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Malaysia’s EPF puts the sustainable into Shariah

The country’s Employees Provident Fund puts considerable effort into Shariah compliance from an ESG framework. Could chief executive Shahril Ridza Ridzuan have hit upon a template for other Islamic funds?


Shahril Ridza Ridzuan, CEO Employees Provident Fund

The Employees Provident Fund (EPF) matters. 

It is not just that, with RM768.51 billion ($196.6 billion) under management as at December 31, 2017, it is one of the biggest pension funds in the region. 

Nor that, with assets equivalent to more than half of the Malaysia Stock Exchange’s market capitalization, it is uncommonly powerful in its own country. Nor even that it is a vital sign of well-run institutional stability in a country where the political environment seems more of a circus by the day.

No, the broader significance of the EPF is what it tells us about the potential for Islamic finance in national pension and sovereign funds. 

Few sovereign or pension vehicles in the Islamic world, from the UAE’s and Qatar’s sovereign wealth funds to Saudi Arabia’s central bank, are actually invested along Shariah principles, despite those countries having far stricter interpretations of Islam than Malaysia does. But the EPF, which now runs a Shariah-only stream of its main fund and has boosted Shariah compliance across all its assets, tells us a lot about the practicality of Shariah investment on this scale and about the crossover between Islamic finance and the environmental, social and corporate governance (ESG) world. 

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