Islamic Finance vs. Sustainability – Commonalities and Difference

Sustainable Swiss Private Banking since 1841.

Islamic Finance vs. Sustainability – Commonalities and Difference

Amsterdam, 13 November 2009Michael Gassner, Islamic Financial Engineer

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Vatican Newspaper

„L‘Osservatore Romano“

Professor Willem Buiter,

London School of Economics

International Monetary Fund

Islamic Finance intensively discussed …

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Sustainability and Islamic Finance in Harmony

“Sarasin defines Sustainable Management as “the production of goods and services with broad social acceptance using

production methods with a low potential for conflict.”

Reducing risks Seizing opportunities

Sustainability=

+

Ecology

Economy

Society

SustainableInvestments

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Islamic Wealth Cycle and the Products

Disposal

Creation

Preservation

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Islamic Finance, SRI and Sustainability - time to join each other …

Negative Industry Screens

In Common: Do not sin yourself!

Islamic: Alcohol, Interest, Pornography

SRI: Landmines, Child Labour, etc.

Negative Financial Screens

Strength of Islamic Finance

Interest Bearing Instruments

Stocks highly affected by Interest

Derivatives

Financial Weakness, Lack of Liquidity

Positive Screens

Strength of Sustainability

Social Investing; Poverty Alleviation

Energy & Climate, Water, Health,

Consumption, Mobility, Smart Housing

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Bank Sarasin: Financial Screening Criteria (Islamic)

Financial Ratios:

Leverage Compliance: Total Debt / market capitalisation (12 m average) < 33 %

Cash Compliance Level 1: Account receivables / market capitalisation (12 m average) < 33 %

Cash Compliance Level 2: (Cash + Cash Equivalents) / market capitalisation (12 m average) < 49 %

Interest Income to Total Income below 5 %

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Negative Industry Screens Compared

Islamic Finance Sustainability

Pornography Pornography

Tobacco Tobacco

Alcohol Nuclear Energy

Gambling Armaments

Financials (Interest prohibition) Chlorine & agrochemicals

Porc Genetic engineering

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Bank Sarasin Islamic Screening Process

Global Investment Universe

Portfolio Construction

Filtered for accordance with Sharia Law by Islamic Finance team, Bank Sarasin, in conjunction with our Sharia Board consisting of:

Sheikh Dr. Mohamed Elgari, Dr Imran Usmani and Dr Monzer Kahf

Output = Sharia Compliant Global Investment Universe List

Investment strategy of

Sarasin Sustainable Investment®

Risk Controlling:• Style• Tracking error • Security risks• Liquidity

Investment Decision Process

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Consistent Investment Decision Process

Investment Universe

Investment Decision Process

Portfolio Construction

Filter in accordance with

Sharia

Islamic Portfolio

Inconsistent Investment & screening process

Investment Universe

Investment Decision Process

Portfolio Construction

Filter in accordance with

Sharia

Islamic Portfolio

Investment & screening process of Bank Sarasin

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Two sided coin:Islamic Finance, SRI and Sustainability

Negative Industry Screens

In Common: Do not sin yourself!

Islamic: Alcohol, Interest, Pornography

SRI: Landmines, Child Labour, etc.

Negative Financial Screens

Strength of Islamic Finance

Interest Bearing Instruments

Stocks highly affected by Interest

Derivatives

Financial Weakness, Lack of Liquidity

Positive Screens

Strength of Sustainability

Social Investing; Poverty Alleviation

Energy & Climate, Water, Health,

Consumption, Mobility, Smart Housing

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Contact Details

Bank Sarasin & Co. LtdMichael GassnerLoewenstrasse 118022 ZurichSwitzerland

Phone +41 (0)44 213 9306Fax +41 (0)44 213 9291

michael.gassner@sarasin.ch

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Important Information

This publication has been prepared by Bank Sarasin & Co. Ltd, Switzerland, (hereafter “BSC”) for information purposes only. It contains selected information and does not purport to be complete. This document is based on publicly available information and data (“the Information”) believed to be correct, accurate and complete. BSC has not verified and is unable to guarantee the accuracy and completeness of the Information contained herein. Possible errors or incompleteness of the Information do not constitute legal grounds (contractual or tacit) for liability, either with regard to direct, indirect or consequential damages. In particular, neither BSC nor its shareholders and employees shall be liable for the opinions, estimations and strategies contained in this document. The opinions expressed in this document, along with the quoted figures, data and forecasts, are subject to change without notice. A positive historical performance or simulation does not constitute any guarantee for a positive performance in the future. Discrepancies may emerge in respect of our own financial research or other publications of the Sarasin Group relating to the same financial instruments or issuers. It is impossible to rule out the possibility that a business connection may exist between a company which is the subject of research and a company within the Sarasin Group, from which a potential conflict of interest could result. This document does not constitute either a request or offer, solicitation or recommendation to buy or sell investments or other specific financial instruments, products or services. It should not be considered as a substitute for individual advice and risk disclosure by a qualified financial, legal or tax advisor.This document is intended for persons working in countries where the Sarasin Group has a business presence. BSC does not accept any liability whatsoever for losses arising from the use of the Information (or parts thereof) contained in this document. © 2009 Copyright Bank Sarasin & Co. Ltd. All rights reserved..

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