global Islamic indices and is designed to help investors build sharia-compliant Australian equity portfolios.

The index was launched by Thomson Reuters in partnership with Crescent Wealth. It matters because it provides a formal, rules-based way for local and foreign investors to identify Australian shares that align with Islamic investment principles, and it comes ahead of potential federal tax guideline changes that could make Islamic investment products easier to offer locally.

ASX-listed companies are screened every three months to ensure they do not earn more than 5% of total revenue from activities the index deems non-compliant. That quarterly screening keeps the index aligned with its sharia-compliant rules.

The index lists non-compliant activities as music production and distribution, adult entertainment, alcohol, cinema and broadcasting, gambling, insurance and financial services, pork and tobacco, and weapons and defence. Companies earning more than 5% of revenue from these activities are excluded.

The index favours resource and energy stocks. The largest single holding is pharmaceutical firm CSL (10.1%). Others in the top weights include Woodside Petroleum (9.5%), Origin Energy (8.7%), BHP Billiton (5.1%) and Rio Tinto (4.9%).

Everyday investors can use the index as a benchmark or starting point to identify ASX stocks that meet sharia-compliant screening rules. Because the index is screened quarterly and lists permitted sectors and exclusions, it helps investors select shares that align with Islamic investment principles or to evaluate potential sharia-compliant products that may be launched.

Yes — Crescent Wealth’s managing director Talal Yassine said Australian companies could attract billions of dollars from global Islamic investment funds. The article also notes Standard & Poor’s estimates Islamic banking assets exceed US$1 trillion globally, indicating substantial potential capital.

The index is reviewed and screened every three months (quarterly). That regular review helps ensure constituents continue to meet the 5% revenue threshold for non-compliant activities, so investors using the index should monitor holdings at least quarterly to stay aligned with sharia rules.